Originally published July 17 2005
Massachusetts suburbanites tired of price control causing higher car insurance rates
by Mike Adams, the Health Ranger, NaturalNews Editor
Massachusetts has a unique system of price controls that makes car insurance slightly higher for suburban and rural residents, but the Christian Science Monitor reports that Gov. Mitt Romney is fighting to change this system that he likens to something from the Soviet Union.
The commonwealth's unique system of price controls results in suburban drivers and most rural residents paying a bit more for insurance, while many city dwellers pay less.
Specifically, Governor Romney wants to eliminate the state's fixed and established rate system, which he frequently compares to something in the Soviet Union.
In short, Massachusetts is stubbornly holding on to its title as the last garrison of auto insurance price controls.
Accidents and car thefts are more common in cities, leading to significantly higher premiums.
But Massachusetts does not allow insurers to charge above a certain price.
As a result, the Bay State forces insurers to take on high-risk customers they expect to lose money on, most of whom are urban dwellers.
Massachusetts switched to a market-based system in the early 1970s, but insurance rates in the cities skyrocketed.
While other aspects of Romney's proposal are popular, the worry about a dramatic increase in urban car insurance premiums has lead to the stalling of the plan in the Democratic-controlled state legislature.
"For a person in an urban area, $1,500, $1,800, $2,000 is an affordable policy; $6,000 is not," says state Sen.
They see the end of price controls as encouraging more firms to enter the state, fostering more competition, and reducing inefficiencies in the market.
"Whenever the auto insurance system is used as some kind of income redistribution scheme, disaster always results," says Robert Hartwig, senior vice president and chief economist of the Insurance Information Institute, an industry group.
Massachusetts has the fourth most expensive auto insurance rates in the nation, but not even reform advocates believe legislative action will significantly change the numbers.
The most expensive states for auto insurance are almost entirely in the Northeast, in part due to the region's high rate of accidents and high healthcare costs.
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