Insurance rate-setting in Massachusetts “behind closed doors:” Report

A new report reveals that the process of setting homeowners insurance rates “largely benefits insurers at the expense of consumers”

Insurance News

By Lyle Adriano

Homeowners in Massachusetts who think the latest increases in their insurance rates are unfair are on to something, according to a Senate committee report.

A recent study conducted by the Senate’s Post Audit and Oversight Committee concluded that the state’s closed process for determining homeowners insurance rates has cost consumers greatly. The same report also recommended that the system should be changed to allow more time for input and feedback from the attorney general.

The report detailed that the cost of insuring a home increased by an average of almost 22% statewide between 2007 and 2013, to over $1,200 a year. Since the increase, many homeowners’ premiums have continued to climb, helping generate returns for insurers that exceed the national average, the report observed.

Of note, the report underlined the “closed door” aspect of the rate-setting process; under current law, the state Division of Insurance (DOI) is allowed to consider rate-hike requests internally. Thus, the rate hikes are only publicly disclosed after the division has reached a decision on a proposed increase. This delayed reveal leaves little time for consumers and the attorney general’s office to review the proposed hikes before they take effect.

The oversight committee has recommended an overhaul of the state’s public records law to allow more information regarding such rate hikes to be publicly available, reported The Boston Globe. Senator and Committee Chair Michael J. Barrett, Lexington-D, proposed an amendment that would require rate-hike requests to be posted online for everyone to see, and sent to the attorney general the moment the requests are submitted to the DOI.

It’s a closed system,” Barrett said. “We just want rate-increase requests declared public records at the time of filing.”

In response to the report, state regulators said that they heavily debate with insurers over requests for rate increases, making sure to look after the interests of consumers while protecting insurance companies’ proprietary information.

“We act very much like policemen,” said DOI spokesperson Chris Goetcheus.

While Goetcheus affirmed that the insurance division would defer to the Legislature on whether it should make initial rate requests public, he shared that such an action would cause a “a procedural mess.”
 

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