On July 16, 2007, the Massachusetts Commissioner of Insurance, Nonnie S. Burnes, issued two decisions which will introduce managed competition into the Massachusetts automobile insurance market.

The first decision ends the so-called "fixed and established" system in which the Commissioner sets rates for the voluntary market. In its place, the Commissioner will soon introduce a regulatory framework that will set forth guidelines for insurance companies to propose premiums based upon true costs and considering factors such as driving record, number and severity of at-fault accidents, and traffic violations. The Commissioner stated that she would "view with extreme skepticism any rate proposal that is based on socio-economic considerations such as education, occupation, home ownership or credit report or score" and further indicated that she stands ready to utilize her "broad statutory authority and regulatory powers to take corrective actions should any insurer seek to take advantage of the changed environment."

The second decision issued by the Commissioner addresses the so-called "residual market" -- the sector of the market in which insurers would not likely willingly offer policies absent government intervention. The Commissioner's decision allows companies more control over the risks they cover in the residual market and offers incentives for companies to provide better service to the residual market. The Commissioner asserted in her decision that companies were able to manipulate the previously-existing residual market system to avoid an equitable share in the residual market risk.

The framework of the Commissioner's decision to move to "managed competition" will be developed over the next several months. She has promised at least one public hearing in which consumers, advocates, industry representatives, producers and other interested parties will be able to comment and "help shape the outcome of managed competition."