For Immediate Release - January 07, 2010

Attorney General Martha Coakley Blocks Industry Plan for Double Digit Rate Increases on Home Insurance

Cape Cod consumers will face no increase under settlement; homeowners statewide on average see rate roll-back of .72% and save over $7 Million

BOSTON - Attorney General Martha Coakley's Office has entered into a settlement with the Massachusetts Property Insurance Underwriters Association (a.k.a the Fair Plan), lowering rates for homeowners that obtain insurance from the residual market by a .72 percent average statewide. The FAIR Plan had proposed increasing homeowners' insurance rates by 2.2%. The settlement, which was filed yesterday at the Division of Insurance will save Massachusetts homeowners over $7 Million compared to the rates sought by the insurance companies.

"We believe this settlement protects consumers from the unwarranted rate increases sought by the industry," said Attorney General Martha Coakley. "In these tough economic times, it's important that consumers not be overcharged for insurance."

The FAIR Plan, which is made up of the state's insurance companies, is designed to provide homeowner insurance to consumers who could not otherwise obtain it in the private market at reasonable rates. The plan covers over 150,000 urban and coastal homeowners.

The FAIR Plan submitted a request for a rate hike to the Division of Insurance on October 30, 2009. Its proposal included 10% rate increases for New Bedford, Lawrence, Lowell, Newton, Springfield, Chicopee, Holyoke, parts of Worcester and Bristol County. The industry also sought a 2.4% increase in rates for more than 70,000 Cape Cod and other coastal homeowners. The industry did recognize the need for rate decreases for the City of Boston, and dropped rates between 3 to 10 percent in these areas.

Attorney General Coakley's Office was able to successfully block proposed rate increases for Cape Cod, Fall River, Lynn, Cambridge, Somerville, Hampshire, Newton, Franklin, Berkshire, Chicopee, and Holyoke. Under today's settlement, New Bedford, Lawrence, Lowell, Springfield and Worcester rate increases will be 5% instead of the 10% that the FAIR Plan was seeking.

The Fair Plan must seek approval of any rate increase from the Commissioner of Insurance. The Attorney General's Office testified on December 15, 2009 that given the current economy, many policyholders would not be able to pay increased premiums sought by the industry and that premiums have been increasing steadily over the past 10 years.

In 2007, the FAIR Plan requested an overall rate increase of 13.6%, with a 25% increase for policies covering property in Cape Cod, New Bedford and Fall River. Attorney General Coakley's Office challenged this request, and the FAIR Plan's proposal was subsequently denied by the Commissioner of Insurance. In 2006, the Commissioner had approved a rate hike that allowed homeowners' rates in the Cape and Islands to increase 25%.

The 2009 Fair Plan litigation was handled by staff from Attorney General Coakley's Insurance and Financial Services Division, including Assistant Attorneys General Peter Leight, Monica Brookman, Alex Klibaner, and Amy Gwiazda, Legal Analyst Melissa Swindel, Division Chief Glenn Kaplan, Mathematician Burt Feinberg, paralegal Brian Daly, and economist Bryan Lincoln.

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