Auto insurers overcharging $100 on average, Reilly says
AG, who is pushing for 18 rate cut, says loss forecasts are too high
Massachusetts drivers on average paid $100 too much for auto insurance last year and are on track to overpay by another $100 this year, according to documents filed yesterday by Attorney General Thomas F. Reilly.
The records, filed as part of hearings held to set 2006 auto insurance rates, blame the overpayments on faulty loss projections. Those projections, the documents say, netted auto insurers a $400 million windfall in 2004 and will give them another $420 million windfall this year.
The overpayments by drivers amounted to roughly 10 percent of the average statewide premium, which currently tops $1,000.
Aides to Reilly said the data confirming the consumer overpayments just came to light and could play a pivotal role in the rate case if state regulators admit them.
The attorney general, in pushing for an 18 percent rate cut next year, is predicting the downward trend in claims losses of the last two years will continue next year.
The insurance industry and a unit inside the Division of Insurance say losses are likely to revert to the higher levels of earlier years.
Higher claims losses drive up insurer costs and result in higher premiums.
Stacey C. Gotham, an actuary working for Reilly, said the loss forecasts submitted by the State Rating Bureau, the Division of Insurance unit, were ''likely to result in additional excessive industry profit."
The State Rating Bureau is seeking a reduction of 7.8 percent in the average statewide premium next year, while the Automobile Insurers Bureau of Massachusetts is seeking a reduction of 0.1 percent. While tiny, the rate cut requested by auto insurers is the first they have ever sought.
Christopher Goetcheus, a spokesman for the state Office of Consumer Affairs, which oversees the Division of Insurance, said the hearing officers in the auto insurance rate case will have to decide whether to allow Reilly to make additional filings.
''But it sure smacks of the old-style politicization of the rate case that everyone is tired of," Goetcheus said of Reilly's filings. ''Good government resolves problems, and that's what the governor's reform plan would do."
Governor Mitt Romney has filed legislation to scrap the current rate-setting process, in which state regulators set all auto insurance rates, and replace it with a system that would let insurers set their own rates under looser government regulation. Romney says greater competition would lead to lower rates. Hearings on the Romney bill are scheduled for next month.
Reilly, who is planning to run for governor next year, has not taken a formal stand on Romney's legislation, but has said he favors auto insurance competition as well as other changes.
Rate hearings are usually dry affairs, but this year Reilly has taken his push for an 18 percent rate cut public, on several occasions holding news conferences around the state to rally support.
Daniel Johnston, president of the Automobile Insurers Bureau of Massachusetts, could not be reached for comment.
Bruce Mohl can be reached at mohl@globe.com. 