Mass. AG Questions Insurer’s High Risk Insurance Auto Rates

Massachusetts Attorney General Martha Coakley wants a public hearing to review the auto insurance rates of a new company entering the market in Massachusetts.

Occidental Fire and Casualty Insurance Co. of North Carolina is asking to charge Massachusetts drivers rates that are based on the rates companies charge “high risk” drivers and to add additional fees and surcharges. According to Coakley, the insurer did not provide the sufficient supporting data to justify its proposed rates or fees and surcharges.

Coakley said she is especially concerned because Occidental is targeting inner city drivers who may not have as many choices as other drivers. “We have learned recently that many of the auto insurance providers in Massachusetts are not renewing their contracts with many inner city agents, or agents in less affluent, minority areas,” said Coakley. “If Occidental were the only company offering insurance in these areas, many consumers will be steered into paying these unjustified and excessive premiums.”

State law gives Coakley’s office the right to challenge proposed auto insurance rates. Once the Attorney General’s Office challenges a rate proposal, the state insurance commissioner cannot approve an insurer’s rates without first holding a public hearing.

Occidental made its initial rate filing on Feb. 13, 2009. The company proposes to charge base rates that are 10 percent higher than the base rates charged by the Massachusetts “residual market” last year. The residual market is the pool of drivers that insurance companies consider to be “high risk” and generally don’t want to voluntarily insure.

Attempts to reach Occidental for response were not immediately returned.

The Attorney General’s Office is also challenging various provisions of Occidental’s filing as unfair or otherwise illegal in Massachusetts, including: a 35 percent surcharge on any policyholder who cannot verify his or her driving record, a $25 “policy fee” to “cover the costs required to attract and write a customer,” and $8 installment fees, which Coakley says may be illegal.

Occidental has also said that it may prevent its customers from reinstating their policies after they receive a notice of cancellation for nonpayment, which is also contrary to Massachusetts law, according to Coakley.