Massachusetts insurance regulators on Friday rejected FAIR Plan’s request to raise rates by an average of more than 7 percent.
FAIR Plan, whose official name is Massachusetts Property Insurance Underwriters Association, serves as the state’s home insurer of last resort. It is designed to provide coverage at reasonable rates to consumers who cannot obtain it in the open marketplace. This includes about 60,000 families on Cape Cod and other coastal areas where insurers have declined to issue home insurance policies.
The law requires that rates through the FAIR Plan are not excessive. Overall, FAIR Plan offers coverage for some 150,000 Massachusetts families.
The insurance industry sought Insurance Commissioner Joseph Murphy’s permission to raise rates for the FAIR Plan by an average of 7.4 percent for homeowners across the state and by 10 percent in New Bedford, Fall River, Quincy, Lawrence, Brockton, Lynn, and parts of Boston. Homeowners on Cape Cod faced a 6.7 percent rate hike under the industry proposal.
Insurers have argued in the past that new hurricane models show Massachusetts is more vulnerable to hurricane damages than previously estimated. The FAIR Plan also has not received a rate hike in around six years.
But Commissioner Murphy stated that “Ensuring that insurance rates are commensurate with the benefits provided at the most reasonable cost is the division’s priority.”
“If you want to raise rates on Massachusetts consumers, you had better do your homework and be prepared to justify the increase that you are seeking,” according to Commissioner Murphy.
Massachusetts Attorney General Martha Coakley welcomed Commissioner Murphy’s decision, noting that “Consumers in the FAIR Plan have nowhere else to go and should not be required to pay unjustified rates.”
“We are very pleased that the department of insurance recognized that the insurance companies were using unexplained hurricane models that we believed were incorrect for Massachusetts,” Coakley said. “The rejection of this proposal will save thousands of Massachusetts residents hundreds of dollars and provide them with solid, more affordable insurance.”
Attorney General Coakley’s office, which represents insurance rate payers, had earlier asked Commissioner Murphy to reject the FAIR Plan’s proposed rate hikes on March 30.
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