BOSTON, MA — States like Massachusetts that require no-fault auto insurance have some of the nation’s highest premiums, and should change their laws to require insurers of at-fault drivers to pay for accidents, according to a report released in Boston on Tuesday.
“The bottom line is that no-fault is a bonanza for insurance companies. It’s a disaster for consumers,” said Harvey Rosenfield, an attorney with the nonprofit consumer group sponsoring the report, the California-based Foundation for Taxpayer and Consumer Rights.
Most states have standard liability insurance, or what the report called “personal responsibility insurance,” in which insurers of drivers found to be at fault in accidents must pay costs for the innocent parties.
Nine states, including Massachusetts, now have mandatory no-fault insurance. The law requires drivers to be compensated by their own insurer, regardless of who caused the accident. During the time covered by the report, there were 10 states with no-fault insurance; Colorado dropped its mandatory no-fault policy in 2003.
Premiums in states with no-fault insurance are 19 percent higher on average than in states with personal responsibility insurance, according to the report. The report also found that rates went up on average 9.8 percent between 1998 and 2002, compared with 5.1 percent in states with personal responsibility insurance.
Massachusetts rates in 2002 averaged $624, making it the third highest in the country. New York, which also has no-fault, had the highest average auto insurance of $741, and New Jersey, which has a mix of no-fault and liability, averaged $659, according to the report.
Rosenfield acknowledged that no-fault insurance is not the sole factor behind rates. Rhode Island, for example, has standard liability insurance with average rates of $610, the fourth highest in the country, while Connecticut was the sixth highest rates of $600.
The report also found that rates fell when states abolished mandatory no-fault insurance, and also recommended stringent industry regulation.
Daniel J. Johnston, president of the Automobile Insurers Bureau of Massachusetts, said there’s no consensus that no-fault insurance causes high rates.
“The devil is in the details. What really matters is what you’ve got in its place when it’s gone,” he said.
Chris Goetchus, spokesman for the state Division of Insurance, said a task force convened by Gov. Mitt Romney in April is looking at reforming auto insurance in the state, including the state’s mandatory no-fault insurance. Fraud is a major focus of its work, he said.
“Nothing’s off the table. They’re looking at all aspects of the no-fault law, with an eye to reducing unnecessary costs,” he said.
Massachusetts, the only state where auto insurance rates are set by state regulators, was the nation’s first state to adopt no-fault insurance, in 1971. Six states and the District of Columbia have repealed their mandatory no-fault insurance laws since 1980, according to the report.
The report was based on insurance data through 2002 reported to the National Association of Insurance Commissioners.