Auto Anticipation (Again)
The most recent study of auto insurance in Massachusetts recommends measured competition on products and some pricing – there's no reason for all involved not to be optimistic.
My excited anticipation of last week's editorial column may not have been rewarded with a particularly in-depth or innovative report on the Massachusetts auto insurance system, but I feel there are reasons for optimism for all parties with the product of Gov. Deval L. Patrick's study group. For one thing, it might have said very little new, but at least it did so succinctly.
I recognize that it may be fashionable to dismiss the recent report as a non-event. However, whatever one's goal for auto insurance in the Bay State may be, the report offered mid-way points. Want competition? Okay, how about a little bit, the report suggests. Just enough to ease consumers into the idea of shopping around for coverage based on product enhancements and service. Currently, most auto insurance offerings are relatively interchangeable. Unless a consumer gets a group discount or had a good experience with one particular insurer, the choice matters little.
It is this idea, of limited competition and product differentiation on optional coverages, that has the most chance of getting through a legislature that doesn't want to be the party responsible for tossing out a system that's been in place in for 30 years.
And after all, modest competition still forces insurers to make their mark with consumers. And flex-band rating – a system where the state sets a percentage insurers can add or subtract from the standard rate – would impel consumers to recognize how their driving can affect their premiums and how insurers can create appealing products when given the opportunity.
Much of the report's recommendations state the obvious and don't offer any clear steps to reach a meaningful resolution. Yes, the accident rate is high - but now that much of the fraud in the system has been identified and reduced, how much more can the state do to prevent drivers from getting into fender benders?
The report acknowledged that auto insurance must remain affordable, while improving the system for insurers. Clearly, they've got the destination down, but have left the drafting of the road map up to other policymakers.