Massachusetts Senate to Launch Inquiry Into Home Insurance Rate Hikes

The Massachusetts Senate’s oversight body is launching an inquiry into homeowners insurance rate increases approved by the Division of Insurance (DOI) this year after a brutal winter led to increased claims activity.

State Senator Mike Barrett (D-Lexington), chair of the Senate Post Audit and Oversight Committee, says he wants to hear explanations from insurance executives and DOI regulators, and comments from consumer advocates.

So far, several large property insurers have received DOI approval for rate hikes. Mapfre USA Corp. (formerly Commerce Insurance), the state’s largest home insurer, will increase rates by 8.9 percent on average beginning Aug. 1. Mapfre USA, which insures more than 214,000 homeowners in the state, increased rates by 2.3 percent last year. Safety Insurance, which covers nearly 150,000 homeowners in Massachusetts, will raise rates by 9.1 percent on average starting in December. Bunker Hill Insurance will increase its rates by an average of 7.8 percent.

“Last winter, insurers shelled out real money to pay for damage from ice dams and water leaks — but hikes of eight and nine percent deserve a very close look by regulators and legislators,” Barrett said. “The industry is supposed to set aside reserves in advance for the occasional tough year. I hope the Division of Insurance went to town with its due diligence before approving these big increases. Let’s see if they did. We want to make sure residents are protected.”

Barrett said the committee will hold an oversight hearing in September and hopes DOI will provide extensive background on the rate hikes.

“I find the recent increases to homeowners insurance rates troubling. Residents pay their premiums each year and rely on their insurance to cover a portion of the damages for circumstances outside of their control,” said Senate President Stan Rosenberg (D-Amherst). “After already contributing to considerable out-of-pocket costs, homeowners should not be penalized for using their insurance.”

“I understand the severity of our most recent winter but how does one bad winter result in rate hikes that in some cases are more than three times normal yearly increases? I hope Senator Barrett and his committee can shed some light on how these rate hikes were approved,” said Rosenberg.

According to a 2013 report from the Division of Insurance, there are 1.86 million homeowners insurance policies across Massachusetts. Typical annual rates for Massachusetts homeowners are in the range of $1150-$1250. The new charges could add another $100 or more a year. Average yearly increases in homeowners insurance rates have been around 2-3 percent.

Barrett noted that state law requires insurers to supply DOI with evidence that rates are not “excessive, inadequate, or unfairly discriminating.” In evaluating rate requests, the Division takes into account past or anticipated losses and past or anticipated catastrophic events, and allows for a “reasonable” expected profit margin. The Division itself isn’t required to hold a hearing unless it anticipates rejecting requests, which was not the case for recent home insurance rate increases.

The Massachusetts Senate’s Post Audit and Oversight Committee is a unique body charged with overseeing implementation of state programs, with the power to issue subpoenas to aid in investigations.