Young drivers will save the most under state's new insurance ratesBy Bruce Mohl, Globe Staff
Automobile insurance companies and agents are reporting a strange phenomenon as they calculate customer premiums this year: young, inexperienced drivers, the ones who as a class have the highest accident rates, are getting the biggest break on their bills.
The statewide average premium dropped this year by 8.7 percent, but drivers with less than six years' experience on the road, particularly those in suburban and rural areas, are seeing their bills drop nearly twice as much on a percentage basis because of a new point system for penalizing bad drivers and rewarding good ones.
The premiums of inexperienced drivers are still way above the statewide average of $995, but in many cases they are dropping dramatically this year. State officials say the decreases are being caused by ''Perfect Storm"-like conditions, including the deepest rate cut in more than 25 years, the elimination of a quirk in rates that negatively affected inexperienced drivers, and the point system, which doesn't penalize young drivers just because they are new to the road.
''The rates are going down and some rates are going down more than average because of changes we made to the system," said Cara Blank, the actuary for the Division of Insurance. ''But keep in mind it's a one-time system correction."
Joe Gilmore's premium experience illustrates what's happening. The Franklin resident insures two vehicles, one for himself and one for his 17-year-old daughter, both of whom have clean driving records. When their policies renewed in January, their insurer issued them temporary premiums based on last year's rates. More recently, the company sent them adjusted bills reflecting this year's rate cut and the new system.
The difference between the two bills was minuscule for Gilmore, but huge for his daughter. The premium on Gilmore's vehicle dropped 3.2 percent, or $26, to $784. His daughter's premium plummeted $515, or 20 percent, to $2,115. Their combined bill fell 15.7 percent to $2,899.
''I was thrilled," said Gilmore, who pays both premiums. ''But it doesn't make any sense."
Gilmore said he appreciates the large decrease in his daughter's premium, but he still thinks she is being charged too much. He knows younger drivers are far more risky to insure, but he said their high premiums condemn them before they get behind a wheel. He said more rigorous driver's education is the answer to the high accident rate among young drivers, not an increase in the driving age, as some on Beacon Hill have proposed.
Christopher Russo, the owner of Russo Insurance Agency in Medway and Gilmore's agent, said good drivers like Joe Gilmore are not receiving a big enough reduction in their rates this year.
''The rates have decreased significantly for inexperienced drivers, particularly for inexperienced drivers who are bad drivers," Russo said. ''People who should be paying more are getting big breaks."
Russo pulled a number of examples from his files, including one where a customer with three years' driving experience and five minor traffic violations saw his premium drop to $3,291 this year from $4,207 last year, a reduction of 22 percent.
Another driver, listed on his parents' policy as an occasional operator, saw his premium fall 12 percent to $2,502, even though he has two major accidents on his record.
Angela Davison, a broker with Lehrer & Madden Inc. in Natick, said inexperienced drivers aren't the only ones saving money. She said an elderly client, a Step 15 driver last year, saw his premium drop 32 percent this year to $804.
''Overall, the worse your driving record, the more you saved," Donovan said. ''What they're trying to accomplish with this isn't working."
Blank, the state's actuary, said it is difficult to generalize about premium changes without reviewing each policy. But she said newer drivers are seeing steep reductions in their premiums for several reasons.
Under the state's old Safe Driver Insurance Plan, new drivers started out at Step 15 and worked their way down to Step 9, the best category, one year at a time. The new point system, Blank said, begins all incident-free inexperienced drivers at 0 points, starting them with a clean slate.
Blank said inexperienced drivers are also benefiting from the elimination of a rating-system quirk that had the effect of increasing the price of their liability coverage by 7.5 percent. Combined with the reduction in the statewide average premium of 8.7 percent, Blank said, inexperienced drivers on average are seeing a 15 percent reduction in premiums this year.
Blank said inexperienced drivers in suburban and rural areas are seeing the biggest reductions. She said inexperienced drivers in urban areas are benefiting less because the subsidies they receive from other drivers have been reduced. Subsidies are used in the Massachusetts auto insurance system to keep the premiums of high-risk drivers reasonable, to lessen the temptation to drive without insurance.
Under the step system, a driver who caused an accident paid surcharges for five years. With the point system, the surcharges are higher in the first three years but then diminish quickly. As the state moves from steps to points, drivers with older incidents on their record may see savings, while drivers with recent incidents may be in for rate shock.
One of Russo's clients, an experienced driver who had a clean record until last year, when he was found at fault in a major accident, saw his premium rise this year by $600, or 44 percent, to $1,865.
James Ermilio, senior vice president and legal counsel for Commerce Insurance of Webster, the state's largest auto insurer, said the new system appears to focus more on individuals' driving record instead of their perceived risk.
''They're really focusing on driving history and record as a predictor of risk," Ermilio said. ''That's the theory, and I think it's a pretty good one."
© Copyright 2006 Globe Newspaper Company.