The premium finance company AICCO illegally canceled approximately 100 Mass. auto insurance policies
AICCO, Inc., a subsidiary of AIG or the American International Group, Inc. has agreed to pay $160,000 to resolve allegations lodged against it that the company cancelled certain premium financed auto insurance policies without giving the proper statutory notice.
According to the assurance of discontinuance filed last week in Suffolk Superior Court, the company illegally cancelled close to 100 Massachusetts auto insurance customers’ policies by sending the requests to insurance companies on three days after the date of the notice. As a result, AICCO has agreed to make payments of more than $125,000 to the approximately 100 of its auto insurance customers that the company had cancelled or tried to cancel before prematurely. In addition, the premium finance company will also pay an additional $35,000 to the Commonwealth.
“Massachusetts customers should receive proper notice of auto insurance cancellations so they can determine an appropriate solution for continued coverage,” AG Coakley said. “Our office will continue to ensure that these providers are complying with state insurances laws, not prematurely pulling the plug on these policies.”
For those unfamiliar with premium finances companies, these institutions are essentially like bank lending institutions except that they enable people to pay for their insurance premiums on an installment basis. The premium finance company advances the full premium on an insured’s insurance policy. The premium finance note contains a power of attorney to cancel the policy and recover any unearned premium if the insured defaults on any payments.
Under G.L. c. 175, §113A, premium finance companies can only legally cancel an automobile insurance policy’s 20-day notice.
The state’s statutes on premium financing are designed to ensure that a premium finance customer has adequate time in which to right their accounts prior to the cancellation of their policy. This permits an insured from having their insurance policies lapse thereby requiring them to remove vehicles from the road or to seek replacement coverage.
This is the third premium finance investigation that the Attorney General has conducted since 2011 that resulted in refunds to Massachusetts customers. In 2011, the AG announced that
For those interested in learning more about premium financing in Massachusetts, our Premium Financing Checklists may be the right place to begin.