Premium Finance Company to Pay $160,000 for Prematurely Canceling Auto Insurance Policies
Company Failed to Give Required Notice Before Canceling Policies of Close to 100 Massachusetts Customers
BOSTON – A New York-based premium financing provider has agreed to pay $160,000 to resolve allegations that it illegally cancelled certain financed auto insurance policies affecting close to 100 Massachusetts customers, Attorney General Martha Coakley announced today.
According to the assurance of discontinuance, filed in Suffolk Superior Court Wednesday, AICCO, Inc., a subsidiary of American International Group, Inc. (AIG), issued cancellation requests to insurance companies with an effective date that was just three days after the date of the notice. State law requires premium financing providers to give at least a 20-day notice to the insurance company that issues the policy.
“Massachusetts customers should receive proper notice of auto insurance cancellations so they can determine an appropriate solution for continued coverage,” AG Coakley said. “Our office will continue to ensure that these providers are complying with state insurances laws, not prematurely pulling the plug on these policies.”
This statute works in conjunction with other provisions to ensure that customers have adequate time to bring their accounts current before their policies lapse and they are forced to take vehicles off the road or seek replacement coverage.
A premium finance company provides loans that enable people to pay their insurance premiums in installments. The company uses the unearned premium on the policy as collateral for the loan. If a customer misses a scheduled payment, the premium financing provider may seek to cancel the policy.
Under the terms of the settlement, AICCO will make payments totaling more than $125,000 to roughly 100 customers in Massachusetts whose policies AICCO allegedly prematurely cancelled or sought to prematurely cancel in violation of state law, in addition to a $35,000 payment to the Commonwealth.
The AG’s Office began its investigation of illegal cancellation practices by premium financing providers in 2011. This is the third investigation to result in refunds to Massachusetts customers. In 2011, IPFS Corporation paid $82,000 to settle similar allegations. In January 2013, Flatiron agreed to pay $42,000.
This matter was handled by Assistant Attorney General Jenny Wojewoda with assistance from Investigations Supervisor Arwen Thoman and Mathematician Burt Feinberg of Attorney General Coakley’s Insurance and Financial Services Division.