Attorney General Maura Healey’s Insurance & Financial Services Division Chief, Glenn Kaplan, has formally requested Acting Insurance Commissioner Gary D. Anderson to reject the installment billing fee increases proposed for MAIP policies issued on or after August 1, 2015, by Commonwealth Automobile Reinsurers (CAR).
The change, if approved, will increase installment billing fees on MAIP policyholders from $6 to $8 per installment, late payment and cancellation fees from $25 to $29, and returned check fees from $25 to $29. The proposed fee increases have been recently been the subject of a March 8, 2015 Agency Checklists article: CAR Increases Installment Billing, Late Payment, And Bounced Check Fees.
Attorney General calls CAR’s proposed fee increases “outliers” and contrary to statute
The Attorney General’s letter claims that a review of the CAR survey of existing voluntary market fees, upon which the CAR Governing Committee approved the changes, shows that “CAR’s proposed fees are outliers.” The Attorney General based this conclusion on the fact that of the 34 insurance companies surveyed by CAR:
- “not a single company reported charging a late payment fee above the MAIP’ s current late payment/cancellation fee $25;
- “only three reported charging an installment charge above the MAIP’s current $6 per installment charge; and
- “only three reported charging a dishonored check fee above of the MAIP’s current $25 fee.
The Attorney General also advised the Acting Commissioner that “we believe CAR’s fee proposal is particularly inconsistent with sound public policy, as well as being contrary to statutory standards and inconsistent with accepted ratemaking practices.”
This proposed fee structure according to the Attorney General:
- circumvents pricing protections envisioned by our legislature,
- exceeds voluntary market norms, and
- lacks adequate supporting data and analysis.
Attorney General questions CAR’s methodology and territorial impact of fees
The Attorney General’s letter pointed out that while drivers in Brockton, Charlestown, Chelsea, Dorchester, East Boston, Everett, Holyoke, Hyde Park, Jamaica Plain, Lawrence, Lowell, Lynn, Malden, Randolph, Revere, Roslindale, Roxbury, Springfield, Winthrop and Worcester represent only about 15% of the voluntary market, they constitute about 40% of the drivers insured in the MAIP.
The letter then argued that CAR’s Billing Fee Study lacks “any explanation of its methods, procedures, assumptions, and data” and that CAR’s fee change proposal “is based upon estimates on top of estimates, with no explanation of how any of those estimates were derived.”
In the Attorney General’s opinion, CAR’s Billing Fee Study appears to justify increased fees simply based upon the extra expense allegedly associated with servicing MAIP policies. But, the Attorney General points out that in its 2013 MAIP rate filing, CAR stated that “[t]he expense of servicing a policy is basically the same regardless of whether it is written voluntarily or through the residual market.”
Attorney General asks Commissioner for CAR to offer electronic fund transfer as a payment option
The Attorney General also asked for the Acting Commissioner to order CAR to implement low or no cost electronic fund transfers for MAIP insureds paying in installments.
The Attorney General advised that “nearly every insurance company in Massachusetts will eliminate or reduce installment fees for voluntary customers who sign up for electronic billing and/or electronic funds transfer (“EFT”) payments.” But since CAR does not require carriers to make EFT payment options available to MAIP policyholders, the Attorney General believes MAIP customers are unfairly excluded from utilizing the installment fee waivers and discounts that voluntary market customers receive in the ordinary course.
Besides requesting the denial of the proposed rule, the Attorney General stated:
In the interest of fairness and equality, we further recommend that you direct CAR to help lower costs for residual market policyholders by giving MAIP policyholders access to the same billing and payment methods as voluntary customers, along with comparable EFT and e-bill discounts.
CAR fee increases became effective as a Rule change as of March 28
Article X of the CAR Plan of Operation provides that a Rule of Operation proposed by the Governing Committee shall become effective:
- either upon the approval of the Commissioner or
- upon the expiration of thirty days from the time of submission provided that
- no public hearing has been requested on the Rule and
- the Commissioner has not previously disapproved the Rule
In this case, the Commissioner has neither approved nor disapproved this proposed rule change and no public by a CAR member has been requested. Therefore unless the Commissioner acts to stay or disapprove the Rule the new fees would have become a part of CAR’s Rules of Operation on Saturday, March 28, 2015.
The Attorney General’s letter recognizes the likelihood that the Rule change may take effect by the simple expiration of the thirty day approval period as it states as its final footnote: “If you have approved CAR’s proposal by the time this letter reaches you, we ask that you reconsider your decision based on the information provided in this correspondence.”
Below you can access a copy of the letter from Assistant Attorney General Kaplan to acting Commissioner Anderson.