The Howes Insurance Agency

GEICO Enters Market

2009-06-02T09:25:00.002-04:00

GEICO entered the MA private passenger auto insurance market and wrote
its first policy on Monday, May 18, 2009. As soon as we were permitted by the
Division of Insurance to do so, MAIA obtained a copy of the filing — as we do
with every company filing — and began the tedious task of reviewing the forms,
endorsements and rules.

On “launch day,” your editor obtained a quote from the GEICO website. The
good news is that is was NOT cheaper! It was difficult to determine exactly how much MORE expensive the GEICO policy was because the quote included a $100 PIP deductible (??), NO Waiver of Deductible, NO Medical Payments and NO Substitute Transportation.

Our review of their filing revealed some interesting changes. GEICO has
made a number of changes to the Massachusetts Auto Policy (MAP). Most
notable is that the definition of YOUR AUTO does not include a motorcycle. In
addition, the following sentence has been added to the Trailer definition: “The
trailer must be pulled by your auto.”

GEICO has added the following exclusion to Part 4. Damage to Someone
Else’s Property: “In addition to the above exclusion for the business or selling,
servicing, repairing or parking autos, while anyone is using a vehicle in the
course of any business. This exclusion also applies to private passenger autos,
pick-up trucks, vans, and similar vehicles used for the delivery or transportation of goods or materials unless such use is incidental to your business of installing, maintaining, or repairing furnishings or equipment.”

Interestingly, the exception for delivery or transportation of goods which is incidental to your business of installing, maintaining, or repairing furnishing or equipment above seems to conflict with the second part of GEICO’s private passenger automobile definition in Rule PPA-01: B. utility vehicle of the pick-up, panel or van body type with a gross vehicle weight of 15,000 pounds or less, that is not used as a public or livery conveyance for passengers, but rather is used for personal and family pleasure, commuting and/or business purposes. A utility vehicle that is customarily used for wholesale or retail delivery or commercial transportation of property is excluded from the private passenger automobile definition.

GEICO has added the following language to Part 7. Collision, Part 8. Limited
Collision and Part 9. Comprehensive: “The cost to physically repair the auto is
limited to the prevailing competitive price, which is the price we can secure
from a competent repair facility conveniently located to you …”

GEICO has replaced Part 10. Substitute Transportation with Rental
Reimbursement and has defined when reimbursement of rental expenses ends:
“Reimbursement for rental charges and transportation expenses shall end the
earliest of when your auto has been: 1. Returned to you; 2. Repaired;
3. Replaced; or 4. If your auto is deemed by us to be a total loss, then seventy
two (72) hours after we pay the applicable limit of liability under Part 7, Part 8
or Part 9.

GEICO has replaced Towing and Labor with Part 11. Emergency Road Service. We have included the complete text of this new coverage in our online GEICO Executive Summary.

GEICO has made changes in the Cancellation and Renewal section of the policy. The first two reasons for cancellation of the entire policy in the Seventh and Eighth Edition MAP were retained; however, the following reasons were either replaced or added:

3. There is a suspension or revocation during the policy period of the operator’s license or motor vehicle registration of you or any other person residing in the same household as you and who usually operates a motor vehicle insured under the policy.
4. You fail to comply with a request for a motor vehicle safety inspection test for a vehicle that was previously totaled in a prior accident.
5. Your failure to complete and furnish us with a renewal application on a form prescribed by the Commissioner at least 30 days before the expiration of the previous policy period.

GEICO also added the following reasons for cancellation:

􀂲 If the driver’s license or auto registration of anyone residing in your household who usually
operates your auto has been under suspension or revocation during the policy period, we may
suspend coverage for that person under any of the Optional Insurance Parts of the policy. We may also reduce the limits for that person under Bodily Injury Caused By An Uninsured Auto and Damage to Someone Else’s Property (Parts 3 and 4) to the minimum limits we are required to sell.
􀂲 We can cancel Emergency Road Service (Part 11) for reasons other than those listed above if we do so within the first 90 days of the policy period.
􀂲 We can cancel, for reasons other than those listed above if we do so within the first 90 days of the policy period, coverage limits which are higher than the limits we are required by law to sell you and any coverage designed to reduce the deductibles set by law.
􀂲 Under the automatic policy termination clause, GEICO has removed the provision that the policy automatically terminates 30 days after you sell your vehicle and do not register another, leaving only the provision that your policy terminates automatically when you sell your auto and do not register another auto.

We are concerned that the GEICO website and all applications and questionnaires improperly require the applicant to submit the date of birth, sex and marital status of all drivers. We will express our concerns about this and other issues to the Commissioner of Insurance.
Some other random items contained in GEICO’s manual of rules include:

1. All cancellations and changes are pro-rata.
2. All coverages except Comprehensive can be suspended by the insured. Obviously, we are concerned about whether GEICO plans to report this to the RMV.
3. Rounding is to the nearest whole penny.
4. Under Driver Definitions, a “rated driver” is “any licensed driver listed on a policy who is not classified as cancelled, excluded, deceased, deployed, having other insurance, or having a learner’s permit.
5. The operator assignment rule provides:
􀂲 Unless otherwise noted, the driver who primarily operates the automobile will be assigned to that auto.
􀂲 Active military are not considered for assignment unless they customarily drives the auto.
􀂲 Inexperienced drivers more than 100 miles away attending a recognized college or educational institution will not be rated unless they customarily drives the auto.
􀂲 When a vehicle is used by both an experienced and an inexperienced operator, the inexperienced operator will be assigned to that vehicle if that is the vehicle the inexperienced driver primarily operates.
􀂲 When there are more vehicles than drivers, excess vehicles will be assigned Class 15 provided that there is a Class 15 driver listed on the policy and all listed drivers have 6 or more years
experience. If there are no Class 15 drivers, Class 10 will apply to the excess vehicles.
􀂲 A vehicle will be rated with the merit points from the operator assigned to that vehicle. Merit points for unassigned Rated Drivers are assigned to the car they operator the most. These merit points are added to the points from the assigned driver.
􀂲 GEICO obtains merit rating information: the company’s own records, motor vehicle records,
applicant’s statements or insured’s statement on self-reporting forms, C.L.U.E., and current
carrier.
􀂲 The GEICO plan includes a 5-year experience period—6 if earliest year is clean
􀂲 Major and Minor accidents are defined the same as 2006 Plan
􀂲 Major Violations include: Driving to Endanger or Reckless Driving; Leaving Scene of Accident
after Property Damage or Personal Injury and Death; Liquor and Narcotics, Operating Under the Influence; Liquor and Narcotics, Operating Under the Influence of and Reckless Operation Causing Serious Injury; Operating after Revocation of License; Operating after Suspension of Drivers License; Refusing to Stop for Officer; Vehicular Homicide; Manslaughter (only if by Motor Vehicle). Out-of-State Major Incidents: Operating under the influence of Liquor and/or narcotics; Vehicular Homicide. Additional Incidents (on or after 10/28/2005: OUI while License Suspended for OUI; Child endangerment while OUI; Manslaughter while OUI.

Additional Incidents (after 1/1/2006):

Permit Unlicensed Suspended Operator of Motor Vehicle; Permit Operation Without Ignition
Interlock; Operate Without Ignition Interlock; Tamper with Ignition Interlock; Bypass Ignition
Interlock for another. All other traffic convictions are minor violations.
􀂲 GEICO’s merit rating plan also includes the following: “Convictions include those violations for
which the applicant or any Rated Driver of the vehicle has been convicted or paid a fine.
Convictions also include violations for which there have been a forfeiture of bail or collateral, a
plea of nolo contendere, or a prayer for judgment continued.”
􀂲 Merit Point Calculation follows the 2006 Plan.
􀂲 Finally, GEICO uses following characteristics: cancellation notices, convictions, current insurance status, days quoted in advance of current policy expiration, lending losses (accident while operated by unlisted driver), length of current residence, negligent accidents, non-negligent accidents, number of drivers, number of drivers added, number of vehicles, number of vehicles added, prior limits of liability, reissues, suspensions, theft/vandalism claims, years insured with current insurer, years licensed, and years with GEICO.

Feel free to visit massagent.com to review the entire GEICO filing or the filing of any other MA auto carrier. As always, you may contact Donna McKenna or Kathy Cormier by phone at 800.974.9312 or 508.634.3900 or by email at dmckenna@massagent.com or kcormier@massagent.com.

Progressive Agrees to Pay Massachusetts Fine

2009-05-29T14:36:00.002-04:00

Progressive Direct Insurance Co., which has long compared its rates to competitors, agreed to pay the state $120,000 to settle charges that it inflated the rates for rival companies, Massachusetts Attorney General Martha Coakley announced today.

Specifically, Coakley's office accused Ohio-based Progressive, the nation's fourth largest automobile insurer, of inaccurately comparing its six-month rates to the 12-month rates offered by other companies, such as Arbella Mutual, Liberty Mutual, and Commerce Insurance. Progressive inaccurately listed all the rates on its web site as six-month prices.

Progressive, which started offering policies in Massachusetts on May 1, 2008, stopped quoting rivals' rates on its web site and through its call center late last year, and notified Coakley's office about the mistake.

“For competition to truly work in Massachusetts, consumers must be able to easily access accurate information about rates from insurance companies,” Coakley said. “Progressive’s failure to provide correct comparison quotes harmed consumers and harmed Massachusetts’ ability to introduce a competitive system in automobile insurance.”

In addition, Coakley's office said Progressive failed to follow its own official rate practices, filed with the state's Division of Insurance, by charging consumer to list additional drivers on their policies who already carried their own insurance. Progressive agreed to reimburse drivers who were improperly charged.

Coakley's office also complained that Progressive frequently failed to notify customers' former insurer when a customer switched auto insurance companies. That in turn led some insurers to cancel customers' policies for nonpayment - instead of just closing the accounts when customers switched to Progressive - potentially hurting customers' credit scores. Progressive agreed to help any customers who were affected.

Progressive spokeswoman Cristy Cote acknowledged the company mistakenly calculated the rates for some competitors when it began offering insurance in Massachusetts last May.

But the company noted that it shut down the service and notified state regulators and competitors after it discovered the errors. It also said it offered to pay the difference for customers who bought its policy when a competitor actually offered a lower rate, provided the customer wanted to switch to the other firm. The company said it also cooperated with Coakley's probe into the other issues.

"We understand that the attorney general’s role is to protect consumers and we wholeheartedly support that goal," Cote said in a written statement. "We are glad to put this matter behind us."

(By Todd Wallack, Globe staff)

Massachusetts Senate Budget Bans Texting while Driving

2009-05-27T12:25:00.000-04:00

The Massachusetts Senate approved an amendment banning all Internet use while driving as part of its version of the state's upcoming budget.

Drivers would be banned from sending text messages, e-mailing or reading the Internet while behind the wheel under the terms of the budget approved late Thursday night.

Senators stopped short of requiring handsfree devices for talking on a cell phone.

Bus, train, trolley and other public transit drivers would be banned from even holding a cell phone while driving. They could only carry one for emergency purposes.

Drivers would face a $75 fine and an insurance surcharge for violations. Transit drivers would face a $500 fine.

"We have a whole generation of drivers who think it's OK to text while driving. This is designed to send a message that it's not,'' said Sen. Steven Baddour, D-Methuen, co-chairman of the Joint Committee on Transportation and a co-sponsor of the amendment.

The amendment passed a day after an 18-year-old Central Catholic senior from Methuen was killed in a single-car accident as she drove to her high school for pre-graduation festivities. Police are investigating whether Rebecca Solomon was texting at the time.

The move also follows an MBTA Green Line accident in which a driver crashed his trolley into another, allegedly while sending a text message to his girlfriend.

The $27.35 billion budget now moves to a House-Senate conference committee.

Technology Helps Parents Monitor Teen Drivers

2009-05-08T13:34:00.001-04:00

RALEIGH (WTVD) -- A car that can't go faster than 80 mph may be a good thing for some, especially parents.

The new technology from Ford is called MyKey. The idea is to allow parents to set limits on teenage drivers.

It won't be available to the public until later this year, but ABC11's Tim Nelson was able to test it.

Each vehicle equipped with MyKey comes with two sets of keys. The goal is simple, according to David Bass who drives around the Triangle promoting MyKey.

"[It] allows the parent to have peace of mind as the teenage driver hits the road," Bass said.
The device still allows young drivers some freedom through settings that are controlled by parents.

Parents can use what is called the administrator key to program desired settings.

The main setting is speed. There is a top speed of 80 mph. Ford said it considered a lower max, but "On certain roadways you have to keep up with traffic," Bass explained. "That if you're going a little slower than that, that could also create a safety, hazard, so 80 is the maximum."

But other speeds can cause an alert. A chime can be set to go off when 45, 55 and 65 mph is reached.

And there's more. Another setting can make sure a driver doesn't do certain things behind the wheel. "This setting allows on or off to make sure the teenage driver doesn't spin the wheels, do doughnuts with the car," Bass said.

Once the desired settings are saved, the parent keeps the administrative key and the teen driver gets the MyKey.

ABC11 tested it and as we approached 80, we received a message that we were near top speed and would not be able to go faster.

Another feature of the MyKey technology deals with the radio. If somebody has their seatbelt off, it won't play. But plug the belt back in, and you get your tunes back.

This will allow teen to drive with their friends and listen to music, but with limits.

Ford's research shows 75 percent of parents like the MyKey idea and 67 percent of teens don't like it.

It debuts in the 2010 Ford Focus, which is set to hit car lots later this year. Then the technology will move into other Ford and Lincoln-Mercury cars.

Competition Still Reigns In Healthy Personal Automobile Insurance Market

2009-04-29T08:39:00.001-04:00

The personal auto market remains competitive across the country, even as rates begin to creep upward. Experts in the field said they expect competition to continue throughout the year and into 2010.

As with most other industries, the economy continues to be a factor in the personal auto market. Most observers said this is primarily being seen in the spending habits of consumers, as they forego the purchase of a new car or seek to save on insurance coverage.

In general, though, those in the industry said they have not seen any dramatic change in the marketplace compared to a year ago, and they predict only minor tweaking going forward, rather than any wholesale market shifts.

Insurers are seeing some deterioration in performance in terms of combined ratio, according to Robert Hartwig, president of the Insurance Information Institute, but “not extraordinarily so.” The deterioration, he said, is due to rising claims costs, which in some states has more than offset declining accident frequency.

Accident frequency is down, according to Mr. Hartwig, because people are driving less. Initially, he said this was due to high gas prices. But in the last six-to-nine months, Mr. Hartwig said the economy is the reason.

The economy has also caused consumers to stop buying as many new vehicles. Mr. Hartwig said growth in the personal auto insurance market will slow because the number of new vehicles sold is falling and there are more cars being taken off the road than put on.

Derek Ross, a spokesperson for the Independent Insurance Agents and Brokers of the West and vice president of CM Meirs Co., an independent agency in Woodland Hills, Calif., said he, too, has seen a reduced number of vehicles on the road. At the same time, he said, consumers who are buying are not replacing their old vehicles with vehicles of the same quality. “So we’re seeing a lot of downsizing in the quality” of the types of vehicles on the road.

Speaking to the declining number of vehicles on the road, Mr. Hartwig said, “This has not happened in decades.” He noted there may be a “pent-up demand” for new cars when the economy turns, and he added that insurers will be able to meet that demand when the time comes.

But while experts agree there are fewer new car purchases, not all agree that this necessarily translates to fewer cars on the road. Richard Luedke, spokesperson for State Farm, said people are not buying as many new vehicles, but they are holding onto the cars they have longer, so there is essentially the same number of cars to insure.

Agents have reported some changes in purchasing decisions among consumers because of the economy. James Berliner, vice president of the Professional Insurance Agents of Connecticut and president of Berliner-Gelfand & Co. Inc., a Bridgeport, Conn.-based agency, said consumers are shopping more for insurance and are paying more attention to pricing today.

Paul Monacelli, past president of PIA New Jersey and CEO of Cedar Knolls, N.J.-based ADP/Statewide Insurance Agencies, which writes personal auto in New Jersey, Pennsylvania and New York, said customers are also looking to reduce coverages to save money. They are taking higher deductibles on physical damage, he said.

Mr. Monacelli said he has responded to the shift in consumer buying habits by having longer conversations with customers to ensure they still have enough insurance to protect their assets.
Mr. Ross said he reviews customers who ask questions about reducing costs as if they were new submissions. He said he speaks to these customers about saving money by bundling coverages together and taking advantage of credits for certain levels of education achieved, or certain professions or professional designations.

Insurers are applying these types of credits more liberally than they used to, according to D. Scott Liebert, president of PIA New York and chairman of CLG Insurance, an agency in Nanuet, N.Y. For example, he said he is seeing companies apply credits for renewing coverage early, taking higher limits and owning a home.

Even with consumers shopping more and companies adjusting to compete for business, Mr. Luedke said he has not seen a change in the number of people canceling policies or letting coverage lapse. The lapse and cancellation rate, he said, is about the same it has been for two-to-four years.

Fraud is also a concern for insurers. Mr. Hartwig said there is anecdotal evidence that, because people are struggling financially today, fraud “give up” schemes are on the rise.
Auto theft is also believed to be on the rise, Mr. Hartwig said, particularly in border cities in the United States. He said problems associated with the drug trade in Mexico may be a reason for this rather than the economy.

Despite the economy looming, professionals in this field agreed the personal auto market is still healthy and competitive, with prices remaining relatively stable for the foreseeable future.
Mr. Hartwig characterized the market as “extremely competitive,” and noted a healthy personal auto market is important to the industry’s overall health.

“The number of carriers in some previously difficult-to-operate states is increasing,” such as Massachusetts, Mr. Hartwig said, and residual markets are “virtually depopulated” in many states.

Private passenger auto, he said, currently accounts for 34 percent of all premiums written in United States.

Mr. Monacelli said the market in areas where he writes coverage is “stabilizing.” Up until this year, he said, companies were doing whatever they could to get market share. “They were appointing a lot of agents; sometimes the quality of those agents didn’t meet the profile the companies had in the past,” Mr. Monacelli said.

Companies lived by the mantra that there is a price for every risk, Mr. Monacelli continued, but some of those risks were not necessarily being written at the right prices, casing a deterioration in combined ratios.

The newness of multivariate rating also led to some inappropriate pricing, Mr. Monacelli said. But companies have more experience with this type of rating now, he added, so rates should stabilize some.

Mr. Berliner said insurance company field representatives have warned him that there will be slight rate adjustments upward, but he said this is only being seen in certain regions, not across the board. While other lines are seeing pressure to increase pricing, this has not impacted personal auto, he said.

Rates have been essentially flat according to what Mr. Ross has seen, although he said there has been “some rumblings” about rates beginning to increase. He said he expects some slight increases over the next six months but does not see any landscape-change in the personal auto market.

“Any major changes will happen in baby steps,” he said.

Speaking to State Farm’s experience, Mr. Luedke said rates increased, but only by just under 1 percent.

Mr. Hartwig said the slight adjustment upward in rates is a response to “some underlying increases in costs.” He cited higher medical care costs as an example.

On the regulatory and legislative fronts, Mr. Hartwig said the possibility of some form of federal regulation stands above all other issues. Questions such as whether federal regulation will only be seen as a “systemic risk regulator,” or whether the states or feds will regulate rates, or whether federal regulation will be optional have yet to be answered, he said.

It is also unknown how such changes will affect big insurers versus small insurers, he noted.
Aside from federal regulation, credit scoring remains a “perennial concern,” Mr. Hartwig said. Some states are again talking about bans or restrictions.

Mr. Berliner said a bill has been introduced in his state of Connecticut to ban credit scoring.
Ultimately, Mr. Hartwig said it is incumbent on insurers to make the case for credit scoring and to show that banning the practice will result in an inferior rating system.

The personal auto market remains competitive across the country, even as rates begin to creep upward. Experts in the field said they expect competition to continue throughout the year and into 2010.

As with most other industries, the economy continues to be a factor in the personal auto market. Most observers said this is primarily being seen in the spending habits of consumers, as they forego the purchase of a new car or seek to save on insurance coverage.

In general, though, those in the industry said they have not seen any dramatic change in the marketplace compared to a year ago, and they predict only minor tweaking going forward, rather than any wholesale market shifts.

Insurers are seeing some deterioration in performance in terms of combined ratio, according to Robert Hartwig, president of the Insurance Information Institute, but “not extraordinarily so.” The deterioration, he said, is due to rising claims costs, which in some states has more than offset declining accident frequency.

Accident frequency is down, according to Mr. Hartwig, because people are driving less. Initially, he said this was due to high gas prices. But in the last six-to-nine months, Mr. Hartwig said the economy is the reason.

The economy has also caused consumers to stop buying as many new vehicles. Mr. Hartwig said growth in the personal auto insurance market will slow because the number of new vehicles sold is falling and there are more cars being taken off the road than put on.

Derek Ross, a spokesperson for the Independent Insurance Agents and Brokers of the West and vice president of CM Meirs Co., an independent agency in Woodland Hills, Calif., said he, too, has seen a reduced number of vehicles on the road. At the same time, he said, consumers who are buying are not replacing their old vehicles with vehicles of the same quality. “So we’re seeing a lot of downsizing in the quality” of the types of vehicles on the road.

Speaking to the declining number of vehicles on the road, Mr. Hartwig said, “This has not happened in decades.” He noted there may be a “pent-up demand” for new cars when the economy turns, and he added that insurers will be able to meet that demand when the time comes.

But while experts agree there are fewer new car purchases, not all agree that this necessarily translates to fewer cars on the road. Richard Luedke, spokesperson for State Farm, said people are not buying as many new vehicles, but they are holding onto the cars they have longer, so there is essentially the same number of cars to insure.

Agents have reported some changes in purchasing decisions among consumers because of the economy. James Berliner, vice president of the Professional Insurance Agents of Connecticut and president of Berliner-Gelfand & Co. Inc., a Bridgeport, Conn.-based agency, said consumers are shopping more for insurance and are paying more attention to pricing today.

Paul Monacelli, past president of PIA New Jersey and CEO of Cedar Knolls, N.J.-based ADP/Statewide Insurance Agencies, which writes personal auto in New Jersey, Pennsylvania and New York, said customers are also looking to reduce coverages to save money. They are taking higher deductibles on physical damage, he said.

Mr. Monacelli said he has responded to the shift in consumer buying habits by having longer conversations with customers to ensure they still have enough insurance to protect their assets.
Mr. Ross said he reviews customers who ask questions about reducing costs as if they were new submissions. He said he speaks to these customers about saving money by bundling coverages together and taking advantage of credits for certain levels of education achieved, or certain professions or professional designations.

Insurers are applying these types of credits more liberally than they used to, according to D. Scott Liebert, president of PIA New York and chairman of CLG Insurance, an agency in Nanuet, N.Y. For example, he said he is seeing companies apply credits for renewing coverage early, taking higher limits and owning a home.

Even with consumers shopping more and companies adjusting to compete for business, Mr. Luedke said he has not seen a change in the number of people canceling policies or letting coverage lapse. The lapse and cancellation rate, he said, is about the same it has been for two-to-four years.

Fraud is also a concern for insurers. Mr. Hartwig said there is anecdotal evidence that, because people are struggling financially today, fraud “give up” schemes are on the rise.
Auto theft is also believed to be on the rise, Mr. Hartwig said, particularly in border cities in the United States. He said problems associated with the drug trade in Mexico may be a reason for this rather than the economy.

Despite the economy looming, professionals in this field agreed the personal auto market is still healthy and competitive, with prices remaining relatively stable for the foreseeable future.
Mr. Hartwig characterized the market as “extremely competitive,” and noted a healthy personal auto market is important to the industry’s overall health.

“The number of carriers in some previously difficult-to-operate states is increasing,” such as Massachusetts, Mr. Hartwig said, and residual markets are “virtually depopulated” in many states.

Private passenger auto, he said, currently accounts for 34 percent of all premiums written in United States.

Mr. Monacelli said the market in areas where he writes coverage is “stabilizing.” Up until this year, he said, companies were doing whatever they could to get market share. “They were appointing a lot of agents; sometimes the quality of those agents didn’t meet the profile the companies had in the past,” Mr. Monacelli said.

Companies lived by the mantra that there is a price for every risk, Mr. Monacelli continued, but some of those risks were not necessarily being written at the right prices, casing a deterioration in combined ratios.

The newness of multivariate rating also led to some inappropriate pricing, Mr. Monacelli said. But companies have more experience with this type of rating now, he added, so rates should stabilize some.

Mr. Berliner said insurance company field representatives have warned him that there will be slight rate adjustments upward, but he said this is only being seen in certain regions, not across the board. While other lines are seeing pressure to increase pricing, this has not impacted personal auto, he said.

Rates have been essentially flat according to what Mr. Ross has seen, although he said there has been “some rumblings” about rates beginning to increase. He said he expects some slight increases over the next six months but does not see any landscape-change in the personal auto market.

“Any major changes will happen in baby steps,” he said.

Speaking to State Farm’s experience, Mr. Luedke said rates increased, but only by just under 1 percent.

Mr. Hartwig said the slight adjustment upward in rates is a response to “some underlying increases in costs.” He cited higher medical care costs as an example.

On the regulatory and legislative fronts, Mr. Hartwig said the possibility of some form of federal regulation stands above all other issues. Questions such as whether federal regulation will only be seen as a “systemic risk regulator,” or whether the states or feds will regulate rates, or whether federal regulation will be optional have yet to be answered, he said.

It is also unknown how such changes will affect big insurers versus small insurers, he noted.
Aside from federal regulation, credit scoring remains a “perennial concern,” Mr. Hartwig said. Some states are again talking about bans or restrictions.

Mr. Berliner said a bill has been introduced in his state of Connecticut to ban credit scoring.
Ultimately, Mr. Hartwig said it is incumbent on insurers to make the case for credit scoring and to show that banning the practice will result in an inferior rating system.

Auto Insurance Fraud on the Rise, officials say

2009-04-21T13:28:00.000-04:00

Investigators know the tricks of insurance fraud trade

Insurance officials say they have noticed an increase in fraud as people become desperate in the tough economy.

By Laura A. Bischoff
Staff Writer

Insurance fraud investigators weren’t born yesterday. They know the difference between when an amateur and a professional thief dumps a car.

The professional removes the global positioning system, airbag, high-end stereo and other valuable parts before setting a stolen car ablaze or rolling it into a pond or lake.

The amateur leaves those items inside the car. And sometimes the rookie makes other mistakes, such as torching the vehicle in view of a surveillance camera, or reporting the car stolen with eyebrows singed.

Joel Demory, fraud chief with the Ohio Department of Insurance, said investigators see plenty of “boneheaded” moves by people looking to dump their cars for insurance payouts.

State insurance officials say they have noticed that insurance fraud, through staged thefts, is on the rise as people become desperate in the troubled economy.

The state fire marshal reports that between 2004 and 2007, Ohio saw a 62.3 percent increase in vehicle arsons.

Other states have reported measurable increases in auto give-ups in recent years. New York reported a 25 percent increase between 2007 and 2008, New Jersey saw a 59 percent increase in suspected vehicle arsons between 2004 and 2007, and California reported a 40 percent increase in vehicle give-ups in fiscal year 2008 compared with fiscal year 2007.

“If it looks like a fake car theft, acts like a fake car theft and quacks like a fake car theft, then it’s probably a fake car theft,” said James Quiggle, spokesman for the Coalition Against Insurance Fraud, a consumer and insurance interest group.

Investigators consider whether the owner was behind on the payments, if they claimed high-end equipment was in the car, whether they recently checked on their insurance coverage, whether the owner has all the keys and if there are signs of forced entry on the car.

They also talk to neighbors and review surveillance camera footage from where a car was reported stolen and where it was found.

Sometimes it can take six months to investigate and prosecute an insurance fraud case, according to Demory.

But an insurance fraud conviction for dumping a car worth more than $5,000 carries a maximum penalty of 18 months in prison and a $5,000 fine in Ohio.

Quiggle said a recent survey found that during the last decade, American’s attitudes toward insurance fraud have become more tolerant. People see bilking big insurance companies out of a few thousand dollars as harmless, he said.

“Morally, these people find it easy to rationalize torching their car, because they don’t view insurance fraud as a real, live crime,” Quiggle said.

“They don’t consider the cost of these crimes are being passed on to all the policyholders in the form of higher premiums.”

Mass. Ranks Last Again in US For Use of Seat Belts

2009-04-08T14:01:00.000-04:00

By Michael Levenson, Globe Staff | April 7, 2009

Massachusetts ranked last among the states in its rate of seat belt use last year, extending a dismal trend that has prompted renewed calls for a tougher seat belt law.

The rate, 66.8 percent, was down 1.9 percent from 2007 and well below the national average of 83 percent, according to the National Highway Traffic Safety Administration. Massachusetts' rate, which has been last or near last for years, has improved from a rate of 56 percent in 2001.

Massachusetts is one of 22 states that do not allow police officers to stop motorists for not a wearing seat belt. State law allows police to ticket drivers for the offense, but only if the drivers are stopped for another reason first.

Efforts to pass a "primary enforcement" law have repeatedly failed in the Legislature, defeated by critics who argue the law would give police too much power to stop drivers. Some have also raised concerns that minorities would be unfairly targeted.

A "primary enforcement" bill has been filed in the Legislature again this year, but has not gained traction, legislators said. Proponents say the bill will not only save lives, but bring Massachusetts $13.6 million in federal transportation funds if it passes before June 30.

"It's really the only thing that's proven to bring up the usage rate," said Arthur Kinsman of the American Automobile Association of Southern New England. But opponents, like Senator Robert L. Hedlund, say the bill is "an intrusive, big government move."

Hedlund, a Weymouth Republican, said: "Common sense dictates you should wear your seat belt, whether or not there's primary enforcement."

Mass. House Approves Bill That Would Make Auto Insurance Appeals Board Permanent

2009-04-03T13:44:00.002-04:00

By DAN RING dring@repub.com

BOSTON - The state House of Representatives on Thursday approved a bill that would make permanent a state board that rules on drivers' appeals of motor vehicle insurance surcharges.

The 155-0 vote in the House moved to enshrine the state Division of Insurance's Board of Appeal in state law and strip away the power of an insurance commissioner to unilaterally abolish the board.

The vote comes two weeks after Insurance Commissioner Nonnie S. Burnes dropped her disputed plan to scrap the board and agreed to keep it operating. Burnes had wanted to eliminate the board as part of a new system that allows auto insurers to set their own rates and allows drivers to shop around for the best rates.

Rep. Angelo J. Puppolo, D-Springfield, a cosponsor of the House bill, said it didn't make any sense to eradicate the board.

"The board allows consumers a fair appeal process," Puppolo said. "I'm glad we were able to make it permanent. It's a great win for the consumer."

The House approved the bill after a 90-minute debate.

The Senate last week voted 39-0 to approve the bill.

A spokeswoman for Gov. Deval L. Patrick said the governor supports the preservation of the appeal board, but needs to review the details of the bill before deciding whether he will sign it.

Sen. Stephen J. Buoniconti, sponsor of the bill in the Senate, said he expects lawmakers to send a final bill to the governor's desk in about a week. The West Springfield Democrat said the bill is universally supported and is a high priority.

Buoniconti said he received 50 phone calls from insurance agents and consumers when Burnes planned to abolish the board.

Supporters said the appeal board gives consumers a fair hearing if they are assessed a surcharge. A driver can receive a surcharge if the insurer rules the driver is more than 50 percent at fault in a collision.

Surcharges can costs hundreds of dollars and can remain on an insurance bill for up to six years.

People can pay $50 to lodge an appeal with the board and an appeal often pays off. Last year, the board heard 43,264 appeals around the state and approved 52 percent of the appeals, according to the state Division of Insurance.

About 10 percent of the hearings, or 4,500, were held for Western Massachusetts residents at the Registry of Motor Vehicles on Liberty Street in Springfield.

Burnes had planned to have motorists appeal surcharges directly to their insurer. But critics said insurers were unlikely to grant many appeals of their own decisions considering the money at stake.

In a statement on Thursday, Burnes said, "We heard the concerns voiced by the public and responding to those concerns, we decided to maintain the board of appeal and its accident resolution review process."

Burnes had moved to dismantle the board because she said it didn't fit with managed competition for auto insurance. Under the year-old competitive system, the state no longer fixes rates and insurers have more freedom to offer different policies and compete for customers.

Burnes also met with resistance because elimination of the board would have actually cost the state money. According to Burnes, the state receives about $2 million a year in fee revenues and it costs about $1.7 million a year to operate the board.

"These hearings not only pay for themselves but generate revenue for the commonwealth," said Rep. Walter F. Timilty, D-Milton. "That's a plus in this climate."

New Registry of Motor Vehicle Fees 2009

2009-04-02T11:14:00.002-04:00

This list reflects the transactions that will change in price Friday, April 3, 2009 at 5:00 pm:

Registration Fees
*Amendment $25.00
*Duplicate $25.00

License & ID Fees (5 year)
*Class A $75.00
*Class B $75.00
*Class C $75.00
*Mass ID / Liquor ID $25.00

Out of State License Conversions (5 year)
*Class A $125.00
*Class B $125.00
*Class C $125.00

Title Fees
*Certificate of Title (Clear, Owner Retained, Reconstructed, + Recovered Theft) $75.00
*Salvage Title (Repairable + Parts Only) $50.00

Other Fees
*Instant Issue License/ID $50.00
*Driver History (Paper) $20.00
*Driving Records (Certified + Non-certified) $20.00
*Accident Report $20.00
*Reducible Load Permit Amend $20.00
*Reducible Load Permit (Overweight Permits) $50.00 Minimum
*Returned Check/CC Fees $15.00

A Milder Hurricane Outlook From AccuWeather

2009-03-19T13:40:00.000-04:00

A Milder Hurricane Outlook From AccuWeather

NU Online News Service, March 18, 11:55 a.m. EDT

The 2009 hurricane season will see three hurricanes impacting the U.S. coast, compared with four that arrived last year, and a lower total number of named storms, according to an AccuWeather.com early forecast.

Joe Bastardi, AccuWeather chief long-range and hurricane forecaster, also predicted storms may be more likely to form in the Atlantic basin closer to the coast. The possibility of a major hurricane making a U.S. landfall cannot be ruled out, he warned.

“This year’s forecast shows only half as many impacts on the United States as there were last year,” Mr. Bastardi said. “But keep in mind, it only takes one major hurricane hitting a highly populated area to have devastating impact.”

“Early indications show a reduction in the overall number of named storms and of major hurricanes in the Atlantic basin compared to last year, but the number of storms should still be near or a little above normal.”

The meteorologist pointed to several factors influencing the forecast, including:

• Dissipation of the weak La Niña in the Pacific Ocean. A reverse to a weak El Niño, which is associated with decreased hurricane activity in the Atlantic, is most likely in the middle to latter part of the hurricane season.

• The expected orientation of high pressure in the eastern Atlantic will produce stronger easterly trade winds across northern Africa than last year. This will result in increased dust and dry air being pushed westward into the Atlantic where many tropical storms originate.

• Cooler water temperatures in the deep tropical Atlantic, a typical breeding ground for hurricanes, which can reduce hurricane activity and intensity. This may create a season in which storms are reaching a greater intensity further north and east than last year, leading to less impact in the Caribbean areas hit hard last year.

• A continuing multidecadal pattern of higher-than-average water temperatures in the Atlantic, raising the chance of major storms near the East Coast until about 2020.

Mr. Bastardi forecasted that while there will be 13 storms this year, compared with 16 in 2008, the number of hurricanes will remain the same at eight. He predicted two major hurricanes compared with five last year and one major hurricane hitting the coast compared with none last year.

Are You Covered?

2009-02-23T08:36:00.003-05:00

Will your home insurance really protect you in case disaster strikes? Find out if your policy fits your needs -- plus how to reduce its cost.

By Elizabeth Gehrman February 22, 2009

Like many people, Nancy Dalrymple and Michael Flannery never thought much about their homeowner's insurance. Every so often they put a check in the mail for their agent and figured coverage would be there if, God forbid, they ever needed it.

Until their Winthrop single family went up in flames in November 2005, that is. "I thought everything was fine," Dalrymple says. "But they said we were way underinsured. We only had something like $193,000 on the structure, and we had damage of about $360,000. Then of course you have other coverage for contents, but it was a total loss. We lost far more contents than we had coverage for."

In addition, Dalrymple says she felt rushed, during a time of trauma and devastation, into getting the extensive repair work done quickly, which led to hiring a contractor who went way over budget and disappeared in the middle of the job, and a second whose shoddy work landed the couple in informal mediation talks. The couple, who had paid off their mortgage two months before the fire, had to take out a new mortgage to finish the work. They still have not moved back into the house. "Once you have a claim, it becomes an adversarial relationship between you and the insurance company," Dalrymple says, "whereas you thought they were part of your team. They're not."

Dalrymple might feel differently, insurers insist, if she had been more informed about her homeowner's policy and what it entailed. "Most people never read their policy," says Mike Barry, vice president of media relations at the Insurance Information Institute, an insurance trade organization based in New York. "I understand it's not the most scintillating reading, but it's well worth their while to do it. The greatest mistake people make is not understanding their policies."

Many in the insurance industry maintain that it is the job of agents to keep their clients informed, but there is no question that being a proactive consumer -- knowing what to ask your agent about in terms of both coverage and cost-saving measures -- will put you in a better position in the event disaster does strike. "Every year, get a checkup on your insurance," says Kathy Silvia, a licensed broker and cofounder of the Fair Insurance Agency in Centerville. "Just like you would get an annual physical exam. Schedule it for when your policy renews, which is usually the month you bought your home. The worst time to find out what you're covered for is after a loss." Getting an insurance checkup is especially important if you've done renovations that have increased the value of your home.

The state's switch to a competitive auto insurance system last year means there are now more opportunities to shop around for all your insurance needs -- and if you bundle the policy for your car with one for your home, using the same carrier, you could save up to 20 percent. Here's how to get the coverage you need and maybe save some cash, too.

Choose the Best Coverage: The first thing consumers need to understand, insurance insiders say, is the replacement cost for both the dwelling and contents. The replacement value of the dwelling will be lower than what your house would be worth on the open market and lower than the tax assessor's evaluation, because both of those values are affected by location, lot size, and other factors, whereas replacement value only takes into account how much it would cost to rebuild the house in what insurers call "like kind and quality." That is, if you had gingerbread and intricate moldings in the original structure, the new house should have those, too, at no extra cost to you.

When you apply for a policy, your agent should ask lots of questions about the construction of your home. If you feel you don't know enough to judge your home's replacement cost, it might be a good idea to hire a contractor to help you get an accurate appraisal.

Standard policies require you carry at least 80 percent of your home's replacement cost, says Silvia. So if you purchased a policy with $100,000 in replacement cost a few years ago, but building materials have gone up since then, as long as that $100,000 still represents at least 80 percent of the current cost of rebuilding your home, the insurer will pay the full amount.

You can add endorsements that modify your insurance coverage; two are particularly recommended: Guaranteed replacement cost coverage pays the full cost of replacing or repairing a home, even if it is above the policy limit. This endorsement can protect you from inflated building costs in the event of a disaster that affects a whole neighborhood, such as a hurricane, a wildfire, or something unexpected like the 2006 chemical-plant explosion in Danvers. Another is a building ordinance endorsement, which protects you if building codes change in a way that might increase your replacement cost. On the Cape, for instance, the code was recently amended so that windows are now required to withstand 110-mile-per-hour winds rather than 90-mile-per-hour winds. "Twenty miles an hour means absolutely nothing to me," Silvia says, "but in the pocketbook, it means a lot when you have to replace those windows."

Putting your personal property on a replacement-cost basis may also be worthwhile, since standard policies - which generally assume contents to be worth 50 percent of the replacement cost of the dwelling -- figure in the depreciation of electronics and other goods. "If you get 50 percent for content value and add a replacement cost endorsement onto the policy," says Silvia, "most companies will increase the content value to 70 percent of the building's value." For example, say your television is stolen. A standard policy will take into account the age of the TV; if the average life of a TV is 10 years and yours was five years old, you'll get only half of its replacement value toward buying a comparable new one -- unless you have this extra coverage.

In certain circumstances -- such as if your home has a swimming pool or trampoline or you own a breed of dog deemed dangerous -- standard insurance companies will often refuse to cover you. In that case, you'll have to go with the Fair Access to Insurance Requirements (FAIR) plan, a state-sponsored program paid for with money pooled by all the carriers that operate in the Commonwealth. The FAIR plan covers all owners as long as their houses meet certain minimal safety requirements (such as there are no live wires dangling from the ceiling), and it does not necessarily cost more for comparable coverage.

As Dalrymple and Flannery found, even a single large claim can also force you into the FAIR plan. "Sometimes it makes me embarrassed to be in insurance," says Irene Morrill, vice president of technical affairs for the Massachusetts Association of Insurance Agents. "You've been a client for multiple years, paid your bills, never had a loss, have a loss, and we nonrenew you. It makes no sense to me." On the upside, you can challenge nonrenewal, and after three years claim-free, most companies will again consider you an acceptable risk for the voluntary market.

Consider These Extras

In addition to basic replacement costs and liability, many other types of coverage can be tacked onto a standard home insurance policy. Whether you want them depends on how you live and your tolerance for risk. Among the extras you might want to consider:

Many people don't realize that if they have a home-based business, a standard homeowner's policy covers the contents of their office for only $2,500; an endorsement can raise that substantially. It's also wise to cover your business for additional liability. Morrill tells of the time a FedEx delivery person fell down and sued the homeowner. "It was a business delivery," she says, "so they didn't have coverage."

According to Silvia, fewer than 10 percent of Massachusetts residents have flood insurance, which most agents think is a big mistake. Even if you don't live in a flood-prone area, an unusually heavy rain can bring water into your basement and storm drains can back up, and these are not covered on a standard homeowner's policy. Depending on where you live, you may need to purchase this coverage through the National Flood Insurance Program, which is managed by the Federal Emergency Management Agency (fema.gov/business/nfip). You can challenge your flood zone -- say, if you live near the water but on top of a high hill -- and possibly lower your rate. To learn your flood risk, go to floodsmart.gov and type in your address.

Earthquake damage is also not covered on a standard policy and, depending on your location and the type of house you have, it can run as little as $35 per $100,000 of coverage. Julie Bisconti, marketing director at Claremont Insurance in East Boston, says her mother has affordable earthquake coverage on her frame house in Revere, but her mother's next-door neighbor can't afford it on his more crack-prone stucco house.

Whether you think it's worth the extra cash depends on your own personal comfort level. "There is a fault in Eastern Massachusetts," says Frank Mancini, president and CEO of the trade organization Massachusetts Association of Insurance Agents. "I think the last time there was a quake was probably 250 years ago. Are we due for one? I'm not a seismologist."

If you have valuable art, antiques, jewelry, or the like, you may want to add a rider for them. "You need separate appraisals for each thing," says Bisconti, "and if you start listing each of these individual things, you'll really start paying for them." Therefore, that $500 Hummel figurine your grandmother gave you probably isn't worth an amendment; your $15,000 Renoir sketch, however, is a different story. "You can't insure sentimentality," adds Morrill.

Most policies won't cover all similar valuables -- that is, all the books in your collection or all of your jewelry - but require separate appraisals for each piece; there are, however, some companies that offer blanket endorsements, so be sure to ask your agent.

A few of the more obscure but possibly worthwhile types of extra coverage include identity-fraud expenses, additional personal liability for things like slander and defamation of character, and even a refrigerated products rider -- which has a low deductible and might have come in handy during the recent ice storm in the north-central part of the state. Often, such types of coverage can be packaged together for an additional cost of as little as $50 a year.

Lower Your Costs: The cost of your insurance policy is based on many things, including the neighborhood you live in and the age, condition, and style of your house -- a flat roof, for example, is considered a greater risk than a pitched roof, since snow buildup can cause a collapse. While you can't change certain aspects of your house, there are many factors under your control:

Your credit score: Those who maintain decent credit, goes the reasoning, probably work harder to keep their houses in good shape, too. A score in the high 700s will put you in the highest-tier -- and lowest-cost -- insurance schedule.

Your C.L.U.E. score: Your Comprehensive Loss Underwriting Exchange number is similar to a credit score, but rather than tracking whether you pay your Macy's bill on time, it keeps tabs on how many insurance claims or even inquiries you make. A low C.L.U.E. score will increase your policy's cost, so it's a good idea to check yours periodically to make sure no mistakes have crept in. You are entitled to a free C.L.U.E. report annually and can order it at choicetrust.com. If there are errors in your report, learn how to appeal them at consumerdisclosure.com.

Your lifestyle: Many companies offer discounts for nonsmokers and, perhaps surprisingly, even for those who work at home. "Some companies will give a credit if nobody works outside the home for more than a certain number of hours a week," says Silvia. "Because it's more likely they'll be there if something happens." If you're the type who always has a little something in the bank, that can help, too: Insurers frequently offer "paid in full" discounts to those who save them monthly paperwork by clearing up their entire bill yearly instead.

Your home's extras: Additional security in the form of deadbolts or burglar and fire alarms can decrease your premium, as can storm shutters if you live in an area with high-wind risk.

A higher deductible" "Insurance is for 'Oh, my gosh, my house is leveled to the ground,' " says Silvia. "It's not for 'They just stole my $200 bicycle.' " She recommends increasing your deductible from a typical $500 to $1,000 or even $2,5000. "Whatever you can afford. It can save you 20 to 25 percent of your premium." You may also be able to save money by increasing only a portion of your deductible; for instance, agree that you'll pay more if hit by a wind- or hailstorm.

Shopping around: Some insurers offer a discount for longtime customers; others lower your premium when you switch carriers. Every couple of years, it's a good idea to get some competing quotes to make sure you're getting the best rate; a good place to start is at insweb.com, which allows you to include the specifics of your house and lifestyle before providing you with the name of an insurer in your area that meets your needs.

Taking a class: Some insurers offer a discount of up to 15 percent to clients who take three workshops with the Massachusetts Affordable Housing Alliance's HomeSafe program. Learn more at mahahome.org/class/hs_about.html.

File a Big Claim Wisely

If you find yourself in a situation similar to Dalrymple and Flannery's -- where you've experienced a significant loss -- often your best first step is to hire a public adjuster. Though no statistics are available, public adjusters maintain that for a 10 percent cut, they can increase the payout you will receive from your insurer. "An insurance claim is a business transaction between two parties with opposing interests," says Timothy Ball of Ball and Boyd Public Adjusters Inc. in Marstons Mills. "One side knows what they're doing, and the other side doesn't. We're helping the side that doesn't." You'll get better results, Ball says, if you call a public adjuster immediately after the problem strikes, rather than getting one involved after your insurance company has already made a decision. "It's much easier to negotiate when they haven't taken a position yet."

Even if the amount you're reimbursed doesn't end up being substantially higher, many say it's worth hiring your own adjuster simply because of the energy required to settle a claim. "A major benefit of our service," Ball says, "is that you don't have to deal with the insurance company. It saves you time, aggravation, and, ultimately, money."

Nancy Dalrymple, who hired her adjuster right away, agrees. "You have to pay," she says, "but you're so traumatized by the event that it's hard to get your foot going. Our adjuster took care of a lot for us so we didn't have to deal with it."

What Every Homeowner Must Do:

Buying a good insurance policy is just the start. The following measures will ensure that if you ever have to file a claim, you can prove what you've lost. "The more documentation you have," says John Cantalupa, supervising underwriter for the Massachusetts Fair Access to Insurance Requirements plan, "the easier the process will be."

Take photos of your house that clearly show the materials used in construction; keep a copy both on and off the premises, either in a safe-deposit box or with a friend or relative. Document any special features, such as marble tile or a custom kitchen.

Keep a list of valuable contents, with photos and any appraisals, both on and off the premises. Knowyourstuff.org, a site administered by the Insurance Information Institute, allows you to download free software to create an inventory of your home.

Elizabeth Gehrman lives in East Boston and writes the On the Block column for the Globe Magazine. Send comments to magazine@globe.com.

Massachusetts Agents Want Regulator to Rein in Progressive

2008-12-31T13:27:00.000-05:00

December 23, 2008

A trade group for Massachusetts insurance agents has asked the state's top regulator to force Progressive Insurance to take down its Web site, which agents say routinely gives inaccurate quotes -- particularly when comparing Progressive's prices to its competitors.

The complaint comes in a letter to Insurance Commissioner Nonnie Burnes from the Massachusetts Association of Insurance Commissioners. The letter follows an admission by Progressive that its Web site was mistakenly doubling the rates of several competitors -- Commerce Insurance and Liberty Mutual.

It's the second time in the seven months Progressive has been selling personal auto insurance online that the company has become a target of agents' ire. In August, the company admitted that its Web site was mistake-prone in some circumstances, and vowed to correct any problems.

"It is safe to say that an independent insurance agent found to be providing inaccurate quotes, particularly for competing companies, would face a regulatory hearing and fine by the Division of Insurance," wrote Frank Mancini, president of the Massachusetts Associaton of Insurance Agents. "We are not aware of any action taken by the DOI for the inaccurate quotes provided to Massachusetts consumers earlier this year by Progressive."

Mancini is requesting that Progressive be forced to take down its Web site until the accuracy of its quoting system can be verified. Mancini has also said the company should be fined for every inaccurate quote

It's not the only problem the agents' group has with Progressive. Agents say Progressive is selling six-months-only policies, which are supposedly against regulations in the Bay State, as well as altering deductibles and PIP coverage without informing purchasers of the ramifications of the changes.

In a statement, Progressive spokeswoman Cristy Cote said the mistakes were caused by human error in the design of the site. Cote also said that Progressive has sent apologies to the 21,000 consumers who saw incorrect quotes.

"To help remedy this situation, we notified both companies as well as the Massachusetts Division of Insurance and the Attorney General's office, and we removed the comparison rating service from our Web site," she said. "We will not re-install this service until we're completely confident that it is delivering fair and accurate pricing information to Massachusetts consumers."

Most Holiday Travelers Unaware Of Insurance Coverages

2008-12-05T13:01:00.001-05:00

A majority of travelers don’t fully understand what insurance covers during their trips according to a national survey by an agents group.

The telephone poll was sponsored by Trusted Choice and the Independent Insurance Agents & Brokers of America based in Alexandria, Va.

Conducted by International Communications Research, an independent research firm based in Media, Pa., the survey contacted 1021 households during the month of November.

People were asked if they thought their personal auto insurance would cover a car rental for damages or other related expenses; if their insurance would cover them for loss of luggage containing gifts; or if health insurance covered them if they became ill or were injured while traveling.

Thirty to 75 percent of the respondents either did not think they were covered or did not know if they were.

“With so many people traveling for the holidays, it is imperative that they understand their insurance needs and rights before leaving home,” said IIABA President and Chief Executive Officer Robert A. Rusbuldt.

He said IIABA advises that travelers “consult with their Trusted Choice independent insurance agent to discuss their current policies and what do to in the event that they need to file a claim while on vacation.”

Madelyn Flannagan, IIABA vice president for education and research, said, “Many consumers do not know when they may already be covered or where they might have gaps while on vacation.”

The survey found that about 75 percent of homeowners did not think or did not know if they would be covered in the event the airline lost their luggage containing holiday gifts.

Actually, most homeowners or renters insurance policies do provide worldwide coverage for most belongings, IIABA said. Airlines have reimbursement policies for lost luggage. Lost gifts purchased with a credit card may also have some level of protection from the issuer. Before purchasing baggage insurance, consumers should check their current policies. It may be a waste of money, according to IIABA.

Nearly one third of consumers do not think or do not know if their current policies cover them in a rental vehicle. In fact, driving a rental car is considered to be the same as driving your own vehicle for liability purposes, IIABA advised.

The purchase of liability damage waiver and collision damage waivers are often not necessary, but IIABA said that consumers should consult their independent insurance agent to find out what’s best for their travel needs, especially when traveling outside of the United States.

The survey found that more than 35 percent of respondents did not think or did not know if they were covered in the event they became ill or injured no matter where they were located.

Most individual and employer-provided health and medical insurance policies cover you when you are injured or become sick no matter where your injury or illness occurs for short recreational trips, said the IIABA

The group said that in general, major medical health insurance plans sold in the U.S. will provide coverage for emergency medical services you require while traveling. Still, insurance companies cannot guarantee the quality of care that is available wherever you travel and some policies have territorial restrictions.

Status of AIG

2008-09-22T08:12:00.001-04:00

AIG, Inc. continues to work with regulators during this difficult time for financial markets. As has been stated many times publicly, AIG Property Casualty Insurance is not a solvency risk; the value of its assets exceeds its liabilities.

AIG Private Client Group is continuing to write new business.

In addition, here are a few more important facts to note:
*AIG Private Client Group, which operates as part of AIG Property Casualty Insurance, faces no such liquidity concerns.
*AIG Property Casualty Insurance has $26.7 billion in policyholder surplus, as well as invested assets of $65 billion. These assets are protected by law and cannot be taken from policyholders!

As a point of reference, a leading AIG Private Client Group competitor has policyholder surpluses of $14 billion.

As you likely know, yesterday AIG reached an agreement in principle with the New York State regulators to exchange illiquid assets from the parent company with more liquid assets in operating insurance companies. These assets are of like kind and quality to one another; the only difference is duration.

AIG Property Casualty Insurance has the resources to pay policyholder claims and will continue to do so. On average, we are paying $73 million in claims each day.

AIG Property Casualty Insurance was downgraded by A.M. Best yesterday. Even with this downgrade, our insurance companies carry a rating of “A” or “Excellent.” This rating compares favorably with most major companies.

AIG Property Casualty Insurance results:
*AIG Commercial Insurance continues to exhibit strong financial performance with 2008 second quarter operating income of nearly $1 billion, net written premiums of $5.99 billion and a profitable combined ratio of 93.7%.
*AIG Private Client Group’s year-to-date results: $87.3 million in operating income; $520 million in net written premium; combined ratio of 81.4%.

We remain committed to, and capable of, serving the needs of our policyholders. If you have any questions, please contact your local representative. Thank you for your continued support of AIG Private Client Group.

Copyright © 2008 American International Group, Inc. All rights reserved.
AIG Private Client Group, 70 Pine Street, 21st Floor, New York, NY 10270

Fed takes over AIG

2008-09-17T12:01:00.001-04:00

Fed in AIG rescue - $85B loan

Government response reaches dramatic new level: U.S. will take 80% stake in nation's largest insurer to prevent global financial chaos.

NEW YORK (CNNMoney.com) -- In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group, officials announced Tuesday evening.

The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) the funds. In return, the federal government will receive a 79.9% stake in the company.

Officials decided they had to act lest the nation's largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries.

An eventual liquidation of the company is most likely, senior Fed officials said. But with the government loan, the company won't have to go through a tumultuous fire sale.

"[A] disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said in a statement.

The bailout marks the most dramatic turn yet in an expanding crisis that started more than a year ago with the mortgage meltdown. The resulting credit crunch is now toppling not only mainstay Wall Street players, but others in the wider financial industry.

The line of credit to AIG, which is available for two years, is designed to help the company meet its obligations, the Fed said. Interest will accrue at a steep rate of 3-month Libor plus 8.5%, which totals 11.31% at today's rates.

AIG will sell certain of its businesses with "the least possible disruption to the overall economy." The government will have veto power over the asset sales and the payment of dividends to shareholders.

The company's management will be replaced, though Fed staffers did not name the new executives. Edward Liddy, the former head of insurer Allstate Corp (ALL, Fortune 500)., will lead the company, the Wall Street Journal reported.

The board will remain. For customers, it will be business as usual, officials said.

Taxpayers will be protected, the Fed said, because the loan is backed by the assets of AIG and its subsidiaries. The loan is expected to be repaid from the proceeds of the asset sales.

The government had resisted throwing a lifeline to AIG, hoping to entice investment firms to set up a $75 billion rescue fund. Officials opted not to bail out Lehman Brothers, which filed for bankruptcy on Monday. But by Tuesday night, it became clearer that the private sector would not step in to help AIG, which has a greater reach into other financial companies and markets than Lehman does.

"We are working closely with the Federal Reserve, the SEC and other regulators to enhance the stability and orderliness of our financial markets and minimize the disruption to our economy," said Treasury Secretary Henry Paulson. "I support the steps taken by the Federal Reserve tonight to assist AIG in continuing to meet its obligations, mitigate broader disruptions and at the same time protect the taxpayers."

Dramatic end, high stakes

The firm's options grew more limited as the day wore on. Its already-battered share price fell another 21% with more than 1 billion shares trading hands, and plummeted another 46% in after-hours trading.

At one point Tuesday morning, shares fell more than 70% - a day after losing 61% of their value.

In a statement late Tuesday night the company said, "AIG is a solid company with over $1 trillion in assets and substantial equity, but it has been recently experiencing serious liquidity issues. We believe the loan, which is backed by profitable, well-capitalized operating subsidiaries with substantial value, will protect all AIG policyholders, address rating agency concerns and give AIG the time necessary to conduct asset sales on an orderly basis."

The company also commended the Federal Reserve and the Treasury Department for "taking action to address AIG's liquidity needs and broader financial market concerns."

Furthermore, the firm expressed its gratitude to New York Governor Paterson, and other NY State as well as Federal officials.

New York State officials, who regulate the insurance titan, had urged the federal government to rescue AIG. The state attempted to help AIG on Monday by allowing it to tap into $20 billion in assets from its subsidiaries if the company could comes up with a comprehensive plan to get the much-needed capital, said a state Insurance Department spokesman.

Pleased with the federal government's response, New York Gov. David Paterson said Tuesday night: "Policy holders will be protected. Jobs will be saved. Business will continue."

The funding became ever more crucial as the insurer was hit Monday night by a series of credit rating downgrades. The cuts meant AIG (AIG, Fortune 500) could be forced to post more than $13 billion in additional collateral.

Late Monday night, Moody's Investors Service and Standard & Poor's Ratings Services each said they had lowered their ratings. A few hours earlier, Fitch Rating had also downgraded AIG, saying the company's ability to raise cash is "extremely limited" because of its plummeting stock price, widening yields on its debt, and difficult capital market conditions.

The downgrade could force AIG to post $13.3 billion of collateral, Fitch said in a statement. Also, the moves would make it more expensive for AIG to issue debt and harder for it to regain the confidence of investors.

All the while, analysts urged the company to unveil its restructuring plan.

"Management needs to address investor concerns now before the market sell-off becomes a self-fulfilling prophecy," Rob Haines, analyst at CreditSights, said Tuesday.

Global ripples

The failure of AIG could have caused unprecedented global ripple effects, said Robert Bolton, managing director at Mendon Capital Advisors Corp. AIG is a major player in the market for credit default swaps, which are insurance-like contracts that guarantee against a company defaulting on its debt. Also, it is a huge provider of life insurance, property and casualty insurance and annuities.

"If AIG fails and can't make good on its obligations, forget it," Bolton said. "It's as big a wave as you're going to see."

AIG has had a very tough year.

Rocked by the subprime crisis, the company has lost more than $18 billion in the past nine months and has seen its stock price fall more than 91% so far this year. It already raised $20 billion in fresh capital earlier this year.

Its troubles stem from its sales of credit default swaps and from its subprime mortgage-backed securities holdings.

AIG has written down the value of the credit default swaps by $14.7 billion, pretax, in the first two quarters of this year, and has had to write down the value of its mortgage-backed securities as the housing market soured.

The insurer could be forced to immediately come up with $18 billion to support its credit swap business if its ratings fall by as little as one notch, wrote John Hall, an analyst at Wachovia, on Monday.

This year's results have also included $12.2 billion in pretax writedowns, primarily because of "severe, rapid declines" in certain mortgage-backed securities and other investments.

The company brought in new management to try to turn the company around. In June, the company tossed out its chief executive, Martin Sullivan, and named AIG chairman Robert Willumstad, who joined AIG in 2006 after serving as president and chief operating officer of Citigroup (C, Fortune 500), in his place.

Master Policy Deductibles

2008-06-17T10:14:00.000-04:00

June 2008

A few years ago I did a Tech Talk on this subject. Based on the emails I have received in the last few months … perhaps it bears repeating and updating …

Condominium Master Policy deductibles … can they be deadly for personal lines clients who live in condominium units? Yes!
First … in a condominium arrangement who insures what??????
That can be an EXCELLENT question! We all know that when one buys into a condominium situation – shared ownership – one receives two different ownership interests. First, the individual unit for living is individually owned. If I buy a condominium unit, it belongs to me. Everything in that unit that I can touch, I own!

I also receive “common” ownership in the non-individual or common areas such as land, roof of building, common walls, common beams, swimming pools, etc. In Massachusetts, as in most other states, the Association is required to purchase insurance on common areas.

How does the individual unit get insured?
That depends. It depends on the bylaws or insuring agreement in the condominium documents. Sometimes the bylaws only require the Association to insure commonly owned area and the individual unit owner must insure ALL of his/her individual unit. The individual unit owner accomplishes this through the purchase of large amounts of Coverage A – Dwelling value under the HO-6 Unit-owner policy. This can be expensive for the unit owner, but insurance coverage can be easily obtained.

In other situations the Association agrees to “take on” the responsibility of insuring individually owned unitbuilding items through a discussion in the bylaws. The Association may insure ALL building items in the individual units or just some of the individually owned unit-building items. One must read the bylaws carefully to determine what, if any, insurance responsibility is left for the unit-owner. Does the Association OWN the items in the individual unit. NO, NO, NO!!! But, through the bylaws, a contract, an insurable interest is granted to the Association allowing the Association’s commercial policy to apply to individual unit-owner items.

There are TWO ways where the Master Policy deductible could be a problem for unitowners

Way one … Let’s suppose … The Association, through it’s bylaws, has chosen to accept responsibility for insuring the individually owned items …
The Association buys a Condominium master policy to cover the building items whether common or individually owned … hopefully on a Special Form basis. Suppose the Association purchases a $250 deductible for the Master policy and there is a loss fully contained in one unit, who pays the deductible?

This is a point that the unit-owner should address when purchasing his/her unit. Or, you should have them look into this issue when you sell them their Unit-Owner Policy covering their contents and liability exposures. If the Association chooses to pay the deductible, great! If the Association makes the unit-owner responsible for the deductible …$250 out of pocket for the unit-owner shouldn’t be too much of a hardship!

What if the Association has a $5,000 deductible for all losses …
The bylaws required the association to cover the individually owned units as well as common areas and the loss happens entirely in your client’s unit … a kitchen fire … who pays the deductible amount here?

Again, your client should check into this issue with the Association. Quite often, the Association bylaws state the Association will provide insurance for unit-owner building items, but will NOT cover the deductible. Generally, a loss that is contained in a specific unit is NOT assessed to other fellow unit-owners. The individual unit-owner suffering the loss is expected to pay for the deductible.

How do we cover the deductible in this situation????
I have NO idea!!! I used to think that I knew. Years ago I had read and had been taught that one buys coverage for one’s unit through Coverage A and it would respond to a loss not covered by the Master Policy.

After all … the definition of “Coverage A – Dwelling” in the HO-6 certainly LEADS ME TO BELIEVE that I can insure my “stuff”!

COVERAGE A – Dwelling

We cover:

1. The alterations, appliances, fixtures and improvements which are part of the building contained within the "residence premises";

2. Items of real property which pertain exclusively to the "residence premises";

3. Property which is your insurance responsibility under a corporation or association of property owners agreement; or

4. Structures owned solely by you, other than the "residence premises," at the location of the "residence premises."

Reading the whole policy can be a drag …
However, it appears that the Other Insurance Provision of the HO-6 is being used to NEGATE the individual’s right to insure his/her own property. It’s almost “un-American”!

The Other Insurance Provision has always stated that if the Association and the unit-owner insure the same property, then the Association Master Policy will be primary and the HO-6 will be excess. How can the Master policy cover the same stuff as the HO-6? Well …through the bylaws/condominium documents. If the bylaws told the association to cover the condominium building ..both common areas and individually owned areas then this “contract” provided an insurable interest to the association IN the individually owned unit property. The Unit Deed gave the unit-owner an insurable interest in the individual unit.

Normally when two entities can insure the same thing … the parties themselves determine WHO should do it … and act accordingly.

The following is the ISO 2000 Other Insurance Language. The only difference between the HO-2000 language and the HO-91 language are those words that I crossed out.

F. Other Insurance And Service Agreement
…
2. If, at the time of loss, there is other insurance or a service agreement in the name of a corporation or association of property owners covering the same property covered by this policy, this insurance will be excess over the amount recoverable under such other insurance or service agreement.

The Other insurance clause states that when both the Master Policy and the HO-6 cover the SAME property then the Master Policy is primary and the HO-6 is excess. Now ... just WHAT does that mean? For years many insurance “pundits” explained this to mean that the loss first goes to the Master Policy and then back to the HO-6 for the amount of the loss not paid by the Master Policy … i.e. the Master Policy deductible.

Unfortunately, ISO has chosen not to interpret their policy in this way and stated in the HO-2000 Homeowner filing:

“The unit owner is only covered for the amount of loss that exceeds the amount recovered by the association under its policy. If the association doesn’t recover because of a high deductible or other reasons, the unit-owner does not recover.”

With this interpretation then Coverage A can ONLY be available at the “high-end”… that Coverage A will NOT pick up any master policy deductible. If the bylaws told the association to cover your client’s unit then the client’s Coverage A will ONLY respond when every last dime of the Master policy has paid out.

If the master policy bylaws do NOT insure certain items for the unit-owner, then Coverage A will be the PRIMARY and the ONLY coverage responding to the loss. If the bylaws tell the Association to cover some or all of the unitowner building items, then Coverage A will NOT pick up any Master Policy deductible for damage to these items.

This interpretation is ESPECIALLY dangerous in the light of increasing Master Policy deductibles!!!!!!

What should you do????
If I were you, I would ASK my HO-6 carriers HOW they interpret the Other Insurance Provision. If your carriers agree with the ISO interpretation of the mechanics of the Other Insurance Provision, then Coverage A will NOT respond to a Master policy deductible situation when damage to the individual unit occurs.

How can this loss under the Master Policy deductible be covered?
Under the HO-2000 ISO “addressed” this situation by creating an endorsement to “fix” the Other Insurance Provision. The endorsement that ISO created to fix this situation is HO 17 34 Unit Owner Modified Other Insurance condition. The endorsement merely recites the Other Insurance Clause and adds “whether they can collect on it or not”. I’m not sure what this wording really does … but the filing states that it fixes the problem. Will your carriers sell it? Who knows?

Under the HO-91 this endorsement does not “officially” exist and therefore there is NO WAY to fix this if your carriers take a non-user friendly interpretation. HOWEVER, I was just told by an agent last week that one of his HO-91 carriers had filed the HO 17 34 for use on its HO-6 policies. So …evidentially ..more personal condominium insurance carriers are agreeing with ISO’s interpretation and opting for a “premium generating” endorsement to provide coverage for this situation.

Just what IS the premium for this endorsement?
The ISO premium for the HO 17 34 Unit-Owners Modified Other Insurance condition is 25% of the base premium -- Rule 529 tells you to multiply the HO-6 base premium by 1.25!!! Isn’t that INTERESTING … The “base premium” for an HO-6 is the premium for the Coverage C limit … How ridiculous is this…we are buying an endorsement that applies to BUILDING coverage and rating it based on the amount of CONTENTS the client has.

So ... the MORE contents you have the MORE this endorsement costs … the premium has NOTHING to do with the SIZE of the Master Policy deductible and the amount of Coverage A purchased!!!

WAY TWO …that the Master policy deductible can be a problem…
How is the Master Policy deductible paid when the loss happens to COMMON property?
Suppose a fire burns the commonly owned clubhouse and there is a $10,000 deductible on the Master Policy, how does the Association get this first $10,000 to rebuild? Well, hopefully, there is a “slush fund” to cover deductibles, but I suspect in many associations that is NOT the case. What does the Association management do? They assess the unit-owners since each unit owner owns a share of the clubhouse and other common areas.

Can the unit-owner insure his/her assessment responsibility?
Yes … and no. The unit-owner can insure his/her share of assessments due to “insurance related situations.” Loss Assessment is an additional coverage provided under the HO-6.

7. Loss Assessment

a. We will pay up to $1,000 for your share of loss assessment charged during the policy period against you, as owner or tenant of the "residence premises", by a corporation or association of property owners. The assessment must be made as a result of direct loss to property, owned by all members collectively, of the type that would be covered by this policy if owned by you, caused by a Peril Insured Against under Coverage A, other than:

(1) Earthquake; or
(2) Land shock waves or tremors before, during or after a volcanic eruption.
The limit of $1,000 is the most we will pay with respect to any one loss, regardless of the number of assessments. We will only apply one deductible, per unit, to the total amount of any one loss to the property described above, regardless of the number of assessments.

b. We do not cover assessments charged against you or a corporation or association of property owners by any governmental body.

c. Paragraph P. Policy Period under Section I – Conditions does not apply to this coverage.

This coverage is additional insurance

If a loss that would be a covered peril under the unit-owners HO-6 damages COMMON PROPERTY, then the loss assessment additional coverage will pay the unit-owners assessment responsibility up to $1,000. The unit-owner can increase this assessment coverage up to $50,000 with HO 04 35 Increased Loss Assessment Endorsement for only $25 or so.

What if the Association has a Percentage Windstorm deductible and there is MAJOR windstorm damage to common property??????
Suppose your client purchased HO 04 35 Increased Loss Assessment coverage in the amount of $50,000 and his/ her assessment share of this Master Policy windstorm deductible is $10,000, will the HO 04 35 respond for the whole $10,000? NO, NO, NO per the following clause in the HO 04 35 Increased Loss Assessment Endorsement:

SPECIAL LIMIT – We will not pay more than $1,000 of your assessment that results from a deductible in the policy of insurance purchased by a corporation or association of property owners.

The HO 04 35 under both the HO-91 as well as the HO-2000 program has a restriction for assessments that are due SOLEY to master policy deductibles.

This endorsement should always be sold for it can be very helpful in other property assessment situations as well as many liability assessment situations but it is NOT helpful in “deductible” assessment situations. The insured will ONLY receive the “free” $1,000 loss assessment coverage that is found under his/her HO-6 unit-owner policy towards an assessment that is due SOLELY to a Master Policy deductible. The rest of the assessment will come “out of pocket.”

Make sure that you address this restriction with your client when selling this endorsement.

I have to admit that I do agree this restriction is NECESSARY in the HO 04 35 Increased Loss Assessment endorsement. Otherwise, the Association would buy commercial property EXCESS policies assuming that each loss will be assessed BACK to the individual unit-owner who has been TOLD to carry HIGH Loss Assessment coverage.

So, back to the original issue… Who pays the Master Policy deductible????
As usual ... the answer is …”it depends.”

Buying a one family house has FEWER insurance headaches than buying into a condominium situation!

* * * * *

MAIA Cautions Consumers About Progressive Quotes

2008-05-06T16:10:00.002-04:00

MAIA Cautions Consumers About Progressive Quotes;
Files Formal Complaint With DOI

Today, MAIA issued a press release to every daily newspaper in the state cautioning consumers about serious issues with quotes received from the Progressive Direct website. After initial reports of "dirt cheap" rates, MAIA took a long, hard look at the quotes produced by the site.

According to MAIA President and CEO Frank Mancini, "Our review of the quotes provided by Progressive reminds us of the old saying, 'it it looks too good to be true, it probably is.' Consumers should use extreme caution when requesting online quotes because a computer doesn't ask the questions a live person would ask to be sure you are adequately protected."

Since many of MAIA's issues with the website are believed to be serious violations of the managed competition regulation, MAIA has also filed a formal complaint with Commissioner Nonnie Burnes and notified Attorney General Martha Coakley and Undersecretary of the Office of Consumer Affairs & Business Regulation Daniel Crane of the violations.

The most flagrant violations include:

Progressive requires anyone requesting a quote to provide their social security number, gender, recent military service and marital status. The quote process also informs applicants that Progressive obtains credit reports and credit scoring information, which is prohibited in Massachusetts for both rating and underwriting purposes.

Progressive acknowledges that Massachusetts law requires that every insurer offer twelve-month term private passenger motor vehicle insurance policies at the consumer's option, yet there is nowhere on the Progressive site where a consumer may exercise that option. When questioned on the phone about a twelve-month policy, a Progressive representative admitted that twelve-month policies are not available.

Comparative quotes of Progressive rates with the rates of other companies writing autoinsurance in Massachusetts are inaccurate and use a policy term of six months which is notavailable from any other insurance company in Massachusetts. While other insurance company quotes include an indication of the impact of your driving record in terms of surcharges for at-fault accidents and conviction of traffic violations and credits for good driving, the Progressive quote does not appear to include merit rating information.

We have posted the complete text of the MAIA press release on our website, and you may access it by clicking here.

It is imperative that the information in this press release be seen by as many consumers as possible, and we need your help with this. If you have contacts with your local daily and weekly newspapers, please walk the press release into your contact as soon as possible. Offer to answer any questions your contact or consumer reporters have, or refer them to us if you're not comfortable in that role.

We have also posted a copy of our complaint letter to the Commissioner on massagent.com. You may access this document by clicking here.

Please feel free to contact Frank Mancini or Donna McKenna or by phone at 800.972.9312 or 508.628.5452 if you have questions or need additional information.

Auto Insurers Rip Rules on High-Risk Drivers

2008-04-17T13:53:00.002-04:00

3-year break for newcomers writing polices called unfair

By Jeffrey Krasner, Globe Staff April 17, 2008

Many of the state's auto insurers say competition rules that took effect April 1 give an unfair advantage to companies just entering the Massachusetts market.

Under the state's revamped auto insurance system, insurance companies new to Massachusetts do not have to take on its riskiest and least desirable drivers for about three years. That could give them a financial boost compared with insurers already established in Massachusetts, which will automatically be assigned high-risk drivers based on their market share.

"Those that are in the market are seeking equity and fairness and those that are just entering the market are seeking any advantage they can get," said James T. Harrington, executive director of the Massachusetts Insurance Federation, an industry group that supported the new system, called managed competition.

Progressive Corp. of Ohio, the only insurance company that so far has firm plans to enter the Massachusetts auto market, said it supports the rules exempting it from having to insure high-risk drivers.

"The plan as written is fair, equitable, and consistent with plans in other states," said Emily A. Vlasich, corporate counsel for Progressive, in written testimony to the Division of Insurance.

The Patrick administration last year undertook an ambitious overhaul of the Massachusetts auto insurance market, which was the last one in the country where rates were set by regulators.

Under the new system, companies set their own rates and have greater flexibility to introduce innovative product features and discounts for different drivers. The overhaul was also intended to address problems with how high-risk drivers were assigned to companies. Some insurers claimed their competitors were able to manipulate the old sys tem to avoid paying their fair share for undesirable drivers, who typically generate more claims, causing losses for insurers.

Since auto policies only started renewing this month, relatively few motorists have signed up for policies under the new rates, which are expected to be lower for most drivers.

At the center of the current dispute are rules enacted this year by Insurance Commissioner Nonnie S. Burnes that control the so-called residual market for bad drivers, such as those with numerous moving violations. A public comment period on the rules ends tomorrow, and they must eventually be finalized by Burnes. Under the new system, insurance companies will be assigned high-risk drivers randomly, and are expected to cover such drivers commensurate with their share of the market.

But companies just entering Massachusetts will receive an exemption for almost three years.

"This result is patently unfair to existing companies, especially when one considers how quickly a large company with significant resources can gain market share when entering a new state," wrote Paula W. Gold, vice president and chief regulatory counsel for Plymouth Rock Assurance Corp. of Boston, in testimony to the Division of Insurance. "There should be no free ride for any carrier."

John F. Kittel, executive vice president of Arbella Insurance Group, said in written testimony that with the three-year wait in place, "the rest of the market is subsidizing the new entrant."

He said insurers should be able to provide timely market share data to the state, so there's no practical reason why new entrants could not take on their share of undesirable drivers quickly.

Chubb Group of Insurance Companies, which is based in New Jersey and does not sell auto policies in Massachusetts, disagreed. Michael W. O'Malley, senior vice president of state government affairs for the company, wrote in testimony that an insurer needs to be selling for at least a year before accurate market share numbers can be compiled. He said the rules giving new entrants in Massachusetts three years without high-risk driver assignments are similar to the "tried and true" methods used in about 40 other states.

Progressive, which will begin Internet-only sales May 1, acknowledged in its testimony that it is viewed by some as getting a "free ride" under the new system. But the insurer disagreed with the characterization and said it would voluntarily write policies for high-risk drivers, and thereby avoid random assignment of such customers.

Mass Auto Insurance Has Bumpy Past

2008-03-25T08:31:00.002-04:00

Sunday, March 23, 2008

By Dan Ring

The Republican

Insurance Commissioner Nonnie S. Burnes said she picked up some important lessons from history before her bold move to start competitive car insurance for the state on April 1.

Thirty years ago, Massachusetts dropped its highly regulated form of auto insurance and introduced competition. It turned out to be a brief, failed experiment that drove up rates too high for urban motorists and left the state gun-shy for decades about making any similar changes.

Burnes, who was appointed commissioner in early 2007, said she was keenly aware of the turmoil that erupted after a sweeping law for competitive auto insurance took effect in 1977.

"That was terrible for the consumer, awful for the companies," said Burnes, a former 10-year superior court judge appointed commissioner by Gov. Deval L. Patrick.

Massachusetts has a long tumultuous history with auto insurance. The state approved the country's first compulsory car insurance and first regulated rates in 1926.

A public outcry over mandatory insurance and rising rates caused a crisis on Beacon Hill and prompted the resignation of the state's insurance commissioner in 1928.

Fifty years later, another major dispute erupted when the state made its initial attempt at competition in auto insurance.

Back then, companies were given little time to prepare. Actual rates were unavailable on Jan. 1, but policies were renewed anyway for consumers, taking away choice.

"You can imagine how consumers felt about that," Burnes said.

According to a history provided by the state Division of Insurance, rates skyrocketed in Boston and nearby urban areas.

Patrick B. Bresnahan, who started Bresnahan Insurance Agency in Holyoke in 1957, said urban youth were hit especially hard by the first effort at competition in auto insurance.

"It was chaos," Bresnahan said. "Kids were paying more for insurance than they were for their cars."

Legislators responded by passing a law to cap increases at 25 percent over 1976 levels and ordering insurers to send rebates to some auto owners.

Insurers filed lawsuits and the state's insurance commissioner abandoned the new competitive system and returned to setting rates for 1978.

In succeeding years, auto insurance companies fled the state.

Bresnahan, 73, said he watched companies desert the state during the 1980s and 1990s. "They just could not make a profit here," he said.

In 1977, there were 111 auto insurers doing business in the state. By 1990, that number dwindled to 53 and it stands at 20 today, although that number is expected to grow as other companies come back to the state.

Several insurers paid the state huge exit fees to be released early from their legal obligations. It made more financial sense to pay the fees instead of remaining in the state and continuing to lose money.

Peter T. Robertson, lawyer in Massachusetts for the Property Casualty Insurers Association of America, said insurers were discouraged by the state's method for covering high-risk drivers.

Insurers are allowed to place those drivers in a pool where their accident costs are shared by all insurers and then passed on to all drivers annually.

Burnes is gradually moving to a system of randomly assigning those drivers to an insurer. The amount of assignments to any company would hinge on a company's market share.

Under "assigned risk," insurers will be more responsible for the accident costs of its riskier drivers, giving insurers an incentive to more closely examine claims and reduce fraud.

Robertson said assigned risk is also a fairer way to allocate such drivers.

When Burnes announced her intentions to start managed competition in July of last year, she said the state should no longer be held hostage by the 1977 experience.

She used a state law to administratively phase in managed competition.

She opted to begin the new system on April 1 when 314,000 policies renew.

A total of 540,000 policies renewed on Jan. 1, but are based on last year's rates.

In order to avoid mistakes of the state's past attempt at competitive rating, Burnes capped rate increases at 10 percent for the state's worst drivers. Insurers can set their own rates but only with strict state oversight.

Burnes also retained vestiges of the old system where regulators set all auto insurance rates.

For example, she kept a system of "rating territories" that allows for suburban communities to subsidize rates of urban centers to slightly cut insurance costs in cities where accident rates are higher. Experienced drivers are also paying somewhat higher premiums to keep down the insurance costs of younger motorists.

Burnes is also continuing to ban the use of credit scores and certain socioeconomic factors in determining auto insurance rates.

"I'm going to retain a lot of control to make sure it is rolled out in a smooth way and is beneficial to the consumer," Burnes said.

Insurance costs will still hinge on a person's driving record, type of car and coverage selections.

Other aspects of the state's auto insurance system are sealed in state law and can't be changed administratively, Burnes said.

Under state law, for example, motorists must have only $2,000 in medical bills before they can sue the driver who caused the crash.

Former Gov. W. Mitt Romney sought unsuccessfully to raise that threshold to $4,000 to limit personal injury lawsuits and wring costs out of the system.

Romney also wanted to save money by limiting windshield replacements. He sought to create a $100 deductible that would have been waived for a more economical repair of a windshield. Right now, there is no deductible on windshield replacements.

Future historians may tell us the fate of those and other proposed reforms.

Goal: More Insurance Choices

2008-03-12T14:59:00.002-04:00

By Jerry Kronenberg

Wednesday, March 12, 2008

Boston Herald

Market watchers hope Massachusetts’ new “managed-competition” car-insurance system puts Nationwide on our side - along with Geico, AIG and other firms that have avoided the Bay State for virtually decades.

“If consumers get more choices, that’s a good thing,” state Insurance Commissioner Nonnie Burnes said, saying more firms might enter Massachusetts once the new system starts on April 1.

Burnes said more than 80 percent of insurers quit the Massachusetts car-insurance business during the 30 years that the state heavily regulated rates. Other underwriters never set up shop at all.

All told, only half of the nation’s 10 largest car-insurance firms currently operate here.

However, No. 3 insurer Progressive recently announced plans to begin writing policies under the new system. So has smaller underwriter Peerless, a subsidiary of Boston’s Liberty Mutual.

“The new system hasn’t even started yet and we already have two new (insurers),” Burnes said. “I don’t think that’s a bad start.”

Massachusetts had 111 insurers in place when the state began setting car-insurance rates in 1977.

But 92 have left since then, with no one coming in to replace them.

“Under the old system, it was very difficult for most companies to make money here,” said Frank O’Brien of the Property Casualty Insurers Association of America. “But assuming managed competition sticks, I think we should see more companies coming here.”

Still, Stephen D’Amato of the Center for Insurance Research said adding new insurers “is only a good thing if it produces lower, fairer rates for consumers.”

D’Amato claims the new system gives insurers too much power to base rates not just on driving records, but also on things such as homeownership - factors he said favor the rich.

“Competition can be good,” D’Amato said, “but not the way it’s being implemented.”

Plymouth Rock Billing System Changes - Letter to Agents

2008-02-11T13:42:00.000-05:00

Dear Greg:

We have recently implemented several enhancements to our direct billing system that apply to all policies, regardless of effective date.

In response to your requests, we have instituted a grace period of five calendar days from the payment due date. This grace period becomes effective today and applies to invoices only. A Notice of Intent to Cancel for Non-Payment of Premium will not be issued unless the minimum premium due is not received within the grace period. If a cancellation notice is issued, the effective date of the cancellation will not be extended by any grace period. While this will accommodate occasional delays in mailing time, we would recommend customers who make a payment on or near the actual due date use your agency web payment option to ensure their installment is credited and the policy does not fall into arrears. Next month, we will unveil the first phase of our consumer interface on PlymouthRock.com that will allow customers to access their bills and make payments online without going to the agency.

Also, the return coupon on the billing invoice now lists the payment mailing address on only one side, and has a new optical scan line to improve processing time. Our testing has shown this should reduce the amount of manual handling of payments that can delay proper posting of a payment.

We hope these new billing features will make it easier for you and your customers to do business with us. It’s one more way we can offer “More Than Just Insurance. AssuranceSM.”

Please contact your Marketing Representative with any questions. As always, we thank you for your business.

Bob Warren
Marketing Director - Massachusetts

Development, erosion keep coast at risk

2008-02-08T13:59:00.000-05:00

By Rich Fahey
Globe Correspondent / February 7, 2008

Thirty years ago today the Blizzard of '78 was ravaging the South Shore. Wind gusts of more than 100 miles per hour combined with heavy snowfall to destroy thousands of homes and boats. Before it was over, more than two dozen people would be dead statewide.

What would happen if the same storm hit the South Shore today? Would the flooding, destruction of property, and beach erosion be as severe? Or would changes in building codes and in the way we respond to storms result in less property damage and fewer lives lost?

The answer: We might be better prepared, but the damage could be just as great - or greater.
Specialists say the almost continuous beach erosion from storms in the ensuing 30 years has created a new set of problems, should a storm like the Blizzard of '78 hit the South Shore again.

"The erosion shifts from previous storms have moved the flood plain, putting more homeowners in jeopardy," said Rebecca Haney, a coastal geologist for the state Office of Coastal Zone Management. "In addition, there has been a significant amount of construction in those flood plain areas."

Many of the summer cottages that were unoccupied in coastal towns during the storm 30 years ago have been converted to year-round residences, putting more families squarely in the bull's-eye of a sequel to '78.

"Those cottages are now year-round residences, many of them still vulnerable to a storm," said state Senator Robert L. Hedlund of Weymouth, who represents many of the coastal communities that were devastated in the Blizzard of '78.

Partly offsetting that vulnerability is the fact that homes along the coast, while more exposed, are better built than they were 30 years ago.

Neil Duggan, Scituate's building commissioner for the past 14 years, saw his home - a converted cottage on Lighthouse Road - heavily damaged during the blizzard. Duggan, like others, wanted to rebuild. By 1979, revisions to the state building code required that any rebuilt home in a danger area had to be elevated on 11-foot-high pilings or columns, said Duggan. In 1982, he said, improved federal maps were developed for Scituate, requiring higher elevations in some hazard areas.

Portions of the state building code are routinely refined; the most recent change is a requirement for high-impact windows in debris-borne areas and more stringent hurricane-resistant construction requirements.

Still, erosion is eating away at the buffer between the ocean and coastal communities. Communities such as Scituate and Duxbury have been losing on average a half-foot of beach each year.

While some emphasis has been on building sea walls, the beaches and dunes - not the walls - are the first line of defense against coastal flooding. Hedlund said he was able secure federal money for beach renourishment at Nantasket Beach in Hull, but not for sea wall construction, because "the federal government considered the beach more important when it comes to flood control."
Haney, the state coastal geologist, said the Massachusetts Wetlands Protection Act and subsequent regulations designed to protect beaches and dunes have helped, but storms have still wreaked havoc with the shoreline.

Towns and cities have taken it upon themselves to prepare for the worst. In Hull, which was devastated by floods in '78, an emergency operations center was built as part of renovations to Memorial Middle School.

Acting fire chief Robert Hollingshead, who is also in charge of Hull's emergency preparedness, meets with the heads of town agencies several times a year and whenever a major storm is forecast.

Hollingshead, who joined the Fire Department just after the 1978 storm, said that advancements in technology have improved communication with the public in emergencies. "We have cable TV and the Internet, and we can reach many people quickly."

The state has recognized the issues. In February 2006, Governor Mitt Romney created the Massachusetts Coastal Hazards Commission to review practices and policies, identify information gaps, and draft recommendations for improvements.

In May 2007, the commission released its final report, including a series of recommendations to help safeguard coastal areas. They included updating coastal maps to pinpoint risk and measure rising sea levels due to climate change; modeling potential damage from future storms to alert communities; and providing incentives, such as insurance discounts, for homeowners along the coast to retrofit their homes against storms.

Peter Judge, public information officer for the Massachusetts Emergency Management Agency, the successor to the Massachusetts Civil Defense Agency, said that after the '78 storm, Governor Michael Dukakis issued an executive order creating an emergency management team. It includes federal, state, and local officials, including liaisons from a dozen state agencies, and meets regularly.

"I think if there's two areas we've improved in since 1978, it would be in communication and coordination," said Judge.

In 1978, some people didn't believe the forecast or disregarded it, and thousands were trapped on roads or in makeshift shelters such as car dealerships and restaurants.
"We can't stop people from going out into the storm, but we can let them know what they're in for," said Judge.

Rich Fahey can be reached at faheywrite@yahoo.com

April 2008 MA Auto Insurance FAQ's

2008-02-05T15:40:00.000-05:00

Do you have questions about the upcoming auto insurance changes effective in Massachusetts on April 1, 2008? Get the facts here, and contact us for more information.

Drivers should consider rental car insurance

2008-01-31T17:13:00.000-05:00

Local repair centers juggle an influx of winter customers
By DEBBIE KELLEY
THE GAZETTE
January 31, 2008 - 12:48AM

Slick roads from a regular cycle of wintry storms have caused pileups at local auto body shops.

Red Noland Collision Center is booked until mid-February to repair wrecked cars that are drivable, said Dale Francis, body shop manager. It’s one of the city’s largest dealership-owned collision centers, with a 25,000-squarefoot shop, 30 employees and $6 million in revenues last year.

Vehicles that have to be towed to the shop are accepted immediately but can take a month to six weeks to get fixed, Francis said. “It’s unusual for us to be backed up this far, but we can only schedule so many cars — we can do 230 a month,” Francis said.

“You can just see customers’ eyes twitch — it’s already a negative situation — when we tell them we’re looking at six weeks. They just can’t believe it.”

That’s why motorists should have rental-car insurance to defray the cost, State Farm Insurance agent Mark Campbell said. About 75 percent of customers at Wilson’s Auto Collision Inc. have rental-car insurance, said Ray Wilson, owner of the shop founded 22 years ago Friday.

“We tell them to call their agent to see if they qualify, because out-of-pocket rental is expensive and rental-car coverage isn’t,” Wilson said.

Various roadblocks can delay restoring a vehicle to its pre-crash condition, whether it was involved in a minor fender bender or a rollover. For example, Campbell said the insurance claim process can stall if the insurance company has to order an accident report from the police to verify fault.

Securing an appointment at a local body shop and getting parts to make the repairs also can add time. Severely damaged vehicles sometimes need parts that can’t be found in local parts stores, Francis said.

Wilson said his 14 employees are working as fast as they can, but they also are running several weeks deep in appointments. It’s the same at Black & White Auto Body & Paint, said Rick Lujan, owner and general manager of one of the city’s largest independents.

“You don’t need a lot of snow — just a couple of inches on the ground make a huge difference for body shops,” he said.

This winter has been more treacherous for local drivers than last winter, which brought several major blizzards, because motorists tend to stay off the roads during blizzards but feel more confident to venture out when snowfall is lighter, Lujan said.

To handle his shop’s load, Lujan has added four technicians for a total of 20 employees. “People don’t like to wait too long,” he said.

But it’s hard for auto body shops to gauge business volume, Wilson said.

“Everybody seems to get in a wreck that morning of a storm. Customers don’t just trickle in — they come all at once, and all of a sudden you’ve got an overflow,” he said.

Along with having to endure longer wait times, many motorists needing body work have high deductibles that must be paid out-of-pocket. Higher deductibles lower auto insurance premium costs, and Francis said he’s seen deductibles as high as $3,000.

It doesn’t take much of an impact, said State Farm’s Campbell, for the repair bill to top $1,000.

Lujan said it’s not unheard of for his body shop to fix a vehicle with $12,000 to $15,000 in damage.

And though winter brings a flurry of business, it’s not necessarily the busiest season for collision centers. About 11,000 cars in the area were damaged in a hailstorm last summer, Francis said.

As Wilson said: “It’s the snow and ice now. It’ll be the wind and sand damage in the spring, hail in the summer, then back to snow. Being weather-related is just the nature of our business.”

Mass. Allows Rates and Commissions of 2 Largest Auto Insurers

2008-01-30T08:01:00.000-05:00

By Andrew G. Simpson
Insurance Journal

The two largest auto insurance writers in Massachusetts have been given the green light to use the rates they filed for 2008 in rulings that characterize the state attorney general's objections as "irrelevant" in the state's new competitive marketplace.

The rulings also preserve contingent commissions for agents.

Massachusetts Insurance Commissioner Nonnie Burnes has ruled in favor of Commerce Insurance and Safety Insurance over the protests of Massachusetts Attorney General Martha Coakley, whose lawyers had tried to persuade Burnes that items contained in the two insurers' rate filings led to rates that were excessive even though they both filed for overall decreases.

The rulings mean the two insurers may proceed to market using their filings, which called for an average rate decrease of 8.1 percent by Commerce and an average 6.9 percent cut by Safety.
Commerce is the largest auto insurer with 31.6 percent market share, while Safety ranks second with 11.2 percent.

In declining to disapprove the insurers' rate filings, Burnes also handed independent agents' a victory by upholding the inclusion of contingent commissions as part of the rate filings. Coakley's team had argued that contingent commissions should not have been part of the rates.

Until this year, auto insurers had their rates fixed and established by the insurance commissioner. But beginning in April, 2008, insurers are being allowed to compete using their own rates under a new managed competition system. Insurers file individual rates which become effective unless the commissioner disapproves them.

The attorney general has the right to trigger rate hearings on individual insurer rate filings she deems excessive, which Coakley did in the cases of Commerce and Safety, but the final decisions rest with the commissioner.

Coakley objected to provisions for profit, expenses including contingent commissions, and loss trends used by the two insurers in their rates.

But Burnes dismissed the AG's entire analysis, ruling in favor of the insurers on each provision. Burnes suggested that while the AG's approach might have worked under the previous fix-and-establish system, it was irrelevant under the new managed competition system and that the AG "fails to recognize" that the rules have changed.

Burnes said that while the attorney general wants to challenge individual provisions of rates, as was done under the previous system, a competitive system requires a broader view.

"I do not set the rates under c. 175E [the rate statute]. My authority is limited strictly to disapproving a rate or, under very limited circumstances set forth in the statute, approving it. I look at the proposed overall rates generated by the rate filing viewed as a whole in determining whether a company's proposed rates are excessive for the insurance provided," Burnes wrote.
She further explained how her approach under managed competition differs from that taken in the past in her discussion of the Commerce profit provision:.

"It is not my task to look at aggregate industrywide data for the purpose of developing an underwriting profits provision that reasonably reflects the average financial needs of a mythical 'Every Company,' but is specific to none."

Her analyses of the expense and loss trends provision used similar language.

The attorney general had attacked the inclusion of contingent commissions for agents as "creating serious potential conflicts of interest and leading to anticompetitive effects such as the steering of business away from more cost effective carriers." Coakley's lawyers had also argued that because decisions fixing and establishing rates did not allow them to be included, contingent commissions should continue to be rejected in a competitive environment.

But Burnes said that such past decisions are immaterial to the current situation and since such commissions are legal, if insurers decide they want to pay them in a competitive market, they can.

"Contingent commissions now are one basis for legitimate competition in the industry. Indeed, that is why the Division's rate filing instructions explicitly provide for the possibility of such an expense. It is neither my role, nor the role of the Attorney General, to decide what expenses a company should incur in a competitive insurance market provided no such expenses violate the law. Companies that unwisely spend money will enjoy less success in the market, and this experience alone will alter future conduct," Burnes wrote.

Note: Plans submitted by all admitted carriers have now been approved. Contact us for more information.