NU Online News Service, May 26, 10:02 a.m. EDT
Massachusetts Attorney General Martha Coakley is urging the state insurance commissioner to act promptly to cut commercial-auto insurance rates in the state.
In a letter to Insurance Commissioner Joseph Murphy, Coakley cites a review based on insurance-industry data that shows Massachusetts businesses have been overcharged by nearly $1 billion over the past seven years.
The letter was written in the attorney general’s role as the consumer advocate for insurance customers.
Coakley says the review shows businesses were overcharged $150 million per year between 2004 and 2010. During this period, the same industry data shows rates in Massachusetts were excessive by at least 21.6 percent, Coakley says.
The insurers’ underwriting profits were significantly higher in Massachusetts than the national average, Coakley contends.
The study was undertaken after Murphy rejected a Feb. 10 request from Coakley that the Insurance Department not approve a 23 percent rate increase for Progressive Insurance Co.
Murphy justified his approval by saying that if its customers are unhappy with Progressive’s new rates, they can shop around for lower prices.
In her letter, Coakley notes that shopping around is not an option, as almost all companies are selling insurance at high rates.
Coakley estimates in her letter that the insurers’ excessive rates have reduced economic activity in Massachusetts and that if rates were kept in check, the state would see at least an additional $450 million in overall annual economic activity and 3,000 additional jobs.
She says the estimate was based on formulas used by the Division of Insurance to determine the impact of its reforms of the private-passenger auto-insurance market.
In her letter, she says Murphy had the statutory authority to reduce rates based on the data.
Coakley says Massachusetts law explicitly states that motor-vehicle rates shall not be “excessive” or “unreasonably high for the insurance provided.”
The letter urges the commissioner to undertake a full review of commercial automobile-insurance rates, followed by appropriate regulatory action to reduce rates in Massachusetts to a reasonable level.