EagleTribune.com, North Andover, MA

BOSTON - Auto insurance rates will fall by at least 10 percent next year for about one quarter of the state's drivers, under plans unveiled by insurance companies yesterday.

Many of the state's auto insurers also will offer extra incentives such as "good student" discounts and for use of public transportation to lower costs.

The state's five largest insurers will offer a 10 percent or greater reduction for policies with renewal dates of April 1, 2008, affecting about 1.2 million of the state's 4 million drivers, according to the state Division of Insurance.

Insurance Commissioner Nonnie Burnes called the first test of the state's new competitive auto insurance market a "success."

"I'm seeing it not only in the rates but in the flurry of activity to provide additional (discount) products," Burnes said. "And companies are trying to make sure they try to retain customers."

Under the old system where the state set one rate for all insurers, rates fell by 11.7 percent last year. Some drivers did better, others did less well. The average good driver paid $899 last year to insure a car.

Burnes would not say how next year's rates match up, saying comparing last year's state-set premiums with those offered now under market conditions was not fair.

Still, that didn't stop insurers yesterday from touting their discounts. Liberty Mutual, which covers about 8 percent of the state's drivers, said its good drivers would see a 10.7 percent reduction off last year, the largest cut by a major Massachusetts insurer. Commerce Insurance, the state's largest insurer with 31 percent of all drivers, offered an 8.1 percent average reduction.

Those insurers will offer a variety of discounts. For instance, Liberty Mutual is offering two discounts aimed at urban drivers: 15 percent to drivers who use public transportation and 13 percent to drivers who travel less than 10,000 miles a year. Students who earn a B average are eligible for a 10 percent discount.

Leonard Degnan, a Lawrence insurance agent, said the new rate-setting system could cause problems for urban drivers and drivers across the region.

For one thing, he said the predominance of homeowner discounts would not help Lawrence drivers, many of whom either rent or live in homes not insured by the companies offering auto discounts.

Also, under the old system, it was easier to compare rates from customer to customer. With companies allowed to offer their own rate reductions and various other cuts and without a statewide database to compare rates, Degnan said consumers may have to check with multiple agencies to get the best deal.

Still, he said the rate reductions appeared to be good news.

"What it means is, overall, rates are going to go down for almost everybody," Degnan said.

Consumer advocates yesterday said drivers would have fared better had the state set rates.

Deirdre Cummings, legislative director for the consumer group MassPIRG, said drivers on average would have likely gotten at least a double-digit reduction in 2008 if the state hadn't gone to managed competition. That, she said, is because insurers are paying out less in claims and have lower costs.

"We're switching from a system where rates are going to go down on average 10 percent to 15 percent for one where the average is less," Cummings said.

Burnes insisted that claim was not supported by evidence and was an "urban myth."

MassPIRG had raised concerns that credit scores and other personal financial information could be used in determining what drivers pay. Although Burnes banned the use of credit scores, Cummings said the filings, with greater discounts for homeowners and owners of multiple cars, shows her fears were realized.

"We're moving from issuing policies based on a driver's record to who you are," Cummings said.

Burnes said the discounts are not discriminatory. She pointed out that one company was offering a discount to people who have renter's insurance.

And, she said, offering discounts to homeowners or people who own more than one car makes sense in a competitive market. It means the company pays less to acquire new business.