Regulators reject FAIR Plan proposal to hike rates
Massachusetts insurance regulators Friday rejected a request by FAIR Plan, the state’s home insurer of last resort, to raise its rates an average of 7.2 percent.
The FAIR Plan, officially called the Massachusetts Property Insurance Underwriters Association, had proposed raising home and condo insurance rates by 6.7 percent on the Cape and the Islands and 9.9 percent in several other areas, including New Bedford, Worcester, and Springfield.
The plan, the state’s largest provider of home insurance, currently covers 201,150 householders who are unable to obtain coverage from other insurers, often because they are thought to be at high risk for flooding, hurricanes, or other disasters. The state has nearly 2 million home insurance policyholders.
“Ensuring that insurance rates are commensurate with the benefits provided at the most reasonable cost is the division’s priority,” Insurance Commissioner Joseph G. Murphysaid in a statement. “If you want to raise rates on Massachusetts consumers, you had better do your homework and be prepared to justify the increase that you are seeking.”
Robert Tommasino, the general counsel for the FAIR plan, recently said the group applied for higher rates because it had not received an increase in six years, and new hurricane models show the state is more vulnerable to damage than previously thought. He could not immediately be reached Friday.
But Attorney General Martha Coakley, who is charged with representing rate payers, opposed the increase, saying the FAIR Plan was already earning more than enough money to cover its costs. It earned $200 million from 2007 through 2011.
In a statement, Coakley said she was pleased that the Division of Insurance recognized that insurers were using questionable hurricane models to push for higher rates.
“Consumers in the FAIR Plan have nowhere else to go and should not be required to pay unjustified rates,” Coakley said. “ The rejection of this proposal will save thousands of Massachusetts residents hundreds of dollars and provide them with solid, more affordable insurance.”
Meanwhile, many private insurers are planning even steeper increases in home insurance this year, citing the surge in damage claims resulting from tornadoes, brutal snowstorms, and Tropical Storm Irene last year.
Bunker Hill Insurance in Boston, for instance, previously said it plans to raise its rates by nearly 12 percent this year, while The Andover Companies planned to raise rates by an average of 9 percent.
But rate proposals by the FAIR Plan typically attract much greater scrutiny, both from regulators and outside groups.Todd Wallack can be reached at email@example.com.