Massachusetts Attorney General Calls for Auto Insurance Rate Investigation

March 8, 2009 – Massachusetts Attorney General Martha Coakley is calling for a public hearing to review the auto insurance rates of an auto insurance company that recently began underwriting auto insurance coverage in the commonwealth.

Coakley wants insurance regulators to look into the high risk auto insurance rates and additional fees and surcharges levied by the Occidental Fire and Casualty Insurance Company of North Carolina. Coakley says the insurer has not provided sufficient information to justify the higher auto insurance rates, and she is concerned the company is targeting drivers in urban areas where many other private insurers have ceased offering auto insurance coverage.

“We have learned recently that many of the auto insurance providers in Massachusetts are not renewing their contracts with many inner city agents or agents in less affluent, minority areas,” said Coakley. “If Occidental were the only company offering insurance in these areas, many consumers will be steered into paying these unjustified and excessive premiums.”

Massachusetts law allows the attorney general to challenge proposed auto insurance rates. Once challenged, the insurance commissioner must hold a public hearing and cannot approve the auto insurance company’s rates until after the hearing is held. Occidental made its initial auto insurance rate filing on Feb. 13 and proposes charging base auto insurance rates about 10 percent higher than those charged by Massachusetts’ “residual market” last year. The residual market is a pool of high risk drivers that private auto insurance company’s generally do not want to insure.

The Attorney General also is accusing Occidental of engaging in unfair and illegal insurance practices, including a proposal levying a 35 percent surcharge on policyholders who can’t verify their driving records – including drivers whose official records are from a foreign nation that doesn’t use English. The attorney general says any recent immigrant from a non-English speaking nation would be charged the same auto insurance rate as an inexperienced driver have to pay an additional 35 percent surcharge.

Occidental officials also want to assess a $25 “policy fee” to covers the auto insurer’s marketing costs and monthly $8 installment fees, which Coakley says violates Massachusetts law if the fees can not be justified.

Occidental also requires its auto insurance customers to pay a general comprehensive deductible on top of a “glass deductible” on window damage claims in violation of Massachusetts law, according to Coakley. Occidental also might refuse to allow drivers to reinstate their auto insurance policy after receiving a notice of cancellation for nonpayment, which also violates the law.