Massachusetts Insurance Commissioner Nonnie Burnes is concerned with the cost of insurance from at least four companies doing business in her state. On Friday, December 7th, she voiced her concerns about insurance filings from Arbella Mutual, Commerce Insurance Co., Electric Insurance Co., and Liberty mutual, saying that there were errors caused by the practice in basing premiums, at least in part, on the amount of bodily injury coverage customers buy.
According to Burnes, when carriers discount premiums because customers have higher bodily injury limits, it violates state guidelines for a new “managed competition” system scheduled to go live in April, 2008.
Three of the four companies named by Burnes responded to her concerns with an agreement to fix their filings, but the fourth company – Commerce Insurance Co. – still has their response under review, and has also been told to revise it’s policy on group discounts.
At the same time, Massachusetts Attorney General Martha Coakley also has insurance issues . She wants to take a close look at the rate filings of the aforementioned Commerce, as well as Premier Insurance Co. and Safety Insurance Co, which collectively write about 45% of the policies active in her state, may be overcharging drivers by more than $100 million.
Coakley’s office will be seeking hearings about the rate filings of these three companies, and it has been suggested that Burnes add the latter two to her list of companies that require further administrative review. She believes that the filings in question represent excess profit, that expenses listed were significantly higher than the market average, and that “unorthodox methods” were used to project losses.
It is expected that all these companies will be adjusting their rate structure downwards, perhaps as much as 8.1 percent. Coakley allows that competition is healthy and will help lower the rates consumers pay, but even under the new system, rates are still subject to regulation.
The attorney general’s office has until December 17 to make final recommendations about any remaining filings.