FLEX-RATING SYSTEM SUGGESTED AS SOLUTION TO MASS. AUTO WOES

FLEX-RATING SYSTEM SUGGESTED AS SOLUTION TO MASS. AUTO WOES

Some Republican state lawmakers say the state should step back from its role as rate-setter for Massachusetts' troubled automobile market.

The Republicans, members of the House of Representatives, said they will file a bill aimed at allowing insurers to set auto rates with a band or range set by the insurance commissioner.This system, also referred to as flex-rating, has been instituted in a number of states including New York.

The state's largest auto insurer, however, appears more on track with officials of the Democratic administration of Gov. Michael Dukakis than the Republicans.

Liberty Mutual Ins. Cos. favor competitive ratings, a spokeswoman said, but such a program would be difficult to implement (now) because of rate inadequacy.

Gov. Dukakis and his insurance commissioner, Roger Singer, agree that a competitive auto market is theoretically a good idea. But Mr. Singer said recently that the immediate formation of such a market would be impossible given the chaos in the current Massachusetts auto market.

Liberty also sees the situation that way, the spokeswoman said. Setting up a competitive market right now would cause a severe shock to the system.

As the system comes closer to rate adequacy, it becomes more viable to implement competitive rating system and could ultimately work to the benefit of Massachusetts drivers, the Liberty spokeswoman said.

Gov. Dukakis pointed to a failed 1977 attempt to establish a competitive rating system as indicating such cost-setting must be implemented slowly.

The Republican representatives said an auto reform package filed by the Dukakis administration is tinkering around the edges of the auto market discord. They would increase penalties for auto insurance fraud, exempt anti- theft devices from the state sales tax and have district attorneys name specially designated auto fraud prosecutors.

Most observers believe the current system - which is driving some companies away because of combined inadequate rates and residual market deficits - needs reforms. The question is whether the Democratic-controll ed Legislature is ready to move - rapidly or slowly - in the direction suggested by the minority Republicans.