Mass. AG Coakley Urges Greater Transparency for Auto Insurance Surcharges

December 10, 2013

In an effort to implement greater protections and transparency for drivers who face auto insurance surcharges, Massachusetts Attorney General Martha Coakley is urging the state legislature to implement changes to the law that would prevent consumers from paying unwarranted costs.

In a letter sent to the state legislature’s joint committee on financial services last Friday, Coakley expressed support for two House bills that would ensure that drivers who are wrongfully determined to be at fault for auto accidents are not required to pay additional premiums.

She also showed support for a Senate bill requiring insurers to disclose certain surcharges and how drivers can take steps to eliminate them.

“All too often our office has found that insurers have failed to refund drivers who were overcharged when it comes to their auto insurance, revealing troubling defects in policy processing systems,” Coakley said.

All too often our office has found that insurers have failed to refund drivers who were overcharged when it comes to their auto insurance.

“In order to boost transparency and oversight, we urge the Committee to give these bills a favorable recommendation,” she said.

Massachusetts’ House Bill 919, An Act Relative to Stay a Surcharge Pending Appeal, would halt an insurer’s at-fault surcharge determination while it is being appealed to the state’s Board of Appeal.

Currently, insurers are allowed to impose surcharges while consumers are waiting for their surcharge appeal hearings. If the Board of Appeal later vacates the surcharge, the insurer is required by law to refund the surcharge to the consumer, but the attorney general’s office said it has found that many insurers have failed to provide consumers with appropriate refunds.

The attorney general’s office said it began its investigation into auto insurance overcharges after receiving a complaint from a Met P&C customer whose surcharge had been vacated by the Board of Appeal in 2010. The investigation revealed that by 2012, Met P&C failed to refund the consumer more than $700 in surcharge premiums, which led to a settlement in January.

In March, four auto insurance companies — The Premier Insurance Company of Massachusetts, Plymouth Rock Assurance Corporation, Pilgrim Insurance Company, and Massachusetts Homeland Insurance Company — settled with the attorney general’s office over similar allegations. The carriers will collectively make payments to Massachusetts totaling $170,000.

Additionally, House Bill 848, An Act Relative to Motor Vehicle Insurance Surcharges, would require insurers to reimburse the consumer the amount overcharged, with interest, if the Board of Appeal overturns an at-fault determination. Both bills amend section 113 of chapter 175 of the General Laws.

Another pending legislation, Senate Bill 438, An Act Promoting the Transparency of Automobile Insurance Surcharges, would require insurers to publicly disclose their merit rating plans, list surchargeable events, as well as the circumstances under which surcharges may be removed or refunded. Providing this information would enable consumers to better compare companies and choose those companies which are likely to view their driving records most favorably.

The Senate bill would also require insurers to itemize the premium charges associated with each accident or violation on the policyholder’s driving record.

The attorney general’s office said it is continuing to evaluate other auto insurance companies’ surcharge practices. Massachusetts consumers who paid surcharge premium to a carrier that was not refunded or was not fully refunded after the surcharge was vacated by the Board of Appeal or otherwise eliminated should call the attorney general’s insurance and financial services division at 1-888-830-6277.

Source: Massachusetts Attorney General’s Office

Massachusetts Attorney General’s letter to Joint Committee on Financial Services

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