What's the deal with auto insurance ?

[mark056]

Perhaps someone can enlighten me about auto insurance. Correct me if I am wrong, but aren't the rates we have in Massachusetts based on performance, in other words how we well we drive ?

Now I know that Mass is number 5 in auto-insurance rates nationally. I have also heard the statistic that we pay about 27% more for insurance than the national average. I also know that insurance companies nation-wide take many factors into consideration in assessing a person's rate outside of Massachusetts.

Now let me ask you this (and I suspect someone or several someones who subscribe to this board are in this boat): Let's say that you had a perfect driving record for twenty years or more, but you got divorced or lost your job and as a consequence had serious enough financial problems that it affected your credit rating so you now had a low score, but your driving record has been perfect...your rates are going up. How is that fair ? If you were applying for a loan I could understand a higher interest rate. Well, as a consequence of your financial descent, you are forced to move to a neighborhood with a high crime rate...well your rates are going to go up...and oh you aren't a college graduate so your rates are going to go up....now you have had a perfect driving record, so tell me how is this fair ?

I shouldn't have a problem getting a better rate under the new law if it were passed, but will you ? Be careful what you wish for.

Please tell me where I'm wrong here. Once again, I see a scenario where the decent middle class or working class person is going to get screwed because of circumstances not related to their driving record.

All the best,

Mark

 

[Admin]

Corruption in our Government.

http://massbackwards.blogspot.com/2005/11/let-good-scams-roll.html

 

[Republic of Mass]

Well, lets take it one step further.

If juries cant know about prior's (becasue a prior doesnt me (supposedly [roll] ) someone is more likely to commit the same crime again), why can any lending companies use past history against you?

I had a beef with one credit card company. My other three lenders - all bills paid on time always. I'm screwed for the next 8 ~ 10 years......

How is that fair? What happened with one company is like that one night i shot that guy, or that one dumb b**ch I was an @$$hole too, or that one time I was drunk. Doesnt mean I'm a drunk, Ahole, violent, or bad with bills.....

 

[Len-2A Training]

Mark,

I've had a MA DL for 40 years and there NEVER have been MA rates that actually reflected the drivers' record . . . other than the surcharges that were implemented.

Sans surcharge, every company in MA MUST charge the same amount for the same coverage in the same town. Towns are categorized by accident rates in the town, and everyone in the town is charged accordingly. So, if you have to park your car in the worst car theft area int he state daily but live in an accident free town. Even if your car gets stolen 2x/year, your rate will only reflect the town you live in.

That is the MA system.

In 1971 I moved to CT to take my first post-college job. I was under 25, married, and the insurance was totally competitive in CT. I ended up paying 1/2 the MA rate even though I was listed as "additional driver" on my parents' policy when I lived in MA! Now I was listed as owner and principle driver (actually my Wife too, both of us under 25)!

My MA company offered the same insurance for ~$200 more than the best rate I found in CT . . . and we were penalized because I lived in a Navy town (lots of OUI accidents). But we could shop around for a good rate.

That is how competitive rates really work. So yes, your personal history will count towards your rate if the law changes. Some will pay higher if they are a risk (as interpreted by each company separately). I think that 49 other states work this way, and it seems to work.

Have no fear, MA will never implement a fair system where you pay on your own merits! It's totally against the welfare state mentality that runs this state . . . steal from the good drivers and give to the poor drivers.

We can discuss separately whether auto insurers should have access to all your credit history, medical reports and tax returns! That is indeed a totally separate issue.

 

[Lynne]

I had a beef with one credit card company. My other three lenders - all bills paid on time always. I'm screwed for the next 8 ~ 10 years......

If there were extenuating circumstances RofM, then you can contact the three major reporting agencies and lodge a complaint and have them put in a notation. Or, just make sure you keep all the documentation handy and provide copies when you know someone's checking on your history for something important.

Happened to hubby and I... I keep a folder with the A-hole company's info in it, and if needed, I send whomever a copy of it to show it's BS.

 

[mark056]

Len.

Once again you have proven yourself to be a font of knowledge and I appreciate your concise explanation. Now I get it.

My concern, I guess, really focuses on the other issue that you alluded too, and that is the use of credit histories etc. to determine insurance rates.

Regards,

Mark

 

[Rob Boudrie]

Insurance

Some of the high rates in MA result from the system protecting certain groups from free market rates, for example:

- Males and females are charged the same rate

- Being under 25 does not increase your rates - the only criteria is 6 years driving experience to avoid a new driver penalty. Bonus: Your rates are based on the highest rated driver on the policy, so if you have a 16 year old driver at home you can have a couple of tickets and your rates won't go up, as the 16 year old is still the "highest point" driver.

- Marital status does not influence rates

- Once you're found not at fault for a collision by the insurance comission, the insurance company cannot use it against you. In some states, even a pattern of "not at fault" accidents can be used to statistically profile you into adverse rates. After all, who would want to insure someone who has a not at fault accident year after year. Also, in other states, insurance companies get to decide if they feel like surcharging you; do not have to give you a chance to appeal or even explain exactly how your particular rate was calculated; and are not subject to independent review of fault finding.

- In MA, your insurance can pay a huge judgement, but if you beat the surcharge at the insurance comission hearing the accident is removed from your record (been there, done that).

- Although rates are based on your town, the state determines the amount, and towns like Boston are pay a smaller additional amount for their location than they would under a free market system.

- Indirect mechanisms of "class discrimination" are not allowed to influence your rate - rent vs. own home; credit rating; etc. It may not be pretty, but a suburban homeowner with a A1 credit rating is, on average, a better statistical risk than an urban renter with a bad credit rating.

Auto insurance rates are generally a mix of free market; coercion and social engineering by the goverment. As with any distortion of the free market, the MA system creates "winners" and "losers". I lived in boston when I was 22 out of college and could easily afford the rates. I can't begin to imagine what I would have paid as an under 25 single male urban resident with one "not at fault" totalling of a car under a totally free market system. For every class of person who is protected from the impact of the free market, there is a corresponding surcharge on someone else who has to pick up the freight. As a married, well over 25, resident of a boring suburb, I've moved from the "taker" to the "giver" side of the ledger in this particular income redistribution game.

 

[Len-2A Training]

Rob, when I got my license, the magic number was 25 yo, not the number of years of driving experience. Marital status I think effected MA rates . . . I know that it affected CT rates (free market). MA didn't have "no fault" insurance when I got my license, and point surcharges came much later.

In a free market like existed in CT in the early 1970s, you would get very different quotes from one insurance company to the other for the same person and insurance. My MA insurer quoted me something like $500 for CT insurance and the company I went with in CT only charged me $300 for the same thing.

For those keeping track of the years. . . we kept our MA DL current when we moved to CT. I had a sneaking suspicion that we'd end up back up here, so for the 3 years we were down there, we were dual licensed (MA and CT). Not sure that normal folks can do that any more (I know that CDLs can't), but you could back then.

 

[C-pher]

I don't really get MA insurance. And maybe I'm not getting it, or getting confused.

I just know that when I lived in Ohio, which was only 4 years ago. I paid $300 a year for complete Full coverage. I had the highest on everything. Only because I had a Jeep that I paid 2000 bucks for, only carreid Liability, and it was stolen. I was out all the money of the car. So, I said that no matter what the car costs, I'm keeping the most I can carry on the car.

Anyway, I moved here, with a pretty clean record. I think that I had a speeding ticket back around 94.

I moved into MA, transfered my insurance with State Farm here in MA, and they tell me that I'm a Step 15 because I'm a new Driver in MA. My first year here, my insurance went to a little over 1500 bucks. The next year, I went to a step 9 and it's still 900 a year. I'm not sure why it's so damn expensive here? But it sucks.

Yet, I don't want to go to credit rating based Insurance. And they didn't do that in Ohio, at least 4 years ago. It might have changed by now. Because with my me and my wife's, divorces our credit isn't the greatest right now.

I do know that when I was out of MA. My insurance went down for turning 25, getting married, and when I was on the Deans List in College. I just kept sending my reportcards and transcripts to my agent. It took off 10%.

 

[Adam_MA]

You know what else sucks here...

If you have ANYONE living in the same household as you that is "of driving age" you have to list them on your policy. So for instance, if your child turns 16, and does not want to drive EVER and has no intension of ever even getting their license, you still have to pay a rate based on them living in the same house. Talk about a scam!

 

[C-pher]

When they asked me when I moved to MA, they just asked me of all "licensed drivers" not of driving age. I wonder if I would be in trouble if I had a child 16 that wasn't licensed that I didn't report.

 

[Paulm]

I have a friend who is failry involved in the insurance business who I had asked about auto insurance in Massachusetts. This was brought on by the recent advertisements for and against insurance reform.

She informed me that although I have a great driving record (step 9) that under the new plan being pushed by Romney, by her estimate, my rates would nearly double. Why? Because of where I live (Somerville), where I park my vehicles (driveway not a garage) and the fact that I rent and not own my home. According to her, yes people are going to save on thier insurance, but its the class of homeowners in Wellesley and Weston that are going to reap the windfall.

In the insurance business, the word is that Romney is pushing this reform to open up the insurance market to companies like Geico who will not participate in the market under the current scheme because it involves commitment. Under the new system a company can bail on Mass coverage any time they see fit and enter again when they want.

This is one of Romneys first moves courting the national insurance block to support him in his run for the presidency, at the expense of the regular guy in Mass.

Bugie

 

[Admin]

I have a friend who is failry involved in the insurance business who I had asked about auto insurance in Massachusetts. This was brought on by the recent advertisements for and against insurance reform.

She informed me that although I have a great driving record (step 9) that under the new plan being pushed by Romney, by her estimate, my rates would nearly double. Why? Because of where I live (Somerville), where I park my vehicles (driveway not a garage) and the fact that I rent and not own my home. According to her, yes people are going to save on thier insurance, but its the class of homeowners in Wellesley and Weston that are going to reap the windfall.

In the insurance business, the word is that Romney is pushing this reform to open up the insurance market to companies like Geico who will not participate in the market under the current scheme because it involves commitment. Under the new system a company can bail on Mass coverage any time they see fit and enter again when they want.

This is one of Romneys first moves courting the national insurance block to support him in his run for the presidency, at the expense of the regular guy in Mass.

Bugie

I hope you don't honestly think that by allowing more competition in this state that premiums will go up?

If what your saying about your premiums going up in Somerville is true because of the current system, then that means a ton of other people outside the cities are getting screwed to keep the "cities" premiums down.

SOCIALISM at work. I shouldn't have to pay a higher premium living in Spencer to keep the premiums down in West Roxbury. [roll]

With that logic we should pool all our mortages together to lower the cost of living in Boston. Let the people in western MA pay higher mortages to lower the cost in the cities. [roll]

 

[senorFrog]

What's the deal with auto insurance ?

Ahhh, I'm not really sure re insurance, but FYI Mitt Romney just called you a REJECT!

Just had thought...how about we apply that Ad Stategy to the AG? I'm an upstanding citizen who didn't get my CLASS-A-ALP, Tom Oreilly think I'm a REJECT!

 

[dwarven1]

Just another anecdotal insurance comparision:

When I moved from New Jersey to MA in 87, I brought up with me a one year old BMW R65. For full coverage, I'd been paying about $250 or so in NJ. The insurance agent quoted me ONE THOUSAND DOLLARS for full coverage... on a motorcycle that only COST $4,000 new!

I'm with Romney's plan... I want to see a free market for Insurance.

 

[Admin]

I'm with Romney's plan... I want to see a free market for Insurance.

That's all I'm asking. If you're afraid of Romney's plan because your rates will increase, then you are not currently paying what you should be, and others are covering for you.

 

[Rob Boudrie]

Rob, when I got my license, the magic number was 25 yo, not the number of years of driving experience..

This is the way it is in most states, and also the age at which car rental companies wecome you as a customer. When NY (I think) passed a law stating rental companies had to rent to persons under 25, they did so - with a daily required insurance fee of about $45 on top of the rental rate.

 

[Adam_MA]

I have a friend who is failry involved in the insurance business who I had asked about auto insurance in Massachusetts.

That alone should have told you that you wouldn't get a REAL answer... The insurance company's here in MA are so used to getting outrageous amounts of money and making a HUGE profit, don't you think that ANYONE who has ANY stake in the financial success of such a company would be drawn in to believing anything that the upper corporate fat-cats would feed them?


Adam

 

[Adam_MA]

Rob, when I got my license, the magic number was 25 yo, not the number of years of driving experience..

This is the way it is in most states, and also the age at which car rental companies wecome you as a customer. When NY (I think) passed a law stating rental companies had to rent to persons under 25, they did so - with a daily required insurance fee of about $45 on top of the rental rate.

Most all car rental companies would be willing to rent to those under 25. I had to do that quite a bit for travel on business before I was 25. It would always require a $500+ retainer on your credit card, along with insurance.

Adam

 

[Rob Boudrie]

Insurance

Any new system will still have subsidies for protected classes. To take an extreme example, ethnic demographics will not be used even if they pass statistical tests which do not look at which race would pay more. That is as most of us agree it should be.

But, do you really think Boston drivers will pay a full risk adjusted rate?

There will still be income transfers to various protected classes in the terms of subsidized rates at the expense of other classes of drivers. The only questions on the table are (a) what classes will get prorection?, and (b) will the total take increase? For your answer to "b", just look to see what policy the insurance industry favors and you will have your answer.

 

[C-pher]

I'm with Romney's plan... I want to see a free market for Insurance.

That's all I'm asking. If you're afraid of Romney's plan because your rates will increase, then you are not currently paying what you should be, and others are covering for you.

If that's the case, then why did when I move here go from paying 300 to 900 for an almost spotless record?

I'm only worried that if they charge the same rates that they do now, and then add surcharges because I rent, park outside, and have not so great credit, that it's going to go up from 900. I don't think that I should be paying that much now. Hell, the most I ever paid for insurance was 600 dollars and that was when I was 16 and had 4 speeding tickets.

Maybe I'm just playing the Sheeple, but I'm worried about it. If they think that is really going to drop the insurance rates then that's good. But how much is how much?

Are the rates going to rivel the rest of the country? That's all I'm wondering?

 

[Admin]

Romney's whole plan is to lower the rates. The state already on average is over 20% higher than the national avg.

 

[JonJ]

I'm watching the whole situation with both eyes wide open. I have 2 teenage drivers and we have 4 vehicles.
I look at the other states who have this system and boast lower rates and figure there has to be something good. On the other hand, I look back at electrical de-regulation and it ended up costing us more and making money for the companies.

 

[Admin]

I'm watching the whole situation with both eyes wide open. I have 2 teenage drivers and we have 4 vehicles.
I look at the other states who have this system and boast lower rates and figure there has to be something good. On the other hand, I look back at electrical de-regulation and it ended up costing us more and making money for the companies.

I hear you Jon. I just don't trust this state government that says "we are doing this for the good of the PEOPLE" That usually means you and I are getting screwed.

 

[Coyote33]

...

I'm only worried that if they charge the same rates that they do now, and then add surcharges because I rent, park outside, and have not so great credit, ...

What does "credit" have to do with insurance? I thought "credit rating" had to do with ones ability to pay credit card bills.

 

[C-pher]

...

I'm only worried that if they charge the same rates that they do now, and then add surcharges because I rent, park outside, and have not so great credit, ...

What does "credit" have to do with insurance? I thought "credit rating" had to do with ones ability to pay credit card bills.

The theory, at least from what I've been reading is that if you don't have perfect credit, then you're not very responsible. So therefore, you're more at risk to do something that will raise your insurance. Like speed, or get into an accident. It doesn't matter if I've only had one ticket in 15 years, and it doesn't matter if the credit problem was due to a divorce, or a screw up on your report.

So I've read... As I've said, I've never lived where this was an issue, but I guess with the new plan, it will be a consideration.

 

[KMaurer]

One of the major problems with Massachusetts government is the complete arrogance of most legislators and so many people around here. City on a hill, hub of the universe, yada, yada, yada. They assume that if they're doing it one way and the other 49 states all do it different, then it must be because everybody else is stupid. I used to run in to that attitude all the time when I worked on Beacon Hill. We'd bring in a proposal and they'd dismiss it as untried, unproven, theoretical, impractical. The fact that all but one or two other states were already doing exactly what we were proposing (some for several decades) without any problems never seemed to count for anything. If it wasn't something dreamed up on the Harvard campus, then it tended to be a non-starter. Anybody who'd believe that the current Massachusetts insurance system is helping them would probably believe that the AG's consumer protection regulations do so as well. They know more about economics and insurance than the rest of the world in exactly the same way that Tom Reily knows more about guns than Ed Brown or Les Baer.

Ken

 

[Lynne]

They know more about economics and insurance than the rest of the world in exactly the same way that Tom Reily knows more about guns than Ed Brown or Les Baer.

You forgot to put Harshbarger in with Reilly...after all, his was the brain cramp that started it all.

 

[Chris]

I'm watching the whole situation with both eyes wide open. I have 2 teenage drivers and we have 4 vehicles.
I look at the other states who have this system and boast lower rates and figure there has to be something good. On the other hand, I look back at electrical de-regulation and it ended up costing us more and making money for the companies.

That is why you need to watch the plan carefully.

In the Electrical deregulation, The state FIXED prices for a short time to lull the consumers and then the utilities were free to 'make up' for those losses which they are now.

The 'hope' was that given a market economy new sources would come along to challenge the existing and offer a new choice. Well, those that 'knew' the score were crying "There won't BE any new sources", but the utilities had the $$ to fund the ads to push for the measure.

Some people knew this going in - I was one of them, but when I tried to explain it to my co-workers at the time, all I got was "but the rates are going down!" Such short sightedness is the key to getting people to swallow a poison pill.

The easiest way to know if a plan is good for the consumer, watch the people for and against it.

If Insurance companies are funding ads that claim insurance companies will reject people for bad credit scores, you have to believe they are worried aobut their profits.

Again, reform isn't always good and isn't always bad. The sad part is that the devil is in the details and it is those details that are the hardest parts to work out.

Hell, When the Chapter 180 of the Acts of 1998 were passed in about 12 days and then it took wellover a month for the lawyers and GOAL to fully work out all the details, you KNOW that the wool was pulled over a lot of eyes in the process.

One good thing about car insurance is that there are enough interested parties in the state that you are likely to hear about the 'issues'.

Ask any police officer and he'll tell you that the number of uninsured vehicels on the roads in Massachusetts is quite high. Heck, one year I renewed my boat trailer registration on-line and it was a month later when I went to balance the checkbook that I realized that we never sent in the renewal on the insurance. Yet the registry sent me all the updated paperwork. So much for making sure.

I'm all for free market over government. It won't be perfect and there will be problems that will need to be solved, but the 'screw rate' will be a lot less.

I'm sorry for the people who will get nailed by larger premiums. But in the end, it's the same kind of crying that we are now hearing about the electric rates. You enjoied the perk and now face the balance.

 

[C-pher]

I hear ya, and I'm not happy with what I'm paying now. But then, I know what I paid in Ohio, Kentucky, Mississisppi, and Louisiana. And when I moved here I about fell out of my chair...I'm suprised that most people can afford to drive.

I don't mind that they are going to change for the better. And I hope that bringing in more people will lower the cost. But I think that if it's true about what's going to make people have higer premiums, I do think that it can be kind of fishy.

I mean, I can't afford to buy a house, now when I get what I do for what I pay. I was looking at buy, but figured that I was going to end up paying 3 times what I do now, in a worse neighborhood for half the space. So renting is going to make me pay a higher premium??

Like I said, I might be just freaking out because everything is already so damn expensive already in this state. And if for some reason, my rates are going to go up becuase of things semi-out of my contol, I don't like it. But I admit, I don't like what it is now either.

I guess that I just have some conserns. I wasn't here for the deregulation of electric. And if it was cheaper than it is now, then that's pretty good because I only pay like 50 bucks a month for it now. And it was almost a hundred back in Ohio.

I guess that we'll just have to see.