Back in 1989, the average auto insurance expenditure in Massachusetts was $728.39 when the national average was $551.95. As of 2010, the average figure for Massachusetts stood at $890.83 representing an increase of 22.3 percent over the 21 years. In the same time the national average went up to $791.22, a rise of 43.3 percent. As of 2010, it is still more expensive to buy auto insurance, on average, in Massachusetts compared to the national average. However the gap has closed.
Massachusetts went from being ranked the 5th most expensive state in terms of auto insurance expenditure in 1989 to occupying the 12th rank in 2010. Despite this improvement Massachusetts is not a very competitive state when it comes to auto insurance. The National Association of Insurance Commissioners gave Massachusetts a Herfindahl-Hirschman Index (HHI) score of 1260 (the Department of Justice considers any score under 1000 as competitive and scores above 1000 are considered moderately competitive). That’s the sixth worst score in the country.
A November 2013 study released by the Consumer Federation of America found that states that had stringent auto insurance regulation in place had the most success in keeping insurance rates low. Moreover, these states achieved lower rate increases without adversely affecting profit margins for insurers. One of the key features of better regulation is a Prior Approval (PA) system which requires insurers to file rates and obtain approval before they can be used in the market. The study found this to be one of the most effective ways to keep costs low for consumers. In contrast, Massachusetts has a File and Use (F&U) which requires insurers to file rates without any requirement for approval.
Auto insurance expenditure in Massachusetts has traditionally been more expensive than the national average. Instituting better regulation will see consumers reap the benefits of lower rates.