Why is Car Insurance in Massachusetts So Expensive?
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Residents of Massachusetts pay some of the highest auto insurance rates in nation due to the risks involved with covering motorists in the state which causes insurers to charge inflated premiums. Coverage providers base the cost that is charged for policies on the risk of suffering losses and unfortunately for motorists in the Bay State, the risks are higher than the majority of states, which translates into higher rates.
According to the Office of Consumer Affairs and Business Regulation (OCABR), the state of Massachusetts has more property damage and bodily injury claims per vehicle than almost all states. When claims increase, the cost of coverage is likely to follow. The high number of claims is believed to be attributed to the fact that the majority of policyholders are operating vehicles in densely populated and urban areas that lead to a rise in the likelihood of involvement in a traffic accident .
Also contributing to expensive auto insurance policies is the fact that with more claims comes a larger amount of monetary losses for insurers, forcing them to raise premiums to stay afloat. Aside from a large number of payouts for bodily injury and property damage, the cost of litigation also plays a role. A consumer's liability protection also covers defense costs in the event the other party sues for compensation for injuries and damages caused by the insured while operating an automobile.
With such elevated risks that come with insuring motorists, companies have no choice but to raise rates to have the financial strength to continue to do business in the state. Although, the opposite may apply as well; if claims and payouts begin to decline, premiums may decline as well. But until such a change occurs, motorists are likely to pay a higher price for automobile coverage than the majority of the nation.
Less Expensive MA Insurance may Now Be Available
Fortunately for Mass. residents, the state now allows insurers to compete among each other to gain the business of motorists. Prior to April, 2008, the Commissioner of Insurance would set rates for carriers under the "fix-and-established" system. Therefore, very few companies were in the marketplace and motorists had very little choices for coverage.
Now, under "managed competition", insurers are able to set unique rates in order to entice consumers and obtain new customers. This has made comparison shopping vital for motorists looking to find the cheapest policy available. Since the the "fix-and-established" system was replaced by "managed competition", numerous companies have entered into the Massachusetts car insurance market, giving residents an increased chance of finding savings and benefiting from competition among insurers.
Aside from competing for business by offering lower rates, carriers can now offer a discount for clean driving records which might lower premiums even further. On the same token, motorists may receive a surcharge for having certain violations or accidents on a driving record. All rates still must be submitted to the Commissioner of Insurance and approved, but it has been proven that competition benefits consumers and leads to savings.