The Massachusetts Association of Insurance Agents contends that companies who this year became part of the state's new insurance system, most notably Progressive Direct Insurance Co., must assume some of the pooled losses caused by high-risk drivers that is shared by established companies. In recent years, the losses have totaled about $100 million.
Insurance companies divide that loss based on their market share in Massachusetts.
Nonnie S. Burnes"It's not chump change," said Francis A. Mancini, president and chief executive officer of the association. "We're not talking about a couple of dollars. We're talking about millions and millions of dollars."
Burnes, however, has taken a position contrary to a state rule, according to the Commonwealth Automobile Reinsurers, which provides access to insurance to high-risk drivers, including young and poor drivers.
"It's outrageous," Mancini said. "That's what it is."
On Wednesday, Daniel R. Judson, a Boston lawyer representing the reinsurers governing committee, wrote to Burnes that despite the state rule he understood the Division of Insurance to take the position that new companies are exposed only to an assessment for the reinsurers' administrative costs and not an assessment for any pool losses or profits. Judson further wrote that the governing committee failed "to see where ... the language exists which exempts (any new company) from its share of the profits and losses."
In a letter to association members, Mancini wrote that if Burnes intends to spare new companies from sharing in pool losses, she should state that in an emergency rule to the reinsurers and then "allow for a public hearing and have the DOI explain why such a rule is a fair and equitable way to share the deficit."
B. Catherine Wilton-Bransch, Massachusetts product manager for Progressive, said the company is "a little surprised that this is all blowing up now."
Wilton-Bransch said Progressive believes it should not be part of the pool, that it has taken drivers who would typically be assigned to the pool and written their policies and assumed the risk.
"Fundamentally, we look at it and we say, 'We are not putting anything into the pool,'" Wilton-Bransch said.
Robert R. Wilcox, president of Wilcox Insurance Agency in Westfield, said every company writing policies in the state should help cover pool losses.
"She's got different rules for different carriers," Wilcox said of Burnes.
Earlier this year the association and Arbella Insurance sued Burnes in Suffolk Superior Court, contending companies new to the state have received an unfair competitive advantage as a result of receiving a two-year moratorium on having to write any policies on bad drivers.
"There really isn't any need for an incentive to come to Massachusetts," said Mancini, noting that private passenger auto insurance is a $4 billion industry in the state.
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