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For decades, Massachusetts has been singular in the nation regarding auto insurance: The department of insurance there has dictated auto insurance rates across the board.

Every year the insurance department would announce new auto rates mandating increases or decreases. Auto insurers that wanted to sell policies in Massachusetts had their hands tied; most decided not to bother. There was no reason for drivers to comparison shop.

As a result, a mere 19 companies currently offer auto policies and four insurers hold 60 percent of the market. Drivers are socked with the fourth-highest insurance bills in the nation. It doesn't help that Massachusetts drivers are also No. 1 in fatal car accidents, according to the National Highway Traffic Safety Administration.

Consider this situation: According to MASSPIRG, a consumer advocacy group in the state, in 2007 the car insurance industry's proposed rate change in Massachusetts was -3.7 percent; the commissioner mandated a rate change of -11.7 percent, forcing insurers to take a bigger cut. It's been going on like that for years.

In most other states, auto insurers set their own prices according to market conditions and file their rates with the state. They use "rating factors" to price individual policies and often calculate premiums based on a combination of driver location, driving record, credit history and other personal factors.

The Massachusetts way

In Massachusetts, your driving record, years of experience, and your vehicle's use and safety features are the only rating factors allowed in an effort by the state to make sure good drivers get the lowest rates, urban drivers didn't pay huge bills based on location and that socioeconomic factors aren't used in pricing. Suburban and rural drivers subsidize the more expensive urban Massachusetts drivers, and they will continue to do so.

Now the Bay State is set to dip its toes into auto insurance reform. Masschusetts insurance commissioner Nonnie Burnes introduced a plan called "managed competition" that allows insurers to set their own rates (still subject to insurance department disapproval). Auto insurers are banned from using factors such as gender, education, occupation, homeownership and credit history in setting rates. Age can be used only for giving discounts to drivers 65 and older.

Insurers filed their new rates in November 2007 and they will take effect in April 2008. When everything was in, the average statewide change was a drop of about 6 percent. Liberty Mutual and USAA filed rate reductions of more than 10 percent and one company, Peerless Insurance, a subsidiary of Liberty Mutual, announced it will return to Massachusetts next year after a 20-year absence.

Ways around the Massachusetts way

MASSPIRG says there are still ways insurers can skirt the banned socioeconomic factors. It points out that insurers can look at how much insurance a driver purchased in previous years and whether they pay with an installment plan; those things can give hints as to the driver's economic status.

MASSPIRG also questions just who will actually receive a reduction of 6 percent, even among good drivers.

Other auto insurers are watching with interest to see how "managed competition" shakes out. So far, the nation's two top auto insurers, State Farm and Allstate, show no signs of opening shop in Massachusetts, nor do direct sellers like GEICO. Some may simply never want to enter a market where they can't set rates using personal factors like credit score, which insurers say is a good indictor of whether you'll file claims in the future.

However, in a coup for the state's auto reform, Progressive, the nation's third-largest auto insurer, announced in February 2008 that it will begin offering auto insurance for Massachusetts residents online in May 2008. Progressive said the rates it has filed are 18 percent lower than the average rates paid by Massachusetts drivers in 2007.