Drivers taken for a $200M ride?
The Boston Herald
Massachusetts motorists are getting socked with $200 million in unnecessary premium charges each year due to the state’s no-fault auto insurance, a consumer group said yesterday.
Under the no-fault system, drivers are reimbursed for accidents by insurers regardless of who caused the collision.
But Harvey Rosenfeld, founder of the Foundation for Taxpayer and Consumer Rights, said no-fault leads to more fraud, more claims and more cost pressures that only benefit insurance companies.
Insurance premiums on average are 19 percent higher in states that have no-fault insurance, said Rosenfeld, whose group was a leader in pushing auto-insurance reform in California in the late 1980s.
Premiums also rose 92 percent faster in 10 no-fault states than in “personal-responsibility” states between 1998 and 2002, he said.
The system has been a “bonanza for insurance companies,” Rosenfeld said, estimating that no-fault costs the average driver about $50 extra per year.
The report comes as state leaders, consumer groups and insurers grapple with a proposed overhaul of the state’s auto-insurance system.
But Frank O’Brien, vice president of the Property Casualty Insurers Association of America, disputed whether insurers really benefit from the current system.
“They’re not cleaning up in Massachusetts,” he said, noting there are now only 19 auto insurers here, down from over 50 more than a decade ago.
O’Brien said insurers generally favor reform, noting that property liability is one of the many issues now on the negotiating table.
A spokesman for Gov. Mitt Romney said a state task force is now looking at a number of issues, including “cost drivers” – such as personal-injury benefits – that increase premiums.
Spokesman Chris Goetcheus said Romney favors eliminating “unnecessary costs” that lead to fraud and other expenses that tax the system.
GRAPHIC: Associated Press photo
AT FAULT? Activist Harvey Rosenfeld claims the Bay State’s no-fault insurance system costs Massachusetts drivers an extra $200 million a year.