(FORTUNE Magazine) – While Massachusetts Governor Michael Dukakis campaigns for President on his state's economic successes, one group of companies is bailing out of the Bay State: auto insurers. Fireman's Fund recently decided to hit the road after losing $31 million on its auto business last year. Now Kemper Group, with projected losses of $37 million for 1987, wants to pull out too. Massachusetts has the highest rate of car theft in the U.S., and fully 54% of the drivers fall into its high-risk category. State law prohibits insurance companies from charging bad drivers higher premiums. Instead the insurers put all the high risks into a pool, and the companies pay a share of those claims according to how much insurance they sold in 1982. In almost every other state, insurance companies determine rates, subject to approval by the state. In Massachusetts the insurance commissioner sets the premiums. Insurers say these rates do not cover costs, and want a 32% increase. Since Massachusetts auto rates are already among the highest in the U.S., they are unlikely to get even half that. It gets worse. Dukakis's miracle state penalizes insurance companies that try to leave. Fireman's Fund agreed to pay $45 million as an exit fee. This amount will help cover Fireman's share of the high-risk pool over the next few years.

CHART: NOT AVAILABLE CREDIT: ROBERT PIZZO SOURCE: INSURANCE INFORMATION INSTITUTE CAPTION: Why Auto Insurers Hate Massachusetts DESCRIPTION: Average rate increase, 1984-1987, 1986 claims per 100 cars for property damage, collision and comprehensive, for the United States and for Massachusetts; Color illustration: Speeding vehicle.