The Attorney General for Massachusetts, Martha Coakley sent a letter yesterday to the Insurance Commissioner Murphy requesting that he reduce commercial auto rates in Massachusetts via his statutory authority under G.L. c.175 . In her letter, the Attorney General cited the Commissioner’s previous failure to reject Progressive’s unjustified rate increased in February of this year and that his recommendation to consumers to shop around for better insurance is not a viable solution to this problem.
Coakley went on to argue in her letter that the excessive rates go beyond any single company writing commercial auto insurance in Massachusetts. In a nutshell, the problem is that the rates in the Commonwealth for all commercial auto carries are inflated and excessive and as a result are having a negative economic effect on the both the economy and businesses.
“These inflated commercial auto premiums impact virtually every industry in Massachusetts – from manufacturing, trucking and construction to sale and services,” she wrote. “The added costs limit the ability of businesses to invest in Massachusetts and cost Massachusetts residents thousands of jobs. The problem is especially acute for small businesses, whose ability to create jobs is impaired by excessive rates.”
The Attorney General argues that under Massachusetts law, motor vehicle rates shall not be “excessive” or “unreasonably high for the insurance provided.” Furthermore, the AG contends that the Insurance Commissioner has the authority to reduce commercial automobile insurance rates under that same general law. As such, Coakley is urging the Insurance Commissioner to undertake a full review of commercial automobile insurance rates, followed by appropriate regulatory action to reduce Massachusetts rates to a reasonable level.
The Attorney General went on to say that the insurer’s excessive rates have and are continuing to reduce economic activity in Massachusetts and that if the rates were kept in check by the Commissioner, Massachusetts would see at least an additional $450million in overall annual economic activity and 3,000 in jobs. The Attorney General said that her office reached these estimates by applying in the commercial insurance market the same formulas used by the Division of Insurance to determine the impact of its reforms of the private passenger auto insurance marketplace.
Additional figures cited by the Attorney General were compiled from a review that the Attorney General’s office conducted by examining data from The National Association of Insurance Commissioners and the Automobile Insurance Bureau. According to the AG’s office overcharges to Massachusetts, businesses totaled a $150 million per year between 2004 and 2010, allegedly resulting in a total overcharge of approximately $1 billion dollars. During this same period, the same industry data shows that Massachusetts rates were excessive by at least 21.6% and that insurer’s underwriting profits were significantly higher in Massachusetts than the national average.
View a copy of the Attorney General’s May 23, 2010 letter to Insurance Commissioner Murphy in its entirey here.
