Massachusetts Automobile Insurers Battle for Higher-Risk Drivers.

Byline: Bruce Mohl

Apr. 10--Massachusetts auto insurers have always lusted after good drivers, the kind who pay annual premiums and almost never file a claim. But increasingly they are focusing their attention and resources on higher-risk drivers, those who are more likely to file claims and who no insurer voluntarily wants to cover.

It may seem odd that insurers would compete for what in essence are bad drivers, but companies are finding that unless they battle for the best of the bad they could end up with a disproportionate share of the worst. It's a zero-sum game, with millions of dollars in losses riding on the outcome.

Commerce Insurance of Webster, for example, allegedly offered an agent $100,000 and gave him an all-expenses-paid trip to the Cayman Islands. The goal: to lure him and his roster of "better" higher-risk customers away from a rival, according to regulatory filings and industry sources.

There are also indications that auto insurers are going to great lengths to dump their really bad customers on other companies. Arbella Mutual Insurance Co. of Quincy has been accused of funneling close to $1 million to an agent of Hanover Insurance of Worcester. The money allegedly helped that agent buy up Arbella agencies with unusually high losses, in effect transferring losses of $3 million a year from Arbella.

In many ways, it's a game of hot potato with millions of dollars at stake. Like Castor oil, auto insurers have to swallow drivers in the state's residual, or high-risk market, in proportion to their share of the overall Massachusetts market. The trick is to not get stuck with the real losers, so sometimes it's better to wheel and deal for the best of the worst drivers rather than get stuck with the absolute worst.

Several major companies, including Liberty Mutual, Amica Mutual, and Premier today plan to ask the agency that oversees the residual market to put an end to the unusual competition.