June 30, 2006
Nicole St. Peter
|Fair Plan Rate Decision Announced|
Massachusetts Insurance Commissioner Julianne M. Bowler today disapproved the 12.5 percent average rate increase submitted by the Massachusetts Property Insurance Underwriting Association (the FAIR Plan) and requested that they refile their rate request. The FAIR Plan filing included the cost of reinsurance which they did not purchase and certain nonmodeled losses that were determined to be outside the range of reasonableness. The Commissioner determined that these elements of the filing would result in excessive rates in some territories in the Commonwealth and thus could not be approved under the statute.
Historically, the parties have stipulated to the FAIR plan rates. The 2006 rate filing is the first time that such a filing has resulted in a hearing. Unlike auto insurance rate setting hearings, the Commissioner of Insurance lacks the authority to "fix" homeowners' rates. Her authority is limited to the "approval" of the MPIUA's filed rates provided they are not deemed to be inadequate, excessive or discriminatory, and they lie within a range of reasonableness.