Coakley, credit insurer reach settlement
BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley announced an agreement on Wednesday with a credit insurance company resolving allegations that the company charged excessive credit insurance rates.
Under the terms of the agreement, Central States Indemnity Co. of Omaha agreed to reduce and maintain rates through 2016 for policyholders in Massachusetts. CSI-Omaha sells a variety of credit insurance types to residents in the state.
As part of the assurance of discontinuance, CSI-Omaha will reduce credit unemployment insurance rates by 51 percent, credit family leave rates by 94.8 percent and credit life rates and credit accident and health rates by 32.6 percent. The rate rollback is expected to take effect on policies beginning later this winter. The rates will be in effect until at least 2016. The rate rollback must still 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," 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 and other recurring debts owed by consumers during a set period of time if the consumers are laid off or otherwise lose job income. Typically, consumers purchase the coverage either when they sign up for a particular credit card or in response to an offer accompanying a credit card bill.
Coakley's major concern regarding CSI-Omaha's rates relates to the company's loss ratio. Loss ratio measures the aggregate amount of money spent paying consumer claims compared to the amount of money an insurer earns from insurance premiums. The rate plan for CSI-Omaha, based on 2010 loss ratios reported to the commissioner, showed that it would pay out on average less than 20 cents for each dollar taken in from consumers. Coakley called the rates excessive and began reviewing the insurer's rating plan. Due to Coakley's action, the company must re-file and rollback these excessive rates.