The Proposed Legislation Addresses Appeals of Motor Vehicle Accident Surcharges as well Transparency in Auto Insurance Rating Plans
In a letter sent to the Joint Committee on Financial Services last week, AG Coakley expressed her support for three House bills geared towards implementing greater protections and transparency for drivers who face motor vehicle insurance surcharges. She urged Legislators to pass both bills which would prevent consumers from paying additional unwarranted auto insurance costs.
“All too often our office has found that insurers have failed to refund drivers who were overcharged when it comes to their auto insurance, revealing troubling defects in policy processing systems,” AG Coakley said. “In order to boost transparency and oversight, we urge the Committee to give these bills a favorable recommendation.”
House Bill 919 deals with at the stay process during an appeal
House Bill 919, sponsored by Representative Anne Gobi, is entitled An Act Relative To Stay a Surcharge Pending Appeal. The proposed legislation would halt an insurer’s at-fault surcharge determination during an insured’s appeal to the MA Board of Appeal. Currently, an insurer may implement a surcharge during a consumer’s surcharge appeal process. If an insured is ultimately successful on his or her appeal, then an insurer must refund the surcharge amount to the consumer.
AG Coakley is in favor of changing this process. As she wrote in her letter to the Committee,
“This system is problematic. As an initial matter, it is set up in a way that presumes consumers are responsible until proven otherwise. Moreover, our Office has found during the course of investigations
that many insurers have failed to provide consumers with appropriate refunds after surcharges were vacated by the Board of Appeal… In fact, earlier this year, we filed Assurances of Discontinuance in
Suffolk Superior Court relating to five insurance companies’ alleged failures to pay back all or portions of surcharges after the surcharges had been vacated. While the exact extent of the overcharges is still unknown, and will be determined through AGO supervised audits, we estimate that Massachusetts consumers were overcharged by at least one million dollars by these companies. Through our investigations and implementation of our settlements in these matters, we have learned that calculating refunds of surcharge premiums are a time consuming and onerous process for insurance companies. Accordingly, staying surcharges, as proposed by H. 919, makes sense for all involved parties.”
Those investigations the Attorney General’s office’s has undertaken during the last couple of year has resulted in settlements with Met P&C, The Premier Insurance Company of Massachusetts,, Plymouth Rock Assurance Company, Pilgrim Insurance Company and Massachusetts Homeland Insurance Company for failure to refund auto insurance surcharges due their insureds.
House Bill 848 would add interest to auto insurance surcharge refunds
House Bill 848, sponsored by John Binienda, is entitled An Act Relative to Motor Vehicle Insurance Surcharges would require an insurer to reimburse with interest any amounts it overcharged a consumers as the result of a vacated or overturned at-fault determination by the Board of Appeals. The Bill, along with Bill 919, would amend section 113 of Chapter 175 of the General Laws.
In voicing her support for this bill, AG writes that,
“Full disclosure of insurance pricing is extremely important for consumers. In order to effectively shop around for insurance, drivers should know how much they will be charged, and what they can do to lower their insurance rates. Under managed competition, many insurers now use their own specific rating plans, and charge different amounts for various driving violations.”
Senate Bill 438 would impose more transparency for the entire process involving auto insurance surcharges
Senate Bill 438, An Act Promoting the Transparency of Automobile Insurance Surcharges, is being sponsored by Senator Barry Finegold. It would required greater transparency throughout the entire auto insurance surcharge process. In particular, insurers would be required to publicly disclose their merit rating plans, list their surchargeable events, and to disclose those circumstances under which surcharges may be removed or refunded. The Senate Bill would also mandate insurers to itemize those premium charges associated with an accident or violation listed on the policyholder’s driving record.
Attorney General Coakley writes that passing Senate Bill 438 would create greater transparency in the auto insurance surcharge process by allowing consumers more access to the information insurers use in implementing at-fault surcharges.
“…Not only will this disclosure provide additional helpful information to each consumer about his or her premium, but the full disclosure of surcharges will also help consumers identify errors in insurer compilations of consumer driving records. This is particularly important because some insurers now obtain driving information from privately operated claims databases instead of the RMV. This can have negative implications for consumers because insurers can make erroneous assumptions about claims that appear in the databases. For example, some insurers assume that entries listed in private databases as un-subrogated collision claims are at-fault accidents, when this is not always the case. Additionally, accidents for which the Board of Appeal has cleared a driver of fault have also appeared in these private claims databases and can be errantly assumed to be at-fault accidents by insurers and surcharged as such. Through our consumer complaint programs and investigations, our Office is aware of instances where consumers have been wrongly surcharged, and in some cases, surcharged twice for the same accident. Affording consumers the opportunity to review the driving incidents for which they are being charged is critically important both as a matter of basic fairness and as a means to prevent overcharges.”