Massachusetts DOI Rejects FAIR Plan Rate Increase

June 9, 2014

Massachusetts Commissioner of Insurance Joseph G. Murphy announced Monday his decision rejecting the Massachusetts Property Insurance Underwriting Association’s (“FAIR Plan”) request to increase its statewide home insurance rates by an average of almost 7 percent.

The Massachusetts Division of Insurance said the decision prevents hikes in home insurance premiums for FAIR Plan policyholders across the state. The FAIR Plan is the insurer of last resort for those consumers unable to obtain coverage in the voluntary market.

The decision follows a hearing process involving representatives of the FAIR Plan, the Office of the Attorney General and the DOI’s technical arm, the State Rating Bureau.

“I commend the Division of Insurance for its diligent oversight of these rates,” said Massachusetts’ Undersecretary of Consumer Affairs and Business Regulation, Barbara Anthony. “FAIR Plan consumers can rest easier this year knowing their home insurance bills will not be increasing.”

“As we do with all lines of insurance we regulate, the Division scrutinized this FAIR Plan filing to ensure that the request met both the statutory requirements and the rigorous consumer protections we have put in place,” Commissioner Murphy noted in announcing his decision.

“The FAIR Plan filing was disapproved for failing to meet these criteria. They simply didn’t make their case,” he said.

The DOI said it found that the FAIR Plan specifically failed to meet its burden of proof in two significant aspects of the filing. The FAIR Plan filing did not demonstrate that either the values of hurricane losses or the cost of reinsurance included in the rate filing fell within a range of reasonableness and would produce rates that are not excessive.

After receiving the FAIR Plan’s rate request filing in 2013, the DOI hosted regional listening sessions in Barnstable, Boston and Springfield that allowed consumers to voice their opinions on the proposed rate increases. The formal hearing commenced in Boston after those sessions were complete, and lasted several months.

The FAIR Plan last sought a rate hike in 2011, which was also rejected by Commissioner Murphy as non-responsive to the requirements of the statute.

The state-created FAIR Plan was designed to be the fall-back insurer for consumers who are unable to obtain insurance in the voluntary market. The Plan now provides home insurance to more than 40 percent of the residences on Cape Cod and the Islands and 12 percent statewide. All companies writing basic property insurance in Massachusetts are required to participate in the FAIR Plan and share losses in proportion to their market share.

Source: The Massachusetts Division of Insurance

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