16 November, 2000

Linda Ruthardt, Commissioner
Division of Insurance, Commonwealth of Massachusetts
One South Station
Boston MA 02110-2208

Dear Ms. Ruthardt:

Why do you insist on maintaining state control of private auto insurance? Not only am I being personally hurt by Massachusetts insurance regulation, but the toll your bureau is taking on taxpayers and insurance writers is unacceptably high. According to Chapter 17E of the Massachusetts general laws, every year you are charged with deciding whether to allow free-market insurance in this state. I am not alone in wondering why year after year you choose to isolate Massachusetts as the only state in the union with a socialized insurance system.

As a consumer, I am unnecessarily penalized and hindered by the state-dictated system, in spite of holding the most favorable rating available: “step 9.” I canít buy deductibles lower than $300. I subsidize worse drivers. My insurance company is not allowed to reduce my premium based on factors allowed in most other statesóe.g., being married. My insurance company, which is a co-op, canít give me credits or dividends based on my premium without state approval. My wife qualifies for a better rating than she was first assigned when we moved here, but we have to wait until our contract is renewed in nine months to have our premium reducedónot because our insurers arenít willing to reduce it, but because the state will actually fine them if they lower our premium. In fact, our insurer is required by the state to maintain a separate section to serve Massachusetts customers. Thatís right: one group of agents to serve the 49 “normal” states, and another to serve Massachusetts. Our insurer faces fines and penalties for just about any deviation from state mandates, including providing unauthorized services!

As if the terrible service passed along to the customer werenít enough, the bureaucratic mess you build and maintain every year you approve “fix and establish” state-run insurance must consume millions of taxpayer dollars. As best I can determine, government offices tied up in the private auto insurance process include: the Merit Rating Board, Commonwealth Automobile Reinsurers, the State Rating Bureau, the Attorney Generalís office, and your Commissionerís Office. The inefficiency of this system must be rivaled only by the Central Planning Bureaus of the former Soviet Union. And just as socialism failed there, state-run insurance in Massachusetts has been a tremendous scourge, bankrupting numerous private insurance companies and driving many others away from serving customers in this state, while charging premiums that are among the highest in the nation. Indeed, given the absurd level of regulation and bureaucratic coercion enforced in this state, it is a wonder that anyone writes insurance here at all!

Is it likely that while open-market insurance works in 49 other states, it canít work in Massachusetts? Forty-two companies write insurance in this state. On what basis can you conclude, year after year, that the “elements for effective competition do not exist” in this state?


David Bookstaber