NEWBURYPORT - Independent auto insurance carriers are working hard to prepare consumers for the state's new competitive auto insurance system, but they should have good news for most local drivers.
For the first time since 1977, the state won't set the insurance rates for the drivers who renew policies on April 1, 2008, and beyond. Under the state's plan to attract more carriers and competitive options for consumers, the rates are expected to fall as much as 10 percent or in some cases more for drivers in suburbs like those in the Newburyport area.
"For good drivers outside of urban areas this will be great; for urban drivers there will be an increase," said Jay Howlett, president of Chase and Lunt Insurance in Newburyport.
The average premium statewide will drop 7.7 percent, the state Division of Insurance said on Monday. Under the old system, for which the state set one rate for all insurers, rates fell by 11.7 percent last year. The average good driver paid $899 last year to insure a car.
State regulators hope the new system will mean better rates for good drivers but have set a cap of a 10 percent increase on the worst drivers. They also believe companies will be prompted by competition to provide better service.
Many of the state's auto insurers will offer extra incentives such as "good student" discounts and use of public transportation to lower costs. The burden on local insurance agencies will be to educate consumers on how those incentives will work for them.
"I don't think competition is a bad thing, but I just think the general population is going to be confused," said Don Beaulieu of Beaulieu Insurance in Salisbury.
Initially, the insurance companies will have to work to understand and cope with new policies and filing deadlines, as well as the new cost of advertising the new perks.
"This is going to be a learning process for everyone," said Beaulieu, noting advertising, discounts and additional time explaining the new process to consumers will all need to be factored into company's new rates. "The insurance companies are going to have to lay out a plan to make their businesses look more competitive."
At Chase and Lunt Insurance in Newburyport, Howlett is working to educate customers, as well.
"We sent out notices to all of our customers letting them know we are prepared," Howlett said. "We have made one of the biggest investments in the agency to make sure we have new technology and man power to handle the changes."
At Gould Insurance in Amesbury, Jay Gould is eager to see how other insurance companies will set their rates.
"Every morning we get up and look to the insurance gods and ask them to give us clarity," he said.
The state's five largest insurers will offer a 10 percent or greater reduction for policies with renewal dates of April 1, 2008, affecting about 1.2 million of the state's 4 million drivers, according to the state Division of Insurance.
Insurance Commissioner Nonnie Burnes called the first test of the state's new competitive auto insurance market a "success."
"I'm seeing it not only in the rates but in the flurry of activity to provide additional (discount) products," Burnes said. "And companies are trying to make sure they try to retain customers."
Insurers are touting their discounts. Liberty Mutual, which covers about 8 percent of the state's drivers, said its good drivers would see a 10.7 percent reduction off last year, the largest cut by a major Massachusetts insurer.
Those insurers will offer a variety of discounts. For instance, Liberty Mutual is offering two discounts aimed at urban drivers: 15 percent to drivers who use public transportation and 13 percent to drivers who travel fewer than 10,000 miles a year. Students who earn a B average are eligible for a 10 percent discount.
Staff writer Ed Mason contributed to this report.
