Critics Hit Insurance Plan ; Say Records Should Drive Auto Rates

By JAY FITZGERALD

Consumer groups are warning that a proposed new auto-insurance system could lead to insurers using information about people's frequent flier miles, student loans, newspaper subscriptions and other factors to set future rates for motorists.

The groups are also charging Insurance Commissioner Nonnie Burnes of being "hostile" to advocates' concerns in general as the state moves toward a new "managed competition" where insurers would set auto insurance rates.

Burnes, who has proposed a major overhaul of the current system, in which regulators set auto insurance rates, has already said that any new market-driven program will prohibit insurers from using "socioeconomic" factors when setting rates for motorists.

She has specifically banned use of a person's marital status, income, education, home-ownership, occupation and other factors.

But Steve D'Amato, a consultant to the Center for Insurance Research, and Deidre Cummings, legislative director of the Massachusetts Public Interest Research Group, said insurers can get around such restrictions by using "proxy" measurements that would still gauge many of the things Burnes would ban.

Insurers, in a deregulated system, could ask if someone ever had student loans, indicating they went to college, they said. Insurers could also ask someone if they have airline frequent flier miles, indicating they can afford to travel.

Insurers can also gauge a lot from simply asking potential customers whether they have home newspaper subscriptions or landline phones.

They can also ask if potential customers regularly make contributions to political candidates, which may offer an indication of a potential customer's affluence.

"What we should be doing is basing a new system strictly on a person's driving record," said D'Amato. "We seem to be heading toward a system in which driving records are less important than people's lifestyles."

In a statement, Burnes' office said the "commissioner is looking out for the consumers' best interests" and trying to give customers more choice in a deregulated system. The statement said "maintaining the existing overregulated system would provide good drivers with no benefits."

The statement went on to say that Burnes will take everyone's concerns under consideration before she issues a final order on her "managed competition" plan next month. Burnes is looking to implement any new system by next April.

Frank O'Brien, vice president of the Property Casualty Insurers Association of America, which represents the insurance industry, called critics' complaints "nutzoid."

"The whole debate is ridiculous," he said of the fight over whether or how to change the current auto-insurance system.

Using a "wide range" of factors when setting rates is what insurers do to assess risk, he said. "That's Insurance Industry 101," he said.

He said insurers will abide by whatever rules are set, but also accused consumer groups of "desperately throwing up roadblock after roadblock" to block reforms.

D'Amato said his group favors a change to a more competitive auto- insurance system. But, he added, rates should only be based on people's driving records.

He said Burnes has been "hostile" to the concerns of consumer groups.

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Originally published by By JAY FITZGERALD.

(c) 2007 Boston Herald. Provided by ProQuest Information and Learning. All rights Reserved.