Attorney General Martha Coakley Recovers Additional $9 Million in Insurance Premium Overcharges for Massachusetts Motorcycle Riders
Total Refunds to Consumers Now Approaching $20 Million
"We are pleased that these insurance companies will return $9 million in insurance premium overcharges to affected motorcycle owners," said Attorney General Martha Coakley. "While we appreciate that these companies cooperated with our investigation, it remains troubling that they systemically overcharged their customers on such a large scale. Our office will continue to investigate other companies engaged in this type of behavior. In order to thwart and correct practices like this, consumers and regulators need transparency and access to information in the auto insurance rating process."
Under the terms of the settlements, filed today in Suffolk Superior Court, it is anticipated that Metropolitan Property & Casualty will return $3.5 million, Plymouth Rock Assurance and Pilgrim Insurance will collectively return $3.6 million, and USAA will return $2.3 million to policyholders. The insurance companies will also make payments to the state totaling more than $500,000 and adopt conduct reforms. Under the terms of similar settlements the Attorney General entered into in January, Safety Insurance Company is expected to return $7.2 million, Liberty Mutual will return $3.1 million and Quincy Mutual will return $800,000 to affected consumers. The three insurance companies will also make payments to the state totaling $510,000. The Attorney General's investigation into other insurance companies is ongoing.
The Attorney General's Office began its investigation into motorcycle rating practices in the fall of 2008 after receiving a complaint from the owners of a 1999 Harley Davidson Road King Classic. The owners alleged that Safety had valued their 1999 Harley Davidson Road King Classic at $20,000 in each year between 2003 and 2008, but had offered the owners less than $11,000 to settle their claim after the motorcycle was stolen. After the owners requested $20,000 in settlement of their claim, Safety tried to refund over $1,500 in premiums to them based on the errant $20,000 value that Safety had used to rate their insurance policy in each year between 2003 and 2008.
Based on this complaint, the Attorney General's Office became concerned that Safety was violating its rating manual, which required Safety to use current motorcycle book values to calculate the premiums charged to consumers. After determining that Safety had used inflated and un-depreciated motorcycle values to rate coverage for thousands of its policyholders, the Attorney General's Office expanded its review to other insurance companies. The Attorney General's investigation found that many auto insurers operating in the Massachusetts marketplace had failed to obtain current book values for motorcycles they insured and were instead using inflated and out of date values to calculate premiums. The Attorney General's investigation also found that while the alleged overcharges began during the "fix-and-establish" period, when the state capped auto insurance rates, the overcharges continued after the deregulation of the auto insurance market and the introduction of "Managed Competition."
Liberty Mutual will begin paying refunds in May; the remaining insurers are expected to send checks to consumers in the fall. Projected average refunds to consumers are expected to be about $300; however some consumers will receive thousands of dollars based on several factors, such as the length of their policy and the price of their motorcycle. In order to be eligible for settlement funds, a consumer's motorcycle must have been overvalued by their insurance company and the consumer must have purchased either collision or comprehensive coverage. Tens of thousands of policies are believed to have been affected.
These cases were handled by Investigations Supervisor Arwen Thoman, Mathematician Burt Feinberg, Economist Bryan Lincoln, and Assistant Attorney General Glenn Kaplan, all of Attorney General Coakley's Insurance & Financial Services Division. The original consumer complaint was handled by Mediator Rebecca Dutra also of Attorney General Coakley's Insurance & Financial Services Division.