The second in a four-part series on the Annual Home Insurance Report
This is the second part of a four-part look at the Commissioner’s Annual Report on Home Insurance in Massachusetts. Since 1996, the DOI has been required to produce a home insurance report pursuant to M.G.L. c. 175 Sec. 4A & 4B. Unlike the private passenger auto insurance marketplace in Massachusetts, however, there are no specific laws requiring that a property owner have home insurance. Please note all of the charts and graphs discussed in our articles comes courtesy of the Annual Home Insurance Report published by the Massachusetts Division of Insurance.
What is the FAIR Plan and what does it do in Massachusetts?
The FAIR Plan is a residual market mechanism that was created by Massachusetts law in the Acts1968 c. 731. Substantially restructured in 1976, and then again in 1996, it is now known as the Massachusetts Property Insurance and Underwriting Association (“MPIUA”).
Under its rules of promulgation, the FAIR Plan offers coverage for those homes which cannot obtain coverage from a traditional homeowner’s insurance company. If unable to obtain coverage in the marketplace, homeowners may apply to the Massachusetts Property and Underwriting Association which is required by statute to provide a homeowner’s policy with a replacement cost of up to $1 million dollars. For traditionally waterfront properties that may have a value of more than 1 million dollars, a homeowner must seek coverage via the surplus lines market.
FAIR Plan participation decreases during 2019
The total number of home insurance policies written in Massachusetts increased during the year in review (2019), albeit not as much as in 2018. According to the published data, the total home insurance policies written by both insurers and the FAIR Plan increased by 1.29%, or by 26,099 policies. In comparison, the total number of home insurance policies written between 2017 and 2018 increased 1.8%, or by about 35,443 policies.
With respect to the FAIR Plan, however, participation decreased in 2019 by approximately 906 policies. As a result, the total FAIR Plan participation in 2019 represented approximately 9.7% of all home insurance premiums in Massachusetts, slightly below the 11.9% of the market share of the Commonwealth’s largest homeowners insurance carrier MAPFRE.
For comparison purposes in 2018 the MA FAIR Plan accounted for 10.3% of all written premiums in the Commonwealth. While an increase over 2017 numbers, this percentage is still substantially lower than when its market share “peaked” at 16.1% back in 2007.
The rise and fall of FAIR Plan policies over the past decade
The following graph represents the number of FAIR Plan Policies during the Fiscal Years 2008-2019 (meaning from October 1st of the previous year to September 30th of the noted year).
As can be noted by the graph above, the number of FAIR Plan Policies has continued to decline from its peak of in 2007 when there were 204,101 policies in force. Breaking it down by territory, the following chart highlights the MPIUA’s written premium for 2019 in each sector, along with its corresponding market share vis-à-vis the voluntary market written premium numbers for the same area.
FAIR Plan Homeowners Insurance Market Share by Territory
| Territory | MPIUA Written Premium 2019 | Voluntary Market Written Premium 2019 | FAIR Plan Market Share 2019 |
|---|---|---|---|
| Boston District A | 11,090,514 | 18,123,521 | 38.0% |
| Boston District B | 310,104 | 10,486,109 | 2.9% |
| Boston District C | 6,003,256 | 4,877,122 | 55.2% |
| Suffolk Remainder | 7,894,512 | 25,752,794 | 23.5% |
| Rest of Boston | 11,276,840 | 83,116,170 | 11.9% |
| Brookline | 359,917 | 24,240,764 | 1.5% |
| Quincy | 2,702,013 | 22,168,863 | 10.9% |
| Norfolk Remainder | 7,488,715 | 226,778,225 | 3.2% |
| Fall River | 4,303,040 | 16,353,102 | 20.8% |
| New Bedford | 8,724,338 | 14,637,319 | 37.3% |
| Bristol Remainder | 9,048,902 | 149,267,523 | 5.7% |
| Brockton | 5,119,634 | 22,698,348 | 18.4% |
| Plymouth Remainder | 22,794,859 | 199,526,014 | 10.3% |
| Barnstable, Dukes, Nantucket | 89,421,617 | 255,233,214 | 25.9% |
| Lawrence | 4,853,957 | 9,129,236 | 34.7% |
| Lynn | 6,283,885 | 20,491,693 | 23.5% |
| Essex Remainder | 12,931,885 | 238,857,451 | 5.1% |
| Cambridge & Somerville | 2,186,148 | 38,749,847 | 5.3% |
| Lowell | 2,135,068 | 18,625,148 | 10.3% |
| Newton | 757,608 | 41,021,941 | 1.8% |
| Middlesex Remainder | 11,252,905 | 422,327,461 | 2.6% |
| Worcester City | 3,987,657 | 37,605,868 | 9.6% |
| Worcester Remainder | 8,350,929 | 216,097,566 | 3.7% |
| Springfield | 2,948,688 | 31,033,258 | 8.7% |
| Chicopee & Holyoke | 1,366,948 | 18,843,105 | 6.8% |
| Hampshire & Hampden Remainder | 4,180,859 | 109,470,055 | 3.7% |
| Franklin & Berkshire | 4,658,470 | 77,725,349 | 5.7% |
| TOTALS | 252,433,268 | 2,353,237,066 | 9.7% |
FAIR Plan continues to write the largest amount of homeowner’s insurance on Cape Cod
In general, the proportion of FAIR Plan policies in force varies greatly by geographic area in Massachusetts. According to a footnote in the DOI Report, the FAIR Plan’s market share is calculated based upon the FAIR Plan and the total market written premium. The largest majority of FAIR Plan policies, however, continues to be without a doubt on the Cape and Islands. This region, comprising the counties of Barnstable, Dukes, and Nantucket, accounted for approximately 34.8% of all policies issued in 2019. The same region represents about 25.9% of the FAIR Plan’s total written premium based upon the chart above.
How the FAIR Plan fits within the Massachusetts homeowners insurance marketplace
Mirroring 2017 and 2018, MAPFRE continues as the largest homeowner insurer in Massachusetts with a 11.9% percent market share. This number is down from the 12.2% market share it had in the last Home Insurance Report. Followed by the FAIR Plan, the other largest writers of homeowner’s insurance are LIberty Mutual, Safety, Chubb, Andover, Arbella, Amica, Travelers, USAA, and Vermont Mutual. The remaining 32.3% is comprised of other voluntary howeowners insurers.
As noted in the DOI Report, unlike other states, the homeowners’ insurance marketplace is mainly dominated by regional carriers with only Amica, Travelers, USAA, Liberty and Chubb selling homeowners’ insurance nationally (outside of New England). Of those, however, it is interesting to note that Chubb and USAA are the only two not based out of New England.
2019 Home Insurer Market Share Comparison (Including & Excluding FAIR Plan)
The following charts provide a comparison of the market place with FAIR Plan’s market share included. Both charts use DOI data and are based on the total premium collected/written and not house-years.
2019 FAIR Plan Financial Results
In its fiscal year for 2019, the FAIR Plan had an underwriting profit of $12,288,000 as opposed to 2018 when it saw an underwriting loss of ($22,227,000). While an improvement, it is half the amount seen in other years with positive results, such as 2017 when it had underwriting profits of $45,041,000 or 2016 when it had gains of $22,092,000. The Division notes that the FAIR Plan’s underwriting results are on a direct basis and do not reflect reinsurance premiums paid by the FAIR Plan or reinsurance recoveries.
On a per policy basis, the FAIR Plan reported that its 2019 fiscal year underwriting profit, also known as “the charge against surplus” was $67 per policy. The following chart tracks the FAIR Plan’s Underwriting gains and losses per policy over the past decade (2009-2019):
FAIR Plan Underwriting Gain (Loss) Per Policy
The following chart using DOI data represents the FAIR Plan’s Underwriting Gains & Losses overall for the same time period:
FAIR Plan Underwriting Gains & Losses Totals
FAIR Plan Home Insurance Rates Retrospective
The year 2013 was the last year in which the FAIR Plan submitted an overall state-wide rate increase of 6.8%. In 2014, the Commissioner denied the rate increase, stating that the FAIR Plan had failed to meet its burden of support in demonstrating that its rate increase satisfied the statutory requirements. The last time that a rate increase was approved was in 2005 when the FAIR Plan was granted a 12.42% state-wide increase in rates, along with a 25.0% increase in Barnstable, Dukes, and Nantucket.
The following chart is a ten-year retrospective the Division created representing FAIR Plan Home Insurance Rate Changes.
FAIR Plan Home Insurance Rate Change
| EFFECTIVE DATE | PERCENT |
|---|---|
| 12/31/1996 | 5.3% |
| 12/31/1997 | 2.2% |
| 12/31/1998 | 0.9% |
| 12/31/1999 | 0.1% |
| 12/31/2000 | -0.5% |
| 12/31/2001 | -0.2% |
| 12/31/2002 | 1.9% |
| 12/31/2003 | 2.8% |
| 12/31/2004 | 3.2% |
| 10/01/2006 | 12.4% |
| 03/31/2010 | -0.7% |
The FAIR Plan Clearinghouse
In order to address the issue of how many homes insured by the MA FAIR Plan could potentially qualify for voluntary market coverage from a licensed Massachusetts insurer, the Division noted that in July 2018, the MPIUA Board of Directors “…authorized and implemented the clearinghouse initiative to help insurance companies work with homeowners’ producers to give more residual market (i.e., FAIR Plan) policyholders the opportunity to find coverage in the voluntary market.” The aim of the initiative is to continue the depopulation of the Massachusetts FAIR Plan.
According to the report, in order to participate in the Clearinghouse, an insurer must comply with the following:
- Be an admitted carrier,
- Be licensed to write homeowners insurance in Massachusetts, and
- Must sign a Clearinghouse Agreement containing the terms and conditions under which the MPIUA will provide information the company.
The DOI notes that while the information provided to companies does not include any personally identifiable information it does include “…certain information about the insured and about the property to assist the member company in determining whether to offer homeowners insurance, through the policy’s listed producer, to an existing FAIR Plan policyholder.”
For 2019, the FAIR Plan reported to the DOI that there was a reduction of -6.7% or 9,113 homeowners policies as of December 31, 2019, “from the policy count at the state of the Clearinghouse Program in July 2018.” Breaking that number down further, it added that:
- Territory 37– Barnstable, Dukes and Nantucket counties — saw the largest territory decrease of 3,858 policies, or -8.4%.
- The dwelling policy program has seen a small reduction of -2.3%, or 745 policies, since dwelling policies were added to the Clearinghouse Program in February of 2019.
More to come on the Annual Home Insurance Report in the coming weeks
Next week, Agency Checklists will take a look at the number of home insurance policies by county followed by further articles on the impact of auto insurance and flood insurance on this market as well as financial results from the report.
How to access the entire Homeowners Insurance Report Series:
