Massachusetts is one year into a new competitive auto insurance market, but there are more and more bumps on the road, including a change coming up next month that has some urban agents complaining thousands of low-income and minority drivers could lose coverage.
Industry estimates are that this could begin affecting 12,000 drivers a month starting April 1, those who get their policies through agents called "exclusive representative producers." That was a system set up in the 1970s to prevent insurers from refusing to write policies in certain neighborhoods or to higher-risk drivers who still have valid licenses and registrations. Governor Deval L. Patrick's administration wants to phase out that system, and says this is about reform, choice, and cutting costs. But some agents say this is tantamount to allowing redlining.
Uphams Corner in Boston's Dorchester section is where Linda L. Webster's written car insurance policies for 32 years, many under a state plan covering risky inner-city drivers most insurers would normally shun. But come April, she warns many of them, and thousands across Massachusetts, will lose their coverage.
"These are the worst times that we have been in for many many years,'' Webster said in an interview on Wednesday. "To go after the people of the inner city, the urban policy holders, and say, 'You are the people we are not going to renew,' '' is extraordinarily unfair, Webster says.
It's related to new "managed competition," but overwhelmingly hitting drivers in low income and minority areas. Webster, who is a leader with the Urban Insurance Agents of Massachusetts trade association, keeps track of where policies are getting canceled on a map with pushpins.
"Springfield, Worcester, New Bedford, Fall river ... urban, inner- city areas. Not suburbs. (Affluent suburbs like) Wellesley and Andover and those areas are not on this map.''
Massachusetts Insurance Commissioner Nonnie S. Burnes insists this is not redlining, but a reform that will save money and expand choice. Instead of dumping high-risk drivers in an industry pool, it'll assign them to individual carriers, making insurers more accountable to drivers and vice versa.
Kofi Jones, spokeswoman for Executive Office of Housing and Economic Development Secretary Greg Bialecki, who is Burnes's boss, issued a statement: "High-risk drivers live all over the Commonwealth, in every community, and they will all continue to have access to auto insurance.
Drivers can shop for new insurance by working with their current agent and using the Massachusetts Auto Insurance Program, or they can shop for new insurance through a different agent or through their own research in the competitive marketplace. No one, anywhere in Massachusetts, will lose the right to auto insurance as we create an assigned risk plan that is equitable and fair for everyone. These changes are helping us transform our auto insurance market and make it more flexible and nimble, and best practices in the industry indicate that this type of assigned risk pool provides the best service to high-risk drivers. For drivers in the high-risk category, these changes will create better customer service by allowing them to build a relationship with one company, and in the long run create the opportunity for them to receive better insurance and reap the benefits of the transition to managed competition."
But Roxbury, Mass., agent Jason Calianos, whose family has been in the insurance business in Dudley Square for 55 years, warns that under the changes, many of his customers will soon have to pay 25 percent down on insurance, up from 10 percent under most policies now. That's hundreds of dollars more that is onerous for people living paycheck to paycheck or government benefit check to government benefit check.
"You have to pay this big insurance bill now? Something's gotta give. And I think the insurance bill's going to give, and there's going to be people driving without insurance. absolutely.''
Howe: Now, if you live out in the suburbs or rural parts of Massachusetts, why should you care about inner-city residents losing car insurance? Because more accidents involving uninsured drivers means premiums go up for everybody -- including you.
Calianos says, "If you get hit by an uninsured driver, it costs your company more and ultimately it will cost your policy more.''
Burnes has said she's very concerned about injustice but remains convinced this is a good plan. Urban insurers just want her to wait six months and come up with a fairer system.
One analogy to what the Patrick Administration hopes this plan does for uninsured drivers is health coverage for uninsured people. Instead of insurers just paying millions into a welfare-hospital pool, they actually start real business relationships with thousands of individual people.
That means more accountability and more responsibility both ways.
Massachusetts State Senator Jack Hart from South Boston is pushing for legislative action to impose that six-month freeze. Just this month, we saw Commissioner Burnes back away from another controversial plan ... that was to get rid of a state appeal board where you can challenge an insurance company saying an accident is your fault, something NECN covered in this story on business day.
The commissioner does have a track record of at least hearing out and sometimes acting on a public outcry.
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