Credit History Won't Be in Play ; New Regulations Designed to Enable Rate Competition

By ANDREW LIGHTMAN

AUTO INSURANCE

BOSTON - The state insurance commissioner has decided to ban insurers from using consumers' credit histories to determine auto insurance rates as part of her new set of regulations aimed at increasing competition among insurers.

The ban, announced on Friday by Insurance Commissioner Nonnie Burnes, represents a shift from draft regulations she issued in August that proposed only a one-year ban on the use of credit information, to allow for a more formal study of the impact.

"A lot of people were raising it as a concern, and we wanted to get it right," Burnes said.

The new regulations, which go into effect as early as April 1, will still allow the state to study and evaluate the use of credit information, although Burnes said the ban will prevent companies from using the data while the state shifts toward managed competition.

The shift is expected to be completed by March 31, 2009, and would allow companies to file their own rates with state regulators for their approval. The current system requires the insurance commissioner to establish a uniform set of rates for all insurers, and does not include credit scores and numerous other factors in the equation.

Burnes said the goal of her managed competition plan is to provide Massachusetts residents with more choice, better services and greater cost savings for good drivers.

In addition to the ban on the use of credit information, the regulations prohibit companies from rating and underwriting policies based on demographic profiles, including sex, age, marital status, race, occupation, income and education. Burnes had proposed those bans in her draft regulations.

The aim was to encourage insurers to place the most weight on driving records and experience in rate-setting and underwriting decisions, Burnes said.

Burnes said the new regulations might drive car owners to change the ways they inform themselves about auto insurance. Still, she expects that even with price differences that result from the increased competition, insurance agents will still play a significant role in guiding customers.

One group of motorists, however, is not pleased with the new regulations.

Motorcyclists were not specifically mentioned in the new regulations, much to the dismay of Paul Cote, government relations director for the Massachusetts Motorcycle Association.

Cote said the state's 170,000 registered motorcycle owners should not have to pay the same rates as automobile drivers, since their cumulative insurance payments double what motorcyclists claim in damages each year.

Facing steep insurance bills, Chick Luther, a motorcyclist from Norwell, said he recently decided to pay off his Harley Davidson in full so he could reduce his required coverage amounts.

"It is very costly," Luther said. "I just grin and bear it."

Cote said most motorcycle owners also own cars or trucks, yet their bikes are not counted toward multiple vehicle credits on their policies.

Burnes said motorcyclists will benefit from new insurance options provided with a more open marketplace: "What I think this does, as it does for autos, is provides them with the option to get more specialized products."

Originally published by By ANDREW LIGHTMAN, The Patriot Ledger.

(c) 2007 Patriot Ledger, The; Quincy, Mass.. Provided by ProQuest Information and Learning. All rights Reserved.