Attorney General Coakley Obtains 32% to 94% Rate Rollback for Massachusetts Credit Insurance Consumers
Central States Indemnity Agrees to Reduce Rates, and Keep Reductions in Place At Least 5 Years
BOSTON – Central States Indemnity Co. of Omaha (“CSI-Omaha”) has agreed to reduce and maintain rates through 2016 for Massachusetts policyholders in an agreement announced today with Attorney General Martha Coakley. Today’s action resolves allegations that the company charged excessive credit insurance rates.
CSI-Omaha sells various types of credit insurance to Massachusetts residents. Under the Assurance of Discontinuance, filed in Suffolk Superior Court, CSI-Omaha will reduce rates on its credit unemployment insurance by 51%, its credit life rates by 32.6%, its credit accident and health rates by 32.6%, and its credit family leave rates by 94.8%. The rate rollback is anticipated to take effect on policies starting later this winter, and the new lower rates will be in effect until at least 2016. The rate rollback must be formally approved by the Commissioner of Insurance before it can take effect.
“This case is another example of how insurance rates in the credit insurance arena are excessive,” AG Coakley said. “We brought our concerns to the company and fought for customers’ rights to a fair premium. The company has now agreed to roll back rates and keep rates down for the next five years. It’s important that insurers do not overcharge their customers and we will continue to monitor the market and protect consumers.”
Credit insurance pays for credit card or other types of recurring debts owed by consumers for a set period of time if the consumers are laid off or otherwise lose job income. In general, consumers purchase the coverage either when they sign up for a specific credit card, or in response to an offer that accompanies a credit card bill.
The Attorney General’s central concern regarding CSI-Omaha’s rates related to the company’s loss ratio. The loss ratio measures the aggregate amount of money spent paying consumer claims compared to the amount of money an insurer takes in from insurance premiums. CSI’s rate plan, based on loss ratios reported for 2010 to the Commissioner of Insurance, showed it would pay out on average less than 20 cents for every dollar taken in from consumers.
The Attorney General believed the rates were excessive and began a review of the insurer’s rating plan. As a result of the Attorney General’s action, the company must re-file and rollback the excessive rates.
The CSI-Omaha investigation was handled by Assistant Attorney General Peter Leight, Mathematician Burt Feinberg, and Division Chief Glenn Kaplan of Attorney General Coakley’s Insurance and Financial Services Division.