Mass. AG Questions Insurer’s High Risk Insurance Auto Rates

March 6, 2009

Massachusetts Attorney General Martha Coakley wants a public hearing to review the auto insurance rates of a new company entering the market in Massachusetts.

Occidental Fire and Casualty Insurance Co. of North Carolina is asking to charge Massachusetts drivers rates that are based on the rates companies charge “high risk” drivers and to add additional fees and surcharges. According to Coakley, the insurer did not provide the sufficient supporting data to justify its proposed rates or fees and surcharges.

Coakley said she is especially concerned because Occidental is targeting inner city drivers who may not have as many choices as other drivers. “We have learned recently that many of the auto insurance providers in Massachusetts are not renewing their contracts with many inner city agents, or agents in less affluent, minority areas,” said Coakley. “If Occidental were the only company offering insurance in these areas, many consumers will be steered into paying these unjustified and excessive premiums.”

State law gives Coakley’s office the right to challenge proposed auto insurance rates. Once the Attorney General’s Office challenges a rate proposal, the state insurance commissioner cannot approve an insurer’s rates without first holding a public hearing.

Occidental made its initial rate filing on Feb. 13, 2009. The company proposes to charge base rates that are 10 percent higher than the base rates charged by the Massachusetts “residual market” last year. The residual market is the pool of drivers that insurance companies consider to be “high risk” and generally don’t want to voluntarily insure.

Attempts to reach Occidental for response were not immediately returned.

The Attorney General’s Office is also challenging various provisions of Occidental’s filing as unfair or otherwise illegal in Massachusetts. Some examples are:

The company proposes to add a 35 percent surcharge on any policyholder who cannot verify his or her driving record. This includes any official record from a foreign country that cannot be obtained in English. Under this policy, any recent immigrant from a non-English speaking country may not only be charged the inexperienced driver rate, but an additional 35 percent surcharge, which the Attorney General challenges as unjustified.

Occidental wants to charge a $25 “policy fee” to “cover the costs required to attract and write a customer,” and $8 installment fees, which Coakley says is in violation of Massachusetts law if the fees are not justified.

Occidental requires consumers to pay a general comprehensive deductible in addition to a glass deductible on glass claims, which Coakley says in violation of Massachusetts law.

Occidental may prevent its consumers from reinstating their policy after they receive a notice of cancellation for nonpayment, contrary to Massachusetts law.

Sources: Massachusetts Attorney General

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