Fighting insurance fraud means lower rates in Mass


The fight against auto insurance fraud is finally starting to pay off for drivers in Lawrence and across Massachusetts. But there’s more work that needs to be done to create a truly fair and competitive insurance system in the state.

Last week, Insurance Commissioner Julianne Bowler announced an average 11.7 percent cut in premiums for 2007, the largest decrease since 1978. The rate cut means an average savings of $119.61 per vehicle across Massachusetts, where the average annual premium will be $898.81.

In Lawrence, where insurance rates are among the highest in the state, drivers with good records could see their premiums fall by more than $200. Under an agreement brokered by state Sen. Susan Tucker, D-Andover, Lawrence drivers will see a greater premium reduction that the state average to reward residents for the city’s fight against auto insurance fraud.

The rate cut is welcome and overdue. Lawrence police and the Essex County district attorney’s office launched an auto fraud task force in the city in 2003. Since then, 213 people have been charged with auto insurance fraud and claims have fallen by $30 million. The results from Lawrence has led to the creation of similar efforts in other cities with high rates of fraud.

The rate reduction comes after another welcome change in auto insurance in Massachusetts, one that puts greater pressure on insurers to continue the fraud fight. All drivers in Massachusetts are required to have auto insurance. In the current system, the state assigns high-risk drivers to companies, but then allows them to dump their policies into a pool where costs are shared by all insurers. Under this system, smaller companies end up supporting a greater share of the cost of insuring high-risk drivers. This, critics say, has resulted in a number of companies refusing to do business in Massachusetts.

Bowler has ordered a new system under which high-risk drivers will be randomly assigned to insurers based on their share of the market. Bowler says the system forces insurers to take more aggressive steps to control losses and reduce fraud. A similar system is in place in 43 states.

Lost in all this is Gov. Mitt Romney’s proposal to reform auto insurance through a gradual reintroduction of a free market – moving away from state-mandated rates to premiums set by driver records and competition for customers. Romney’s proposal died in the Legislature this past year.

New Gov. Deval Patrick should pick up the auto insurance reform effort during his first term in office. Reform that allows competition among insurers is the only way to make certain that good, honest drivers will continue to see lower rates for their car insurance.