A new Bill on the Hill targeted at “bait and switch” auto insurance quoting tactics by certain direct writers
On July 11th, the Massachusetts Legislature’s Financial Services Committee heard testimony on a proposed bill aimed at curtailing alleged deceptive auto insurance quoting practices by certain direct writers.
Entitled H.3682, “An Act relative to fair and accurate motor vehicle insurance quotes”, the proposed legislation would require all insurers offering auto insurance quotes in Massachusetts to verify an applicant’s Massachusetts driving history via a reliable third party database prior to issuing a quote or accepting a down payment on a policy.
The following is a reprint of the Bill’s text courtesy of the Massachusetts Legislature:
Chapter 175 of the General Laws is hereby amended by inserting after Section 4E the following section:
Section 4F. No insurer who utilizes an applicant’s driving history as a rating or underwriting factor for private passenger motor vehicle insurance in the Commonwealth shall provide a quote to an applicant, or accept a down payment for a policy, without first verifying said applicant’s Massachusetts driving history through the use of a reliable third party database.
MAIA President & CEO gave testimony during the hearing in support of the Bill
Massachusetts Association of Insurance Agents President and CEO Nicholas A. Fyntrilakis testified at the hearing on behalf of many agents and consumers who have been the affected by these practices.
According to Mr. Fyntrilakis, certain online direct writers are using “bait-and-switch” tactics to lure customers away. These direct writers are quoting premiums by relying only on an applicant’s self-reported driving history. In many cases these insurers are accepting down payments or sometimes a purported full policy premium based upon these quotes. After issuing these policies, the companies verify the customer’s driving history and, in many cases, dramatically increase the consumers rate based upon the official driving record.
Driving history is a critical factor for most insurers in determining auto insurance premiums,” explained Mr. Fyntrilakis. “That’s why the accepted, responsible industry practice is not to provide a quote until after checking the applicant’s Massachusetts driving history through a third-party database. This bill is about holding everyone; agents, traditional and direct insurance providers alike, to the same common-sense standard.”
Online portals for soliciting auto insurance quotes are tools available to consumers who wish to compare costs and coverage, but accuracy should not be sacrificed for the sake of expediency,” added Mr. Fyntrilakis.”
In addition to Mr. Fyntrilakis, MAIA representatives also gave testimony during the hearing as to the inherent unreliability of using self-reported driving histories for auto insurance quotes. In particular, the MAIA noted that often auto insurance applicants innocently provide incomplete or inaccurate information when submitting information for a quote.
For example, the MAIA noted during its testimony that reviewing an applicant’s driving history is “…a highly technical area and even the most well informed consumer may not be able to distinguish between the legal definition of a “minor” or a “major” accident, or even know with certainty the number of surchargeable offenses on their record.
Mass. agents also testify in support of the bill
While the MAIA represented all of its member agents at the hearing, one Mass. agent also voiced his concerns about the duplicitous practices he has seen certain direct writers employ.
Agents throughout Massachusetts have had customers come back after trying to obtain insurance through online direct providers. When they are provided the initial quote, the customer thinks they’ve found a great deal and of course wants to move forward with the policy. But after the company gets them to sign up and then runs their driving history, their rates can rise significantly,” stated Thom DePaulo, President of the Meridian Insura nce Agency.
Rep. Michael J. Finn is aiming to help consumers
H.3682 was filed by Michael Finn, a State Representative from Springfield (D-West Springfield), and also the current Vice-Chair of the Financial Services Committee. In commenting on his decision to present and support this bill, Mr. Finn says it is all about helping the consumer.
“This is a consumer protection issue. Consumers deserve to receive accurate, reliable quotes for auto insurance policies, so that they can comparison shop with confidence. Buying a car and finding the right auto insurance coverage are significant financial commitments, so it is even more important that consumers have the information they need to make good decisions about their coverage,” stated Representative Finn.
If passed, the proposed Bill’s reach would require any and all insurers who consider a consumer’s driving history as either a rating or underwriting factor for quoting a private passenger auto insurance policy to verify the applicant’s driving record through a reliable database before quoting the policy or accepting a down payment.
What consumers had to say
In addition to the MAIA’ s President and independent agents who testified in support of the bill, there was also oral and written testimony provided by consumers affected by certain direct writers and their auto insurance quoting practices. In particular, the MAIA reported the following testimony from Keith Williams, a computer programmer from Centerville. Mr. Williams recounted his experience as a consumer trying to obtain a quote from the direct writer GEICO.
According to the MAIA, the following is what Mr. Williams recounted during his testimony:
Williams was told that, based upon what GEICO’s representative could see in his driving history, his premium for a 12-month policy would cost $1,600 which was a savings from his existing policy. Encouraged by the rate quote, Williams decided to move forward, whereupon GEICO issued him a policy, accepted his payment in full, and cancelled his existing insurance policy. It was only then that he received an email from GEICO raising his yearly rate to $3,774.10; more than double the quoted premium and a higher rate than he had been paying previously. Williams cancelled the policy and was forced to seek different coverage.
I felt misled,” stated Williams. “I do not think any more consumers in Massachusetts should find themselves in my position: thinking that they were locked into one rate, only to find themselves responsible for one far higher.”