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Massachusetts Division of Insurance Fines GEICO $275,000

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GEICO is the seventh largest writer of private passenger auto insurance in Massachusetts

The Commissioner of Insurance has fined Government Employees Insurance Company (GEICO)$275,000 as part of an agreement the insurer has entered into with the Division of Insurance. Under the terms of the agreement, GEICO must modify certain portions of its current business procedures, as well as implement new procedures in addition to paying the $275,000 fine. The Division says that an additional $275,000 fine has been suspended pending a future re-examination of the insurer.

Today’s announcement is the result of our ongoing monitoring of the insurance marketplace to ensure that consumers are receiving the benefits to which they are entitled and companies are competing on a level playing field,” said Commissioner Murphy.  “The company’s actions created disruptive issues within the auto insurance marketplace in Massachusetts.”

After conducting a market conduct examination earlier this year, the Division determined that the seventh largest writer of private passenger auto insurance in the Commonwealth needed to amend its business practices and improve its systems in order to resolve inconsistencies in the reporting of accident information to both state agencies and policyholders. GEICO has written private passenger automobile insurance in Massachusetts since May 2009, after the Commonwealth’s transition to Managed Competition.
The first major settlement announcement of 2014
Upon completion of its market conduct examination, the Division says its examination identified GEICO’s inconsistent practice in both reporting claim information and providing operators proper notice of at-fault accident determinations. The insurer further failed to inform its operators of their rights to appeal those determinations at the Division’s Board of Appeal. As a result of these determinations, GEICO has agreed to change its business practices and to notify any individuals who might have been affected by these actions, including both current and former customers of GEICO. All notifications will occur within 60 days.
In addition, GEICO will be required to undergo ongoing monitoring as well as an additional market conduct re-examination within the next two years. After that second re-examination, the Commissioner will then decide whether or not to impose the second suspended fine of $275,000.
The settlement agreement between the DOI and GEICO
According to the DOI, the terms of the settlement require that GEICO amend its reporting of claim information as well as to implement new more comprehensive business practices that will ensure that an operator who is determined to be at-fault in an accident be notified of that determination as well as their rights to appeal. In addition, GEICO will have to institute business practices to warrant that  specific data is then correctly reported to the Merit Rating Board within an appropriate time frame.
Under the additional terms of the settlement agreement, GEICO will also be required to do the following:
  • Properly report past claim information to the Merit Rating Board and other insurance carriers for claims that occurred between May 18, 2009 and June 1, 2013.
  • Provide notice of at-fault accident determinations and the right to appeal those determinations to operators not previously notified of GEICO’s at-fault accident determinations between May 18, 2009 and June 1, 2013.  Operators affected by this inconsistency in GEICO’s prior business practices will be allowed to appeal those determinations to the Division’s Board of Appeal.  Consumers who elect to appeal will have their $50 filing fee reimbursed by GEICO.
  • Implement new business practices to ensure that operators determined to be at-fault for accidents receive timely notice of the determination as well as an explanation of their rights to appeal the determination.
  • Routinely audit the effectiveness of new business practices designed to prevent errors and report the results to the Division over the next two years.
In 2011, the Division of Insurance fined the direct writer Progressive Insurance for $125,000 for erroneously informing some of its consumers in Massachusetts that they had used credit information to determine their automobile insurance rate through its website.