Insurance Insanity

As members of the Entitlement Generation, we like it when things require as little thought as possible. When we first heard Insurance Commissioner Nonnie Burnes’s plan to introduce “managed competition” auto insurance to Massachusetts, it sounded good to us. Certainly the free market would spark competition that would provide our car insurance practically for free, right?

Not so much.

Now that auto insurers have announced their rates for next year, Attorney General Martha Coakley tells us the new plan isn’t as advantageous to consumers as the old way of doing things.

Coakley said the state’s average premium would have fallen 11 percent had the companies not factored in unjustified profit and commissions into initial rate filings they submitted to the state last week. That’s nearly the same as the 11.7 percent reduction approved by the state insurance commissioner for this year, which resulted in an average premium of $899.

Based on company rate filings last Monday, Insurance Commissioner Nonnie S. Burnes said the average premium reduction for 2008 would be 7.7 percent. But the attorney general says the actual number is 6 percent. . . .

But we get great new perks for that extra 4 percent we’re paying. Like… pet-injury insurance. Hooray?

Coakley isn’t the only official to voice complaints about the new system. Senator Dianne Wilkerson and Mayor Tom Menino have both asked Burns to eliminate any factors in determining insurance rates other than a driver’s record.

. . . Wilkerson and her consumer-advocate allies say the benefits will be reaped by more affluent, suburban drivers, while lower-income urban dwellers will see their already pricey premiums soar even higher.

The new regulations would prohibit companies from using factors such as income, occupation, and credit history in establishing premiums, but other factors could be used in setting rates.

Wilkerson and other critics say that will open the door for insurers to set rates using proxies for income and credit history, such as home ownership or level of past insurance coverage, that will drive up costs for those who can least afford them.

In a Sept. 10 letter to Burnes asking her to rethink the scheme, Mayor Thomas Menino called the proposed changes a “form of economic redlining.”

So what should we do? In today’s Globe, Burnes tells us all to just calm down.

Kimberly Haberlin, a spokesman for the insurance commissioner, said Burnes “takes her role as a consumer advocate very seriously and will ensure that the division holds insurers to the highest possible standards.”

Haberlin said it was premature to get into a debate over the average premium. She said insurers are likely to file lower rates today, lowering the average premium. She also said the average premium may drop further once consumers start shopping around for the best deal on auto insurance next year.

Our brains hurt. If you need us, we’ll be checking to make sure our policy doesn’t expire until this mess is sorted out.