BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley announced on Friday that she has reached a settlement with an insurance company that allegedly charged excessive credit unemployment insurance rates.
Assurant/American Bankers Insurance Company, which sells credit unemployment insurance under the brand names Chargeguard and Accountgard, allegedly charged the excessive rates for policyholders in the state.
"This insurer's rate levels were excessive," Coakley said. "We brought our concerns to the company and fought for customers' rights to a fair premium. Based on our review, the company agreed to rollback rates and keep rates down for the next three years. We will continue to monitor this market to protect consumers from unfair and excessive rates."
Credit unemployment insurance works by safeguarding credit card or other types of recurring debts for a set period of time if policyholders are laid off or otherwise lose their jobs. Consumers purchase the coverage either when they sign up for a specific credit card or in response to a special credit card offer.
Coakley alleged that the company's loss ratio, which measures the aggregate amount of money spent paying consumer claims compared to the amount of money an insurer takes in from insurance premiums, paid out less than 20 cents on every dollar taken in from consumers.
Despite the Division of Insurance approving these rates, Coakley alleged that the rates were excessive and began a review of the insurer's rating plan.
Under terms of the agreement, ABIC is required to reduce and maintain its rates this spring by up to 90 percent and maintain those rates through 2014. It will reduce rates on its Chargeguard brand credit unemployment insurance by 45 percent and on its Accountgard brand credit unemployment insurance policies by 90 percent.
The rate rollbacks need to be formally approved by the Division of Insurance before they can take effect.