Insure Chief May Revamp Auto System, Ignite Furor

By Bruce Mohl, The Boston Globe

Jul. 12--For the past 30 years, state insurance commissioners in Massachusetts have held a hearing each spring on whether automobile insurers should be allowed to set their own rates. Like actors following a script, the answer has always been the same: no.

But this year there's a new director with a new script. Insurance Commissioner Nonnie S. Burnes, a Superior Court judge until five months ago, has signaled that she would like to give auto insurers some flexibility in setting their own premiums, shedding Massachusetts' distinction as the only state in the nation where regulators set all rates.

The commissioner is unlikely to approve unfettered competition. During a hearing in May, Burnes indicated with her questions that she favored allowing companies to set their own rates within certain ranges approved by her. If she follows the recommendations of a gubernatorial study group, she also is likely to retain subsidies for urban drivers and bar companies from using credit scores to set rates. A decision is expected by Monday.

As the high-stakes drama unfolds, insurance industry officials have privately been speculating about what is driving Burnes. Why is a commissioner with just five months on the job pressing so hard for changes that are likely to spawn legal challenges to her authority as well as a political firestorm for the governor?

Drivers aren't clamoring for change. Massachusetts premiums are among the highest in the nation, in part because the accident rate here is the highest in the nation. But rates have been falling here as they have elsewhere around the country, dropping 8.7 percent in 2006 and 11.7 percent this year. Rates are expected to drop sharply again next year.

Attorney General Martha Coakley, half the state's auto insurers, and the two consumer groups that follow auto insurance issues have urged Burnes to continue to set rates next year. Glenn Kaplan, chief of Coakley's insurance and financial services division, warned Burnes in a 10-page memo that she could face "significant and costly litigation" if she tries to usher in on her own a "hybrid" form of competition where companies compete within price ranges.

"There is no reliable basis in the record of this docket to support a shift to deregulation of rates this year," wrote Kaplan, whose office would defend Burnes if she is sued. "Such a sudden shift would be bad for consumers and bad for the long term viability of our marketplace."

James Harrington, executive director of the Massachusetts Insurance Federation, a group of auto insurers pushing for competition, said Burnes is handling the competition issue the same way she handled cases for 10 years in Superior Court.

"She's done a dispassionate, objective, thorough, and independent analysis of this auto insurance market," he said.

At one hearing, Burnes said she had read all the prior auto insurance cases and decisions dating back to 1977, the last time a commissioner administratively implemented competition and rates skyrocketed for many young and urban drivers.

Burnes also appears to be following the marching orders of Governor Deval Patrick, her current boss and legal partner at Hill & Barlow in the late 1980s and early 1990s. During the campaign for governor, Patrick indicated he would support increasing competition among auto insurers within the existing regulatory framework.

A study group appointed by Patrick backed limited competition. Some industry officials have said competition would drive down insurance premiums, but the study group supported phased-in competition to appeal to large national insurers such as Progressive Corp., Geico, and Allstate Corp., which currently shun the state because of its heavily regulated system.

"The automobile insurance market is ailing, and some form of competitive rating is essential to attract and retain insurers willing to write this line of business," the study group said.

Those opposed to auto insurance competition in Massachusetts are dismayed that Burnes, the appointee of a Democrat, seems to be following the lead of former Republican Governor Mitt Romney. Romney pushed hard for auto insurance competition in the Legislature, but got nowhere. His insurance commissioner, Julianne M. Bowler, did not implement competition administratively.

According to these officials, Burnes is pushing hard for competition in part because her staff, hand-picked by her pro competition predecessor, is egging her on. Payroll records indicate the staff at the Division of Insurance is largely the same today as it was under Bowler; only 10 of the 128 employees have changed since Burnes took over in late February.

The top advisers are all the same, including legal counsel Elisabeth Ditomassi, who helped draft Romney's auto insurance bill; actuary Cara Blank ; and Deputy Commissioner Joseph Murphy.

At a recent auto insurance hearing, Democratic Senator Marc R. Pacheco of Taunton raised the staff issue with Burnes, telling her "there are still members left from that administration that continue to make recommendations all across the government that, quite frankly, are not or have not been proconsumer."

Burnes assured Pacheco she was making her own decisions, just as she did in a dramatic opening statement at an auto insurance hearing in May.

"I have been hearing through the grapevine, and you all know how active this grapevine is, that I'm not making my own decisions here, that somebody else is telling me what to do, whether it's my staff or somebody else. That's not true," Burnes said. "I take a lot of advice, both from my staff and from all of you. But any decision that you see coming out of this agency I'm responsible for, and I want to make that very clear."

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