BOSTON - State Insurance Commissioner Nonnie Burnes is taking steps to limit how much insurers can raise rates under the state's managed competition plan, but consumer advocates and local insurance agents question whether it's the right move to ensure drivers save money.

Burnes has moved to cap premium increases at 10 percent for even the state's worst drivers. The cap was quietly imposed in regulatory bulletins issued earlier this month and takes effect when auto insurance competition begins April 1.

"This is all by the way of managing a smooth transition and protecting consumers," Burnes said yesterday.

One cap limits premium increases for good drivers. If an insurer wanted to raise premiums 10 percent or more, it would have to get permission from the Division of Insurance through a public hearing.

A second cap restricts what insurers could charge high-risk drivers. In Massachusetts, most of those drivers are funneled into a shared-risk pool operated by Commonwealth Automobile Reinsurers.

Commonwealth Automobile Reinsurers earlier this week said the state's 168,000 poor drivers should see their average premium rise 51 percent to $2,092 under the competitive pricing system. But to comply with the new rule, Commonwealth Automobile Reinsurers would raise the average premium 9.3 percent to $1,508.

Under the competitive system, insurers will file their rates for drivers not in the Commonwealth Automobile Reinsurers pool by Nov. 19 for policies renewing April 1. Burnes said early indications from the insurance industry suggest that rates on average will go down in the first year of competition.

Massachusetts drivers were hit hard when the state last let auto insurers compete in 1977. That experiment ended after only a year because auto insurance costs skyrocketed, especially in urban areas. Burnes doesn't think that will happen this time.

Consumer advocates and some insurance agents don't think the cap is a good idea. Insurance rates have gone down each of the last four years, most recently 11.7 percent on average for good drivers. Lawrence drivers saw a 24 percent decrease on average.

Stephen D'Amato, a consultant for the Center for Insurance Research, said with Massachusetts rates trending downward, he thinks a 10 percent premium increase allowance is too high.

"Under the old system, no one would have seen an increase," D'Amato said. "The fact is this opens the door to a possible 10 percent increase."

Leonard Degnan, a Lawrence insurance agent, said Commonwealth Automobile Reinsurers' initial proposal of a 51 percent increase worries him. While it reduced its proposed increase to 9.3 percent, Degnan wondered if it were a sign of higher rates to come.

"Why 51 percent?" Degnan asked. "Is that the true number?"

Thomas Minichiello, a Bradford insurance agent, said the cap prevents companies from truly competing on price, adding competition, not price caps, will save drivers money.

"We have to have competition or leave it as it is now," Minichiello said. "Anything in between is still the insurance department trying to manage auto rates in Massachusetts. And I believe in the free marketplace."

Asked how she arrived at the 10 percent cap, Burnes said, "I don't know where the number originally came from. It seemed like a reasonable range, if I pay $1,000 for a policy and it goes up by $100."

Burnes said the caps would be in effect for the first year of competition but could be extended if necessary. She said companies that wanted to raise rates for good drivers would have to get her approval first.