Romney pitches his insurance reform plan
BOSTON — Amid stiff criticism yesterday, Gov. Mitt Romney defended his automobile insurance plan that he said would reduce rates by at least $150 million for 64 percent of Massachusetts' four million drivers. The plan would mean an annual savings of $90 to $173 for safe Lawrence drivers and provide additional fraud-fighting funds to the city, he said.
In a packed hearing room, the governor rallied to reward safe drivers with lower rates by creating a competitive insurance market to lure national car insurance companies to Massachusetts.
"We've been studying for years," Romney said. "It's time to pull up and shoot. If we could get the major national companies to come here, it would be a good thing for our citizens."
Under the governor's plan, insurance companies would set rates based on variables such as marital status, gender, credit score and employment. Only then could companies accurately assess the risk of individual drivers, rather than rely on the current system that bases rates solely on region and driving experience, Romney said.
Massachusetts is the only state where large insurance companies, such as Geico and State Farm, do not offer automobile insurance coverage and is the last state to update its car insurance laws.
Safe drivers would get a 5 percent rate discount, which would affect 52 percent of Lawrence drivers, said Chris Goetchens, the governor's press secretary. In addition, the governor's plan caps annual liability rate increases at 15 percent.
The bill would piggyback anti-fraud legislation passed in January. The plan would spend $700,000 annually to supplement existing anti-fraud programs in seven cities with the highest frequency of injury claims, including Lawrence. The plan would also cap chiropractic visits and establish a medical fee schedule to curb fraudulent claims.
An anti-fraud campaign led by local and state officials led to a $28 million drop in insurance claims in Lawrence last year and Lawrence drivers are waiting for the rates to fall.
Insurance Commissioner Julianne Bowler said that unless a more competitive market exists, she doesn't see any quick rate relief for Lawrence drivers.
"If we had a competitive market, companies would be able to reward cities and towns immediately," said Bowler, who is responsible for setting state annual insurance rates.
Under the state's unique regulatory framework, the state Division of Insurance sets a baseline rate for all companies. Good drivers get credit for clean records, but they also subsidize bad drivers, resulting in rates that are higher than the national average.
The system has steadily driven auto insurers out of the state, leaving just 18 today.
But critics of the governor's plan said it doesn't address the core problem.
Massachusetts has the highest accident rate in the United States, 40 percent higher than the second-highest rated state, according to Deirdre Cummings, director of Massachusetts Public Interest Research Group. She said in written testimony that lowering insurance rates can only happen with a reduction in accidents.
Sen. Susan Tucker, D-Andover, said the cause of the ailing system is accident rates and said costs will remain high without improvements to driver's education, repairs to the 50 worst intersections in the state and fraud reform.
"It's clear that the current system needs reform, but one fundamental fact that is being ignored is our high rates of accidents," Tucker said.
Attorney General Thomas Reilly also criticized the governor's plan because he said it fails to address accident rates and doesn't approach his recommended 18 percent decrease in rates.
"Real reform is possible, but it must involve a thoughtful and comprehensive approach to our insurance problems," Reilly said.
In his capacity as a regulator and the state's chief law enforcement officer, Reilly plays a role in the rate-setting process. He is currently seeking 18 percent lower premiums for next year, while insurers are seeking a 0.1 percent cut. That amounts to a $200 difference on the average premium, which is now $1,099.
Romney's plan inched forward yesterday during the Financial Services Committee meeting, but it will not voted on before the legislative session ends tomorrow.
The governor responded to questions about the attorney general's criticism and said Reilly should "stop dragging his feet" and come up with an alternate proposal.
"I just can't believe as an attorney general for seven years — with our insurance system that is obviously broken — he would have no answers, no proposals and no legislation," Romney said.
Material from The Associated Press was used in this report.