On May 19, 2011, the Division of Insurance issued Bulletin 2011-09 which replaces Bulletin 2007-13 regarding the Filing Requirements and Procedures for Private Passenger Motor Vehicle and Homeowners Insurance Group Marketing Plans Pursuant to M.G.L. c. 174 §193R.
Like the original Bulletin, this revised version aims “to provide guidance to prevent abuses in connection with the sale of private passenger motor vehicle and homeowner’s insurance policies through the use of group marketing plans, while preserving for consumers the potential benefits of this form of marketing.”
As noted in the revised title, the Bulletin now address the filing and procedural requirements for insurance companies offering insurance policies for both private passenger motor vehicle and homeowner’s insurance policies via group marketing plans. As such, a valid operator’s license and motor vehicle are not longer required of every individual or employee in a group. Now, every individual or employee having a proper insurable interest is entitled to participate in the group.
More importantly, however, is the Division’s modifications to the section on the “Prohibition Against Unfair Discrimination in Access to Group Marketing Plans.” In this section it now states the following:
Private passenger motor vehicle insurance policies assigned by the Massachusetts Automobile Insurance Plan (MAIP) to an insurance company where the assigned policyholder is eligible to obtain private passenger motor vehicle insurance through a group marketing plan offered by the assigned insurance company shall be charged a premium that is the lesser of the premium calculated using the rates in effect for the residual market and the premium calculated based on the insurance company’s filed rates, including any downward deviation filed for policies issued to group members pursuant to that group marketing plan. the adjustment of the insurance company’s quota share for assigned risk policies shall be in accordance with the attribution rules established under the provisions of M.G.L. c. 175 §113H. (emphasis added.)
Agency Checklists has combined the two bulletins below which pinpoints the revisions and changes the Division of Insurance made:
As we transition to competitive rating, concerns have been expressed that some of the existing group marketing plans for private passenger motor vehicle insurance may serve as proxies for underwriting and rating factors that have been prohibited by 211 CMR 79.00.
This Bulletin informs insurers and insurance company groups (“insurance companies”) as well as insurance producers who sell or service private passenger motor vehicle or homeowners insurance policies about the filing requirements and procedures related to group marketing plans. This Bulletin replaces Bulletin 2007-13, which has been withdrawn. It provides guidance to prevent abuses in connection with the sale of private passenger motor vehicle and homeowners insurance policies through the use of group marketing plans, while preserving for consumers the potential benefits of this form of marketing.
Underwriting is the decision process used by insurance companies to determine whether or not to issue voluntarily a private passenger motor vehiclean insurance policy. In contrast, group marketing plans are methods or techniques that insurersinsurance companies may use to market and deliver their products to individual consumers. Group marketing plans allow insurers who use them to offer more competitively priced products through reduced administrative and policy acquisition costs.
This Bulletin informs insurers and insurance company groups (“insurance companies”) as well as insurance producers who sell or service private passenger motor vehicle insurance policies about the filing requirements and procedures related to group marketing plans to be effective on or after April 1, 2008. This Bulletin provides guidance to prevent abuses in connection with the sale of private passenger motor vehicle insurance through the use of group marketing plans, while preserving for consumers the potential benefits of this form of marketing.
Definition of a Group. For the purpose of offering private passenger motor vehicle or homeowners insurance policies through group marketing plans, a group may include employees of a particular employer, members of a particular trade or labor union, or members of an association or organization (“group members” or “members of a group”). A group shall have a constitution and by-laws and shall have been formed in good faith for a purpose other than that of purchasing insurance. Whether a group’s ostensible membership base qualifies for group marketing plan status under M.G.L. c. 175, § 193R is a matter to be determined by the Commissioner of Insurance (“Commissioner”).
Definition of a Group Marketing Plan. A group marketing plan is any method or technique that may be employed by an insurance company to solicit private passenger motor vehicle or homeowners insurance purchases by members of a group, provided that the management or administrator of the group has agreed to or otherwise affiliated itself with the sale of such insurance to its employees or members through a payroll deduction plan or other method of payment.otherwise.
Insurance Companies Eligible to Offer Insurance Through Group Marketing Plans. In order to qualify to offer private passenger motor vehicle or homeowners insurance through a group marketing plan, an insurance company also must be engaged actively in the business of writing the same types of coverage for persons or insureds not solicited or acquired through the use of group marketing plans. An insurance company may not be organized solely or principally for the purpose of furnishing private passenger motor vehicle or homeowners insurance to group members. Insurance companies that elect to offer private passenger motor vehicle or homeowners insurance through group marketing plans shall keep and maintain separate statistical data on the losses and expenses of the members of each group that sponsors such plan.
Group Membership. For purposes of purchasing private passenger motor vehicle or homeowners insurance through a group marketing plan, an employee of a particular employer is any individual so designated by the employer, and a member of a trade union, labor union, association or organization is anyone so designated in its constitution, by-laws or other governing instruments. Group marketing plans shall offer private passenger motor vehicle or homeowners insurance to group members subject to the following conditions and limitations:
- Every individual employee or group member
possessinghaving avalid operator’s license and registered private passenger motor vehicleproper insurable interest shall be entitled topurchase insurance throughparticipate in the group marketing plan, regardless of the underwriting standards applied by an. An insurance companywith respect to individual risks acquired or insured through means other than group marketing plans. Insurance companiesshall not use underwriting standards for members of a group which areprohibited for usenot used by that insurancecompaniescompany when underwritingprivate passenger motor vehicle insurance policies fornon-group members. Underwriting standards for employees or group members shall not include risk attributes prohibited by Massachusetts law. - Insurance companies shall not use rating differentials
or, rate classification techniques, or policy forms that are designed to make it less desirable for a member of the group to purchaseprivate passenger motor vehicleinsurance through the group marketing plan as an individual than it would be to purchase such insurance through the regular individual market. - Insurance companies shall
offer the same standardissue an individual policy contract of the same form to all insured members of the group varying only as to the amounts of insurance and limits of liability requested by the member. - Groups obtaining insurance through a group marketing plan shall not compel a group member to purchase insurance from the insurance company offering its products pursuant to a group marketing plan.
- Insurance companies shall offer every member of a group participating in the group plan an option to continue coverage by a standard policy of the same type offered by the company to persons not eligible for a group plan for at least one additional year upon termination of employment or membership in the trade union, association or organization.
- Insurance companies may not cancel private passenger motor vehicle or homeowners insurance policies that were issued through a group marketing plan except for non-payment of premium, fraud, or unless the entire group marketing plan is canceled. Insurance companies providing private passenger motor vehicle insurance through a group marketing plan may, however, cancel the insurance of an individual group member for loss of vehicle registration or operator’s license by the individual group member where such loss is for a period of one year or more.
Rates for Policies Issued Through Group Marketing Plans. Rates for private passenger motor vehicle or homeowners insurance policies issued through group marketing plans shall be established in accordance with the provisions of M.G.L. c. 175A. and M.G.L. c. 174A.
For the first three years that an insurance company offers private passenger motor vehicle or homeowners insurance through a specific group marketing plan to a specific group, the rates charged to group members shall be the same as the rates offered for the same standard policy when issued to persons not solicited or acquired through group marketing plans. However, rates for group members may be reduced from the rate the insurance company otherwise would charge its non-group policyholders to the extent, but only to the extent, that the insurance company can demonstrate direct reductions to the non-group acquisition and administrative expenses resulting from the group marketing technique. Expense reductions associated with group marketing techniques may include, but are not necessarily limited to, producer negotiated commissions, method of premium payment (payroll deduction or electronic funds transfer),) or reduced insurer marketing or advertising costs.
Insurance companies that have maintained group marketing plans with a specific group for more than three consecutive years may file adjustments to any applicable downward rate deviation for group members based on reduced acquisition and administrative expenses that additionally reflect the most recent three years of loss experience for the group.
Prohibition Against Unfair Discrimination in Access to Group Marketing Plans. Any systematic exclusion of a class or segment of an insurance company’s producer force from offering private passenger motor vehicle or homeowners insurance to members of a group for which the company has a group marketing plan that has the effect of making it less desirable for a class or segment of potential group members as individuals to obtain private passenger motor vehicle insurance through the group marketing plan is prohibited.
Every insurance company offering private passenger motor vehicle or homeowners insurance through a group marketing plan shall, prior to policy sale, make full and fair disclosure to prospective policyholders of all features of the insurance coverage available through the plan. This includes, but is not limited to, disclosure of premium rates, policy terms and conditions, duration of coverage, policyholder services, and identity of producers participating in the group marketing plan.
Private passenger motor vehicle insurance policies issued to a group member pursuant to a group marketing plan with policy effective dates of April 1, 2008 through March 31, 2009 may be ceded to Commonwealth Automobile Reinsurers. The premium charged for such a policy shall be the lesser of the premium calculated using the rates in effect for the residual market and the premium calculated based on the insurance company’s filed rates, including any downward rate deviation filed for policies issued to group members pursuant to a group marketing plan. The voluntary and ceded loss and expense experience shall be used in determining a company’s losses and expenses in accordance with the attribution rules established under the provisions of M.G.L. c. 175, § 113H.
Private passenger motor vehicle insurance policies assigned by the Massachusetts Automobile Insurance Plan (MAIP) to an insurance company with policy effective dates on or after April 1, 2008 where the assigned policyholder is eligible to obtain private passenger motor vehicle insurance through a group marketing plan offered by the assigned insurance company shall be charged a premium that is the lesser of the premium calculated using the rates in effect for the residual market and the premium calculated based on the insurance company’s filed rates, including any downward deviation filed for policies issued to group members pursuant to athat group marketing plan. The adjustment of the insurance company’s quota share for assigned risk policies shall be in accordance with the attribution rules established under the provisions of M.G.L. c. 175, § 113H.
Review and Approval of Group Marketing Plan Filings. Every group marketing plan shall be submitted for review and approval by the Commissioner at least 15 business days prior to the proposed effective date of the plan, unless otherwise ordered by the Commissioner. All applications for group marketing plans must be submitted on the application form required by the Commissioner. Failure to submit a legible and properly completed application form will prevent review and approval of the plan until such application form is submitted properly.
Review and Approval of Rate Deviation Filings for Use in Conjunction with Approved Group Marketing Plans. Any filing for a downward rate deviation for private passenger motor vehicle or homeowners insurance policies issued pursuant to an approved group marketing plan shall be submitted for review and approval by the Commissioner at least 15 business days prior to the proposed effective date of the rate deviation, unless otherwise ordered by the Commissioner. For the purposes of rate deviation filings for groups to be effective for policies with effective dates of April 1, 2008 through March 31, 2009, the insurance company shall submit such filing no later than January 31, 2008. All rate deviation filings for policies issued pursuant to approved group marketing plans must be submitted in the format required by the Commissioner. Failure to provide the actuarial expense and loss support as required by the Commissioner will prevent review and approval of such rate deviation until proper actuarial support is submitted.
Marketing Plans Involving So-Called “Affinity Groups.” Every marketing plan for so-called “affinity groups” with effective dates of April 1, 2008 through March 31, 2009, shall be submitted for review and approval by the Commissioner at least 15 business days prior to the proposed effective date of the plan, and will be evaluated under the provisions of M.G.L. c. 175, § 193R. Marketing plans for so-called “affinity groups” should not be submitted to the Commissioner as part of an insurance company’s rate filing under M.G.L. c. 175E.
For further information on the implications of this law and how it may affect your group marketing plan, contact your qualified legal counsel or Agency Checklists for a professional review. You may view the formal Division of Insurance Bulletin 2011-09 here.
