Auto insurer Safety Insurance Company agreed to pay more than $200,000 to settle allegations that it overcharged hundreds of inexperienced drivers by failing to reduce premiums as consumers gained additional years of driving experience.
The settlement was announced Tuesday by Massachusetts Attorney General Martha Coakley.
The settlement, filed in Suffolk Superior Court, requires Safety Insurance to pay $200,000 in restitution and make additional payments to automobile and motorcycle insurance policyholders pending the results of a review of accounts supervised by the attorney general’s office.
“This is yet another example of an insurance company failing to calculate premiums correctly,” Coakley said. “While we are pleased that Safety agreed to refund the alleged overcharges, this case underscores the need for auto insurance transparency and oversight.”
Under the terms of the settlement, Safety is scheduled to refund the alleged overcharges, plus 6 percent interest, to affected policyholders, in the fall of 2013.
The settlement also requires Safety to correct its business practices and pay $45,000 to Massachusetts. The attorney general’s office said Safety cooperated fully with the investigation.
Under Safety’s private passenger auto insurance rating manual, the company was required to adjust policyholder premiums as certain drivers gained additional years of experience. However, the attorney general’s office alleged that Safety failed to make many of these adjustments, called “mid-term class changes,” resulting in overcharges to hundreds of policyholders. Most of the allegedly affected drivers were in their teens or early twenties.
The attorney general’s office said its staff is now evaluating whether other insurance companies have properly adjusted policyholder premiums as inexperienced drivers gained additional years of licensure.
Was this article valuable?
Here are more articles you may enjoy.