Thanks to a reduction in an incentive program created to encourage companies to provide coverage to underserved communities, more drivers in Massachusetts are being pushed into the high-risk insurance pool, a report by Plymouth Rock Assurance Corp. finds.
The high-risk pool, also known as the Massachusetts Auto Insurance Plan, is the insurer of last resort for those motorists that cannot secure policies elsewhere. High-risk pool policies are potentially more costly than regular ones (the average annual premium for high-risk policies is $1,707, compared to the average annual premium statewide in 2013, at $992), and often offer less coverage options as well.
The study noted an increase of 11.7% in the number of new drivers assigned to the high-risk pool after a 10.7% decrease in the incentive program last spring.
According to a Boston Globe report, an industry group is looking into having those incentives reduced even further—by 20% statewide. The group argued that the incentives are “not as necessary” in a competitive market.
Plymouth Rock attorney Paula Gold, however, believes that the decrease would push more motorists into the high-risk pool and increase the costs of auto insurance in low-income and minority areas.
Commonwealth Automobile Reinsurers—the group managing the high-risk pool—said that for the year ending May 2015, approximately 35,000 drivers were placed in the high-risk pool, which is the lowest record in years. In the year ending March 17 2016, however, the figure had climbed to 39,000.
Some companies, such as Mapfre USA Corp., have asked the state’s insurance commissioner to reduce the incentives. These carriers believe that the market is competitive enough, allowing more high-risk drivers purchase policies from them.
“The marketplace is healthy enough to continue scaling back on available credits to a more reasonable level,” a statement from Mapfre read. The insurer has commented that the number of credits is excessive, which allowed some insurers to sell the credits to other carriers for profit.
