Unfair rate automobile insurance policies challenged by Massachusetts attorney general‏

Nick Rees Apr. 1, 2009, 4:00pm

Martha Coakley (D)

BOSTON (Legal Newsline) - A North Carolina insurance company has entered into a settlement with the Massachusetts attorney general that bars it from using unfair rating practices and company policies for underwriting automobile insurance policies in Massachusetts.

Occidental Fire and Casualty Insurance Company of North Carolina filed its rating plan with the Commissioner of Insurance in February to begin writing automobile insurance this year.

"We have serious concerns regarding Occidental's plan to write auto insurance policies in Massachusetts. As the company is targeting urban drivers in those areas where other companies are pulling out, many inner-city Massachusetts drivers may purchase insurance from Occidental at prices greatly in excess of the fair cost of the insurance," Attorney General Martha Coakley said. "This settlement is an important first step to ensure that Occidental consumers are treated fairly."

Occidental's rate filing shows that the company proposes to charge a base rate that is 10-percent higher than the base rates charged by the Massachusetts residual market last year. The residual market is made up of a pool of drivers that insurance companies deem high risk and generally do not wish to offer policies to.

Following the filing of an Assurance of Discontinuance, Occidental is now prohibited from charging an additional $25 policy fee for each insurance policy, charging installment fees that exceed the Massachusetts usury standards, limiting policyholder rights to reinstatement of their policies after reception of notice of cancellation if the deficiency is paid, charging installment fees to policyholders who pay their balance in full, charging both a glass deductible and a comprehensive deductible on glass claims, charging a 25-percent surcharge on high risk vehicles and rating drivers in Massachusetts based on length of residency.

The Assurance of Discontinuance comes following a March administrative hearing on Occidental's filing before the Commissioner of Insurance. The attorney general's office argued in its motion for a rate hearing that Occidental's proposed rate were both excessive and unjustified while also violating a variety of Massachusetts statutes.

The office of the attorney general used its authority under the Consumer Protection Act to stop the illegal activities of Occidental after the Commissioner of Insurance stated that she could not prevent Occidental from using illegal practices in its rating policies, something she said was beyond her authority.

Occidental will be allowed to begin writing policies on April 1, following the placement of its rates "on file" by the commissioner. A hearing date, however, is set for April 30 as the attorney general's office continues to litigate issues relating to Occidental's inflated rates.

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