Lowell Sun (Lowell, MA)
BOSTON, MA — A new report by a consumer watchdog group claims that Massachusetts drivers could save as much as $200 million per year in auto-insurance premiums just by eliminating its no-fault system of paying claims.
The Foundation for Taxpayer and Consumer Rights released a report yesterday saying that drivers in states like Massachusetts pay 19 percent higher premiums. The Bay State’s policy requires drivers to have their expenses compensated by their insurer, regardless of who is at fault in an accident.
The California-based group recommended Massachusetts switch to a “personal responsibility” auto-insurance system, in which drivers found to be at fault in an accident pay the medical and property damages of the other driver.
“No-fault is a bonanza for insurance companies. It’s a disaster for consumers,” said Harvey Rosenfield, founder of the foundation. “It boosts their investment profits. It boosts their revenues. No-fault is a very expensive form of health care just for auto accidents.”
Rosenfield said his group based its research on data reported by insurance companies to the National Association of Insurance Commissioners.
The study from 2002 found that of the 10 states with the most auto-insurance premiums, seven of those states had some form of the no-fault system. Between 1998 and 2002, auto-insurance premiums rose 92 percent faster in states with no-fault systems compared to states with personal-responsibility plans, according to the report.
A special task force of legislators and state officials appointed by Gov. Mitt Romney is examining the auto-insurance issue and is expected to make recommendations in June. Six states and the District of Columbia have repealed their no-fault, auto-insurance laws since 1980.
Christopher Goetcheus, a spokesman for the Romney administration, said the task force is primarily focused on eliminating fraud and other unnecessary costs and stimulating competition, but is also examining the benefits structure.
“We suspect there is a great deal of fraud within the personal injury structure and we should see a reduction, hopefully significant, in the cost of fraudulent claims,” Goetcheus said.
When asked whether Rosenfield’s estimate of Massachusetts residents being “overcharged” $200 million under the no-fault system is accurate, Goetcheus said, “It’s not unrealistic to think that over the next several years, we could root out that much in fraud alone. It’s not so much the benefits you provide, it’s how they’re abused that may be the crux of the problem here.”
Rosenfield was the author of Proposition 103 in California, enacted in 1988, which required that insurers prove that their rates are not excessive, allowed drivers to challenge the rate proposals by insurers, and gave consumers immediate auto-insurance refunds.
He noted that California’s auto insurance premiums are 37 percent lower than Massachusetts, where consumers pay an average of $1,063 per year.
Rosenfield contended that no-fault premiums are higher because twice the number of people are covered as both parties involved in an accident are paid, and that there are incentives for people without health insurance to commit fraud. In addition, he added, safe driver rates alone in Massachusetts aren’t enough to encourage responsible driving.
“No-fault, by eliminating the concept of fault, encourages reckless driving,” Rosenfield said.
State Sen. Susan Tucker, an Andover Democrat, said her focus is on reducing
the amount of waste and fraud in the auto-insurance system.
“I have one goal, which is to make sure drivers don’t overpay for their car insurance,” Tucker said. “I’m open-minded as to how we get there. The task force is looking at this, and we want to make sure we reduce the number of fraudulent claims.”
State Sen. Andrea Nuciforo Jr., a Pittsfield Democrat, said Massachusetts is not alone among the older, more urban northeastern states with its high auto insurance rates.
“Most of the states with higher rates are northeast states which also happen to be the most urbanized, the cities are old, the roadways are difficult and the weather is bad,” said Nuciforo, Senate chairman of the Financial Services Committee, which reviews auto insurance issues. “Whether no-fault is the cause for higher rates or whether these are symptoms of a larger problem in this market is another question.”
Erik Arvidson’s e-mail address is [email protected]