Massachusetts Lawmakers Seek Answers On Auto Insurance Rates

Jan. 10--BOSTON -- Consumer advocates have long argued that drivers living in minority neighborhoods pay higher auto insurance premiums than those with similar driving histories who live elsewhere.

State law bans discriminatory rate setting by insurers, but advocates and some lawmakers say minority neighborhoods are still unfairly targeted, and higher premiums are forcing low-income families to forgo other necessities.

"I don't think it's fair to charge people a higher premium based on their ZIP code," said Rep. Frank Moran, D-Lawrence, who is sponsoring a bill to ban the practice. "If you have a clean driving record, why should you be paying a higher premium just because you live in Lawrence? It's flagrant discrimination."

Another proposal, filed by Rep. Juana Matias, D-Lawrence, would require the state's Insurance Division to study rates by geographic region to determine if there is discrimination. Her proposal has nearly 20 co-signers, including Moran and Rep. Diana DiZoglio, D-Methuen.

"There's data to suggest that it might be a problem, but we need more information," Matias said. "Massachusetts doesn't track this kind of information."

A recent investigation by New York-based Consumer Reports and ProPublica documented how drivers in minority neighborhoods are charged higher auto insurance premiums than drivers with similar safety records in non-minority neighborhoods despite laws banning the practice.

"This over-pricing may amount to a subtler form of redlining, a term that traditionally refers to denial of services or products to minority areas," the report's authors wrote.

The report examined premiums and payouts. In some cases, major insurers charged premiums that were 30 percent higher in minority ZIP codes than comparable non-minority neighborhoods.

While the report focused on the auto insurance markets in California, Illinois, Missouri and Texas -- the only states that provided comprehensive data -- it showed data collected in Boston and Quincy neighborhoods that were 46 percent higher than premiums in surrounding communities.

Insurers have defended their pricing formulas by saying the risk of accidents is greater in those neighborhoods, claiming they do not collect information about race or ethnicity from customers.

The industry criticized the report as an oversimplification of the way insurers set rates, which base premiums on a driver's history and in part on "territorial ratings," derived from the risk of the area where the car is garaged.

A spokesman for the Massachusetts Association of Insurance Agents didn't return a call seeking comment for this story. Neither did a spokeswoman for MAPFRE USA Corp., the state's largest auto insurer.

Several years ago, Lawrence was at the center of a multimillion dollar auto insurance scam that drove up rates for drivers living in the city. Reports by The Eagle-Tribune and subsequent state and local investigations detailed how lawyers and health care professionals paid tens of thousands of dollars to drivers and passengers to stage fake accidents and file phony claims with insurance companies.

One participant, Altagracia Arias, a 65-year-old woman, was killed when she suffered a fatal brain injury during a staged accident on Sept. 4, 2003.

The probe, which earned the Lawrence the dubious label of "auto insurance fraud capital of Massachusetts," resulted in major changes to the law to prevent fraud and multiple charges brought against more than 2,000 individuals, including 500 from the city.

Matias said insurance rates in Lawrence have dropped since the scandal, but they still remain higher on average than other neighboring communities.

Overall, auto insurance rates have been on the rise in Massachusetts in recent years, mostly due to increased accidents from distracted drivers.

This year, state regulators granted permission for several of the state's largest auto insurers to increase rates an average of 3 percent to 6 percent, according to the state Division of Insurance, which reviews the requests.

In 2016, auto insurance rates increased between 6 to 9 percent, on average.

Deidre Cummings, legislative director for the Massachusetts Public Interest Research Group, said the state has laws on the books preventing auto insurers from setting rates based on a person's socioeconomic background, but insurers often find ways around that with discounts and other "backdoor policies."

"Current state laws are immensely inadequate to prevent discriminatory rate setting," she said. "The reality is auto insurance should be based primarily on how you drive, not who you are or where you live."

Moran said he routinely hears from Lawrence constituents who wonder why drivers in other communities are paying less to insure their vehicles.

"People next door in Methuen are paying $600 to $700 less a year for car insurance," he said. "It's not fair and we need to do something about it."

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group's newspapers and websites. Email him at cwade@cnhi.com.

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