Under Massachusetts new managed competition process to set auto insurance rates, previously discussed here and here, the State’s 19 automobile insurance companies were invited to make initial rate filings and then to submit amended rate proposals after reviewing their competitors’ proposals. It was expected that the insurance companies, after reviewing their competitor’s proposed rates, would lower their rates to offer consumers better deals. However, the Massachusetts Attorney General’s office has noted that very few companies lowered their rates, and, that on average, the filed rates are higher that what the rates would have been under the prior system. Additionally, the Attorney General believes that several of the insurance companies appeared to have increased their base or manual rates which are used to determine the premium each policyholder pays.
While 8 insurance companies have been approved by the Division of Insurance to begin offering their rates, discounts and coverage options beginning on April 1, 2008, the remaining 11 are subject to review. Attorney General Martha Coakley has ordered rate hearings for 5 insurance companies she believes will, in the aggregate, overcharge Massachusetts drivers by $100,000,000. Some of the alleged defects in their filings include the use of inflated loss trends, charging consumers for contingent commissions and excess profit loads. While insurers with small market shares have been spared rate hearings, some have come under criticism by Attorney General Coakley for utilizing unorthodox methods to project property damage coverage’s upward even though property damages have declined substantially in recent years, and for having expenses in the filings that are significantly higher than the average expense of companies in the market.
Attorney General Coakley is also now requesting that the Massachusetts Commissioner of Insurance, Nonnie Burnes, require additional documents from all insurance companies and more closely review discount and rating factors to ensure that the insurance companies are not attempting to circumvent the regulations on socio-economic rating factors. The first adjudicatory rate hearing is currently scheduled for January 9, 2008.
We will continue to monitor these developments and provide updates at InsureReinsure.com.
