A Candle Burnes at Both Ends

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Free-market advocates and some agents applauded last year when Massachusetts Insurance Commissioner Nonnie S. Burnes quickly moved to deregulate the Bay State’s backwards-but-long-established system of personal auto insurance. That move, which took effect April 1, included two fundamental changes: the creation of an assigned risk pool for high-risk drivers, and new rules that give companies more leeway in pricing their policies.

To many in the agent world, it seemed Burnes undertook the move without full appreciation for the confusion it would cause consumers and agents. That is not to say the move has been a failure; it hasn’t. On the most basic level — ensuring that consumers can obtain auto insurance, and attracting some new insurers to the state — the plan has worked. But evaluating such a massive venture on that minimal criteria seems trivial.

Now consider the missteps, some of them documented in Insurance Journal over the last months: a last-minute regulatory scramble to figure out what changes Burnes wanted to make; a rush by the state’s auto insurers to figure out how they would adapt to the new market; a scurry by insurance agents’ vendors to retool their products for a vastly changed auto insurance landscape; and months of late nights for the state’s independent agents, who write 80 percent of all drivers, and were left wondering when April 1 rolled around, “um, how do I do this?”

Other missteps have yet to be realized, such as awkwardly constructed (read: hastily put together) regulatory rules that, within a year, could freeze out drivers with OK records from both the high-risk pool and from the standard market.

Burnes has heavy-handedly guided this rush job. With one hand, she dishes out rules that strangle domestic insurers and independent agents from competing; with the other, she waves off her own mandates (like the prohibition against six-month policies) and establishes rules (such as the “no high risk pool for two years” for new insurers) to encourage out-of-state companies to compete (read: pilfer) the business of the established agency system.

And for what? To trumpet the return of insurers to the Bay State? Big deal: The subsidiary (Peerless Insurance) of a company headquartered in Boston (Liberty Mutual) wrote its first Mass. personal auto policy last month. And, oh yeah, an online direct-writer (Progressive) is offering big discounts on policies that Burnes herself deemed illegal. Some accomplishments…

So what’s really is at stake in the lawsuit brought against Burnes by Arbella Insurance and the Massachusetts Association of Insurance Agents (see page 42)? It’s a battle over who exactly will run the show: the established industry players, newcomers like Progressive, or Burnes. For the last year, it’s clearly been Burnes, who has hacked away at the cozy anachronism that had been the Bay State auto insurance world. But now, her axe seems to have dulled, and she appears powerless to rein in the new players she let out of her Pandora’s Box of problems. It’s now they, not she, who seem to be calling the shots.

Then again, maybe that’s what Burnes wanted along.


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