The Attorney General of Massachusetts, Martha Coakley, sent a letter to the Massachusetts Commissioner of Insurance Joseph Murphy today asking him to suspend Rule 29D which governs the state’s residual market system, the MAIP (The Massachusetts Auto Insurance Plan.)
Rule 29D reads as follows
D. Assignment Period
An Eligible Risk shall be insured by a designated ARC for a period of three consecutive years. The designated ARC may offer to continue an Eligible Risk’s assignment beyond the period of three consecutive years by offering to write a third or subsequent renewal.
Is an Eligible Risk that is unable to obtain insurance in the voluntary market at the end of the consecutive three-year period, or is unable to obtain an extension by the designated ARC he may reapply for coverage through the MAIP. Such reapplication shall be considered a new application and the Eligible Risk shall be assigned to a different Member such that the designated ARC is different than the previous ARC.
In the case of a non-resident military person, pursuant to Rule 26.A.1.c., the designated ARC need not renew if at the time of the renewal the policyholder is stationed in another state and his motor vehicle is not registered in Massachusetts.
In her letter, the Attorney General stated that the newly effective rule exposes MAIP customers to price shock through excessive down payment requirements.
This newly effective rule unfairly stacks the deck against consumers who are forced into the MAIP,” said Attorney General Coakley. “Under Rule 29D, even those MAIP customers with perfect payment histories and driving records can be ‘non-renewed’ by their insurance companies, and then forced to pay significantly higher premium deposits in order to get another MAIP policy. In addition, the ‘non-renewal’ notices being sent to consumers lack specificity and are likely to result in an increased number of uninsured motorists on Massachusetts roadways. We want to address this problem now, before it gets any bigger.”
Drivers who are non-renewed under this process are able to re-apply to the MAIP, but are assigned to a new insurance carrier. As a result, the Attorney General believes that these drivers pay a significantly higher premium deposit than they were previously required to pay.
The Attorney General’s office estimates that more than 100,000 vehicles were insured through the MAIP last year, costing consumers in the Commonwealth approximately $150 million in auto insurance premiums annually.
The Attorney General and CAR have formed a working group to discuss her concerns regarding Rule 29D. Participants in the working group are the Attorney General’s Office, CAR, the insurance industry, the Massachusetts Urban Agent Association and the Division of Insurance. The Rule, however, has already been in effect since April prompting the Attorney General to request its suspension pending the design of a better system.