Friday, May 11, 2012

What's FAIR in Massachusetts?

Massachusetts Attorney General Martha Coakley (D) announced her approval of Mass insurance regulators rejection of a rate hike for its state run property insurer, Massachusetts Property Insurance Underwriters Association

Coakley requested that the insurance commissioner reject the hike because the proposed increase was 
'unsupported, and would contravene the statutory intent' of making insurance available to homeowners at reasonable rates
Apparently, Coakley did not find that the 
undisclosed hurricane models that insurers claim predict the likelihood and damage of a major hurricane hitting Massachusetts
provided sufficient evidence that the rates needed to be increased.  

Coakley's office argued to the Commissioner that
the industry failed to provide witness testimony and evidence in support of its hurricane predictions and reinsurance costs.  
The Mass Insurance Commissioner Joseph Murphy agreed with Coakley that the requested increase had not been appropriately justified
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
Murphy revealed a bit of political risk perspective when he adds that the state's Division of Insurance is concerned with

Ensuring that insurance rates are commensurate with the benefits provided at the most reasonable cost (emphasis mine)
This is an interesting twist of the common insurance phrase that rates must be commensurate with the risk.  From the perspective of a political official their is no doubt a relationship between the benefits provided to the public and the risk experienced by the politician when increasing rates.

The increase was requested to allow for the purchase of more reinsurance and 
 a “profit-provision” add-on that alone equated to $15 million of additional annual profit. Without the add-on, the increases averaged two percent statewide. Between Fiscal Years 2007 and 2011, the FAIR Plan’s profit totaled more than $200 million.

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