Sentry/Middlesex Drops Mass. Auto Line Citing Residual Market

July 1, 2005

Middlesex Insurance Company, a member of the Sentry Insurance group, has informed Massachusetts Division of Insurance that it will stop offering private passenger auto insurance in the state after this year.

The company said it made the decision to exit the market after recent attempts to reform the state’s residual market, Commonwealth Auto Reinsurers, were thwarted by a court ruling.

The company will continue to write other personal lines, including homeowners and boat insurance, along with commercial lines.

“This was a difficult decision for Sentry as it will impact our valued policyholders. We had been optimistic that recent efforts to reform the market, particularly the way the high-risk pool is allocated, would be successful. Last week, a court overturned meaningful auto insurance reforms proposed by Commissioner of Insurance Julianne Bowler. The prospects for significant reform either by regulatory or legislative means are now uncertain, at best. The current situation has left Sentry no choice but to begin the process of withdrawal from the personal auto insurance market in Massachusetts,” Thomas Donnelly, vice president standard consumer products, stated.

The company writes about 22,000 vehicles in the state, or less than one percent of the market. It does not use independent agents but writes direct.

According to Edward Donahue, an attorney with the Boston law firm Ferriter Scobbo & Rodophele, said the company has weighed exiting last year but was persuaded to wait by state officials with hopes of enacting CAR reforms.

The company has been hurt by the current system of allocating high risks. Donahue noted that among its 22,000 vehicles, 5,000 are with a producer with a loss ratio of 245 that the company cannot drop.

CAR, the residual market organization, charges insurers leaving the state to cover three years of high risk pool losses for the risks it drops. In the case of Sentry/Middlesex, it will pay $3.6 million to leave.

The state has about 19 insurers writing private passenger auto coverage.

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