The letter was sent to the Senator Barrett, Chair of the Senate Committee on Post Audit & Oversight
As the Division of Insurance finishes up its series of Listening Sessions on Home Insurance, the Massachusetts Attorney General’s Office (AGO) has decided to weigh in on the matter once again. In a follow-up to the testimony that the AGO gave earlier this Fall, the AGO sent a letter to the Chairman of the Committee, Senator Barrett, further outlining the AGO’s opposition to increased homeowner’s rates and policy recommendations on how to make the rating process for homeowner’s insurance rates more transparent.
The crux of the issue surrounds the recent increase in rates that the Division of Insurance approved for homeowners insurance. In particular, the AGO takes issue with the increases that the DOI approved for two of the state’s top 10 home insurance companies, MAPFRE and Safety Insurance, that saw their rates increase by almost 10%.
The AGO wrote:
As an initial matter, the recent rate increases by several homeowners insurers in Massachusetts are of serious concern to the Attorney General’s Office. We believe rates should be fair for all consumers. The rate increases for two filings, MAPFRE and Safety, both of which approach 10%, are driven primarily by two elements in filings: non-hurricane catastrophe losses and profit.
The letter goes onto explain that the AGO believes that the rate increases are unwarranted because of the type of data that these Massachusetts insurers used as the basis for their rate filings.
“…[I]nstead of relying on long-term data as they had in previous projections, these companies are now placing heavier weight on recent experience,” wrote Glenn Kaplan on behalf of the AGO. “For example, MAPFRE now uses non-hurricane catastrophe averages from the last 7-10 years’ experience, and Safety gives double weight to the last five years’ experience.” Mr. Kaplan then goes on to state that a second factor contributing to the substantial premium increases is due to the profit provisions in the filings.
Specifically, says the AGO, “Had they not changed these two provisions in the filing the rates, MAPFRE would have actually decreased under its new rates, and the rates for Safety would only have increased 2-3% on average under the company’s new rate plan.”
What the AGO proposes…
As a result, the AGO proposed three policy recommendations to increase the transparency and accountability and to create greater focus on consumers. The first is that the existing rate-filing process is supplemented in order to enhance transparency and accountability. That would mean that all new rate proposals as well as any supporting materials or information be filed publicly with the Commissioner of Insurance. The AGO argues that this “…would empower all potentially impacted stakeholders to understand the proposal at the same time it is filed with the Commissioner, and equip stakeholders to raise any questions or concerns with the Commissioner through a public process.”
Second, Mr. Kaplan, recommends compelling the Commissioner to publish standards in order to guide the Commissioner on whether a hearing on a new homeowner’s rate proposal is warranted. The AGO argues that these standards could also be used to address additional stakeholder questions that may arise after the rate filing by an insurer. Publishing such procedures “…would ensure a more transparent rate-setting process that would provide greater accountability to consumers,” contends the AGO.
Finally, The AGO proposed that whenever the Commissioner makes a decision to hold or forego a hearing, he or she should provide a written explanation of that decision that would be subject to judicial review. Such procedures would, according to the AGO, ensure a more transparent rate-setting process that would provide greater accountability to consumers.
