Their efforts are aimed at mending a personal auto insurance system that has few carriers and a premium pricing system that stifles competition because of too much regulation, according to executives with various groups..

Working to develop a scheme is the Concerned Industry Committee, a combination of insurance carriers and industry associations formed a few months ago after prompting from Massachusetts Insurance Commissioner Julianne M. Bowler. The committee's mission is to present a plan to first reform the state's residual market.

Unlike other states with residual pools where insurers share equally in good and bad risks, the state sells insurance through exclusive representative providers. These agents are assigned a single carrier. The controls over rates allow no variation in pricing or coverage, and therefore, no competition between the exclusive representatives, independent or direct agents. In turn, there is no control over underwriting or the distribution of risks.

"The perception is that rates in the view of the insurers are inadequate," said Jim Harrington, executive director of the Massachusetts Insurance Federation, based in Boston, which is part of the committee. "We and others are engaged in reform of the residual market because of its inequities. It needs to be fixed."

"The system is crazy," said Frank O'Brien, New England regional manager for the Property Casualty Insurers Association of America, Des Plaines, Ill. "What we are trying to do is put more sanity back into the system. The current system is so complicated that it defies anyone to explain it succinctly or rationally."

The reform efforts have the backing of Massachusetts Gov. Mitt Romney, who said he would make auto insurance reform an important piece of his administration's agenda this year, said Chris Goetcheus, a spokesman for the Massachusetts Division of Insurance.

Under the current system, noted Frank Mancini, president of the Massachusetts Association of Insurance Agents, there is a two-tier system of agents. He said in many cases the exclusive representative provider can write as much business as he or she wants without penalties from the carriers. On the other hand, traditional independent agents are restricted because of the nature of their relationship with carriers.

"The average customer does not see a difference, unless they ask for a policy with a specific carrier," said Mr. Mancini.

"We see a lot of stress in the market place," he noted. "There is not a great deal of capacity. Our aim is to stabilize the market place and eliminate the two-tier system."

Since Ms. Bowler became commissioner a year ago, the department has worked to find a method of reforming the residual market system before taking the next step at reforming the entire system, said Mr. Goetcheus. Watching with concern over the loss of carriers over the years, Ms. Bowler felt there was an urgent need to reform the market, he said.

It was Ms. Bowler who asked members of the industry to come up with some answers to fix the residual market first, which the industry cited as a major obstacle to any additional reforms.

"The premise is that you have to fix the infrastructure before you can discuss competitive rating," Mr. Goetcheus said. "You can't move into a house without a sound foundation."

Recently, the PCI said that carriers can not be held at fault for the declining number of companies writing business in the state, and for the fewer offerings of premium discounts to good drivers in Massachusetts.

A major part of the problem, say association executives, is that the industry is heavily regulated, with carriers having to go before the insurance department for the slightest rate change.

Recently, the division granted the state's 19 insurers a 2.5 percent increase for 2004 after the carriers requested an average increase of 12.4 percent. The increase is currently being appealed by the state's Attorney General who feels the carriers should not get an increase.

Mr. O'Brien said Massachusetts is unique from any other state in the country in that it is heavily regulated in all respects and the commissioner sets all rates. The state has the fewest number of insurers in the country, he said, even less than New Jersey, which has more than 50 carriers on its books writing insurance in the state.

Recently, only three carriers submitted plans to offer discounts to good drivers, while the others opted not to offer discount plans.

"The fact that companies had to file for discount plans and go through a hearing process to get approval bespeaks the uniqueness and difficulty of this system," said Mr. O'Brien.

But, he added, state officials have recognized that there is a "meltdown" in the industry and they are working on reform.

Both Mr. Harrington and Mr. Mancini said the committees report on reforming the residual market will be presented within the next two-to-three weeks.