AG Coakley: Massachusetts Businesses Have Been Overcharged Nearly $1 Billion in Commercial Auto Rates Over Last Seven Years
Urges Insurance Commissioner To Take Immediate Steps To Reduce Rates
The figures were compiled based on a review, conducted by the Attorney General's Office, that examined data from the National Association of Insurance Commissioners (NAIC) and Automobile Insurers Bureau (AIB). The data showed that Massachusetts businesses were overcharged $150 million per year between 2004 and 2010, a total overcharge of about $1 billion dollars. During this period, the same industry data showed that Massachusetts rates were excessive by at least 21.6%. The insurers' underwriting profits were significantly higher in Massachusetts than the national average.
"These inflated commercial auto premiums impact virtually every industry in Massachusetts - from manufacturing, trucking, and construction to sales and services," AG Coakley said in her letter. "The added costs limit the ability of businesses to invest in Massachusetts and cost Massachusetts residents thousands of jobs. The problem is especially acute for small businesses, whose ability to create jobs is impaired by excessive rates."
In her letter, the Attorney General explains that the insurers' excessive rates have reduced economic activity in Massachusetts and that if rates were kept in check, Massachusetts would see at least an additional $450 million in overall annual economic activity and 3,000 additional jobs. This estimate was based on formulas used by the Division of Insurance to determine the impact of its reforms of the private passenger auto insurance market.
Massachusetts law explicitly states that motor vehicle rates shall not be "excessive" or "unreasonably high for the insurance provided." The Commissioner of Insurance has the authority to reduce commercial automobile insurance rates under that same general law. The letter urges the Commissioner to undertake a full review of commercial automobile insurance rates, followed by appropriate regulatory action to reduce rates in Massachusetts to a reasonable level.
On February 10, the Attorney General requested that the Commissioner reject a proposal from Progressive Insurance Company to increase rates by 23%. However, the Commissioner did not reject the increase, instead claiming that businesses can shop around for lower prices if they felt the Progressive increase was too high. In today's letter, the Attorney General noted that shopping around is not an option, as almost all companies are selling insurance at high rates.
The Attorney General represents consumers in all insurance proceedings.
Click the link for a full copy of the Attorney General's letter to the Commissioner.
This matter was handled by AG Coakley's Insurance and Financial Services Division.