Massachusetts Supreme Judicial Court Issues Ruling on Residual Market Auto Reform

The Commerce Group, Inc. (NYSE:CGI) - The Massachusetts Supreme Judicial Court today issued its decision in the case of The Commerce Insurance Company v. Commissioner of Insurance, ruling (on appeal from the Superior Court) that the Massachusetts Commissioner of Insurance has the authority to create an assigned risk plan to manage the allocation of high-risk drivers in the state.

"Although the Court concluded that the Commissioner has the authority to implement an assigned risk plan, the decision by no means requires her to do so," said James A. Ermilio, Executive Vice President of Massachusetts Insurance Operations for The Commerce Insurance Company. "In fact, since the Romney-Healey Administration first presented their assigned risk plan in 2004, insurance premiums have fallen markedly and are expected to fall again in 2007, while the residual market deficit has plummeted and fraud fighting initiatives have proven extremely successful. In addition, the Commissioner has redistributed the involuntary market burden among insurers."

"Taken together, these changes remedied the perceived inequities in the system and have greatly eliminated the need for the overhaul proposed by the Romney-Healey Administration. It would make no sense for the Commissioner to continue with her outdated plan to implement an assigned risk plan, which consumer advocates and legislators have characterized as a 'consumer unfriendly' system," said Ermilio. "Consumers would find themselves rejected by companies of their choice and assigned involuntarily to another carrier for reasons such as credit, education or other non-driving related factors."

In the past, Ermilio has characterized the Commissioner's proposal as potentially disruptive for agents, consumers and the industry and makes it easier for companies to leave the state. Currently, Massachusetts operates under a joint underwriting system where agents are assigned to insurance companies versus the assignment of individual risks. Pending further information from the Commissioner, Mr. Ermilio noted that the Company is unable to determine the overall impact of this decision.

From: Business Wire (www.businesswire.com)