Massachusetts Division of Insurance


Massachusetts Division of Insurance Issues Warning

The Massachusetts Division of Insurance has issued an official warning to all auto dealers in the state. Salespersons are told to watch what they say and do regarding auto insurance while selling a vehicle. Joseph Murphy, the Massachusetts Commissioner of Insurance, published a letter addressed to all auto dealers and salespersons on the Consumer Affairs and Business Regulation website.

Murphy states numerous reports have been filed with the Division of Insurance that certain motor vehicle salespersons are giving recommendations about particular insurance companies and assisting customers in purchasing their auto insurance.  He warns that only licensed insurance producers are given the authority to sell or attempt to sell, negotiate or solicit insurance, including motor vehicle insurance. The letter stated:

This Bulletin reminds insurance companies and those individuals involved in the sale, finance, registration or insurance of motor vehicles of the Massachusetts rules about placing insurance on motor vehicles.  These rules reflect the longstanding principle that only those who have demonstrated knowledge and competence about motor vehicle insurance by obtaining an insurance license from the Division are permitted to advise consumers about the purchase of such coverage.

The posted bulletin gives these five specific examples of what an auto salesperson may not do while selling a motor vehicle:

Example 1:  A motor vehicle salesperson advises a customer that he could save money by buying his motor vehicle insurance from The XYZ Insurance Company. The salesperson is improperly “soliciting” motor vehicle insurance because she is recommending or urging a person to apply for a motor vehicle insurance policy from a particular company.

Example 2:  A motor vehicle salesperson assists the customer to obtain insurance online by using his office computer to search for motor vehicle insurance for the customer while the customer watches. The salesperson is violating Massachusetts insurance law because he is “negotiating” motor vehicle insurance for the customer by assisting the customer to “obtain” it.

Example 3:  A motor vehicle salesperson offers her customer the use of a computer at the motor vehicle dealership so that the customer can search for motor vehicle insurance, but the computer is preset to the website of a particular insurance company. The salesperson is improperly “soliciting” motor vehicle insurance because she is asking or urging a person to apply for insurance from a particular company.

Example 4.  A motor vehicle salesperson who is arranging financing for the purchase of a motor vehicle tells his customer that she must purchase insurance from a particular insurance company. The salesperson is violating Massachusetts law because he is making financing contingent on purchasing insurance from a particular insurance company.  G.L. c. 175, § 193E.

Example 5:  The motor vehicle dealership maintains a computer terminal linked to the internet for the use of its customers. A customer may use the terminal to search for insurance as long as the salesperson does not operate the computer, the computer is not preset to any particular insurance company’s website, and the salesperson does not recommend that the customer apply for motor vehicle insurance from a particular company.  The salesperson may suggest that the customer start her search for motor vehicle insurance by visiting a site that provides general advice on the purchase of such insurance.  A salesperson may always refer her customer to The Division’s website, www.mass.gov/doi for such information.

This is a firm reminder not only to auto salespersons, but consumers as well. Only a licensed agent holds the knowledge necessary for insuring you with appropriate limits. The deregulation of the auto insurance market has given consumers the option to compare quotes and find the best price, not to be bullied into signing with one insurance carrier or another. For a free quote call MassDrive where a friendly representative will compare quotes from different carriers for you!

To read Joseph Murphy’s letter regarding the involvement of motor vehicle salespeople in the solicitation, negotiation or sale of motor vehicle insurance please access the Consumer Affairs and Business Regulation website here.

Specifics on Toyota Recall & At-Fault-Accidents

Drivers who own vehicles recalled by Toyota over the past month have raised concerns about what this means for their insurance coverage and rates. Drivers who were involved in an accident prior to the recall have faced surcharges other related costs of an “at-fault-accident” that may have been due to the manufacturer’s defects and reason for recall.

Thankfully Massachusetts drivers have an appeal provision that protects these drivers from additional charges and costs of an accident due to Toyota’s recalled parts. The Board of Appeals hears approximately 50,000 cases each year, of which about half the original verdicts are reversed. Once overturned the “at-fault-accident” affecting a drivers record and increasing a driver’s insurance rates will be removed.

Drivers who wish to appeal a decision should discuss the appeal with their local agent first. Speaking with an agent will give the driver a better understanding of the terminology and may share a greater knowledge of auto insurance w to use in Massachusetts insurance carriers are required to use specific standards of fault when determining someone’s responsibility or fault in an accident. One of these standards includes the “Standard of Fault 19” in a collision that a single vehicle is involved, the fault is assessed to the person driving that vehicle. In other words if the accelerator of a recalled Toyota became stuck and the vehicle drove into a tree or other object, besides another vehicle, fault would be assessed to the driver. This is an at-fault-accident someone would want to bring to the Court of Appeals to remove this at fault accident from their record.

The Massachusetts Division of Insurance issued a Consumer Alert that announced hearings for drivers who appealed a decision prior to the recall would be reopened. The board was not previously aware of the manufacturer’s defect and is seeking to right any court decision that a Toyota driver may feel would have been different with the recall. After an at fault accident a driver should automatically receive a notice for their right to appeal the decision.

Appeal hearings are open to the public and for the most part informal. The written appeal is read by the hearing officer and the driver is then going to make his or her case for the appeal. It is also good to be aware that a representative for the insurance carrier will also be present. A person’s driving record is one of the most important determinants of auto insurance premiums. It should not be taken lightly when you are wrongly assessed fault of an accident.

New Insurance Carriers = High Risk Exemption

This past Tuesday the Massachusetts Supreme Judicial Court upheld the Massachusetts Division of Insurance’s decision to temporarily excluded new auto insurance companies from covering high risk drivers. The Abrella Mutual Insurance company filed a lawsuit claiming Nonnie Burnes had exceeded her authority as the insurance commissioner while favoring national companies new to the Bay State. Burnes had adjusted the insurance regulations to exempt the new insurers from covering high risk drivers for two years.

Abrealla with the Massachusetts Association of Insurance Agents brought the law suit in 2008 arguing the exemption place Massachusetts insurers at a disadvantage. This legislation would require the Massachusetts insurers to share the cost of high-risk losses based on their state market share allowing the new insurers to escape this burden.

The Massachusetts Supreme Judicial Court upheld Burnes decision deciding although the new companies would not share the cost of high risk drivers they do help fund the administrative costs of the Massachusetts Automobile Insurance Plan that in turn provides the high risk insurance. Burnes had worked during her career as the insurance commissioner towards deregulation in an effort to bring new insurance agencies to Massachusetts giving drivers better competitive prices and more options.

Frank Mancini, president of the Massachusetts Association of Insurance Agents, stated his association was disappointed in the outcome however will not be giving up. The group has already brought two additional bills attempting to keep the ownership of expiring policies with agents.

Before deregulation state regulators set auto insurance rates charging drivers by their location and driving record. The new system allows carriers to grant discounts for everything from being a student with good grades to holding a AAA membership. It has also brought more competition the the state as carriers set their own rates as opposed to following state regulated rates as before. Deregulation has brought eleven new insurance carriers and looks to be a good step forward for the State.

Murphy New Insurance Commissioner

Joseph Murphy has been named the new Commissioner of the Massachusetts Division of Insurance. He has acted as commissioner since September 2009 after Nonnie Burnes resigned from the position. Serving as first deputy of commissions since 2006 he has played an active role in the transition to managed competition. However this is not his only qualifying position, Murphy has also served as: chief of staff and research director of the Joint Committee of Financial Services and the Joint Committee on Insurance in the Massachusetts legislature.

Murphy Massachusetts Governor Deval Patrick appointed Murphy to the position. Deval publicly recognized Murphy for his outstanding role in the administration’s auto insurance deregulation and day to day operation of the division including its 130 employees and $12 million budget  since Burne’s resignation.

“Joe deserves a significant amount of credit for the success of managed competition and is a leader in our efforts to stabilize health insurance costs for small businesses. He has a keen understanding of the issues that matter to consumers and insurers alike, and will use his knowledge and experience to help us move forward on auto insurance reform, health care cost containment and a host of other initiatives.”

Governor Deval Patrick

Divison of Insurance… What Does it Do?

The Massachusetts Division of Insurance serves the people of Massachusetts and the insurance carriers. The DOI Mission Statement states it’s primary mission is to overlook the solvency of it’s licensees to create and maintain a productive and willing market for insurance consumers. It also includes the following:

“Protection of consumer interests is of prime importance to the Division and is safeguarded by providing accurate and unbiased information so consumers may make informed decisions and by intervening on behalf of consumers who believe they have been victimized by unfair business practices.”

The mission statement exposes what the Division of Insurance is all about, but what exactly does it do? Take a look at the following, listed on the DOI website, to get a better idea:

  • License Insurance Companies: The DOI processes the license of each insurance insurance carrier to ensure only financially stable insurance companies receive and maintain a license to sell insurance.
  • Examine the Financial Stability of Insurance Companies: Monitoring insurance carriers through quarterly financial reviews the DOI looks for signs of financial instability. When financial worries arise the DOI will regulate the actions of the company to prevent insolvency.
  • Examine the Conduct of Insurance Companies: The Division will go further than finances, it also examines an insurance company’s customer relations. Examining everything from a company’s underwriting and rating procedures to renewals and claims the DOI looks to make sure the consumers are treated fairly.
  • Regulates forms, rates, and programs: Through regulating the forms, rates, and programs of each insurance company the DOI ensures products sold by each company follow Massachusetts laws and regulations
  • Provides license for producers and others involved w/ insurance: The Division provides insurance license for producers and others involved in the insurance industry. This ensures that a license will only be given to someone who is qualifies and will abide by Massachusetts laws.
  • Accepts Insurance Complaints: The Division of Insurance also accepts complaints against an insurer, producer/ agent, or appraiser involved in the insurance business. The Division will give each complaint a reply and/ or resolution explaining and coinciding with Massachusetts laws and regulations.

Department of Insurance Report

The Division of Insurance or the DOI issued an executive summary about the progress of Massachusetts change to managed competitive. Under the old system, state regulators set the insurance rates that all automobile insurance companies were allowed to charge.

The new system has generated some excitement and brought in nine additional insurance carriers to the Massachusetts market. Insurance companies can now offer competitive rates, and additional products and services. This is very beneficial to the consumer but it is also important for the consumer to do research to find the best rates.

The program has been a success overall because Massachusetts Division of insurance reported that “Massachusetts consumers saved over $270 million in insurance premiums in the first year of managed competition.” There was also a “13 percent decrease in the number of uninsured vehicles on Massachusetts roads.”

There was a lot of speculation on what the new regulations would do for insurance providers, more particularly, the agents. Fortunately for agents, “sixty-nine percent of consumers continue to purchase coverage through agents, rather than purchase directly. This number is nearly twice the national average.”

The biggest issue is that “approximately three out of four consumers indicated that they were aware of the new auto insurance system, and those who were aware were 60 percent more likely to have saved money than those who were not aware.”

It seems apparent that the system has generated positive outcomes but education and notification for residents may be an area for increased performance.

Massachusetts Managed Competition System Program Assessed

In April 2008, the state government put a managed competition system in place through the Division of Insurance. After some time, the system still continues to receive mixed reviews.

Before the system, state government set the rates for auto insurance effectively regulating insurance providers’ ability to raise rates to gain more revenue. When the plan was first introduced, advocates believed the new system would bring in new carriers and those that opposed said the system would discriminate against select drivers.

The system is now in its second year but there have only been minor changes in the nature of the auto insurance market.

Three major auto insurance providers Allstate, Geico, and Progressive, have entered the market. 6 more small local providers have also joined since the market change. The difference between the larger and smaller providers is that the smaller ones have employed the services of local insurance agents.

It is a concern that with large providers not seeking help from local agents, agents will suffer. Frank Mancini, president and CEO of the Massachusetts Association of Insurance Agents, says that even with some consumers switching to the bigger providers, agents have yet to suffer substantial losses. Independent agents handle up to 78 percent of auto insurance policies in the state. The national figures are much lower, 30 to 35 percent.

The statistics from the first year of operation under the new system show that the average auto insurance cost dropped. With the new system being a hot topic for debate, critics and advocates will surely being watching the market closely.

Coakley alleges unfair rate increases for Massachusetts auto insurance customers

At the end of 2008, Massachusetts Attorney General Martha Coakley asked the Massachusetts state Division of Insurance to look at one insurance company, Premier (a subsidiary of Traveler’s Insurance), for alleged discrimination related to home ownsership.  Coakley’s office alleges that Premier’s new rating system unfairly increases rates for Massachusetts Auto Insurance consumers who do not own homes. As readers of this blog already know, Massachusetts insurance regulations prevent auto insurance companies from basing rates on income, homeownership, among other factors that could be construed as indicators for income.

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