Good morning. MASSPIRG and the Center for Insurance Research are here today to offer testimony relating to Docket Number C2007-03, Proposed Amendments to Rules 23, 26, 28 and 30 of the Massachusetts Automobile Insurance Plan (“MAIP”).
In its proposed change to Rule 23 of the CAR Rules of Operation, CAR eliminated the initially proposed requirement that insurers disclose in writing to consumers the reasons for refusing to issue or renew an auto insurance policy. Specifically, the following language was stricken from Rule 23: “A Member declining to write a risk voluntarily must provide the reason for the declination in writing to the applicant prior to referring the risk to the MAIP.” In addition, the Division of Insurance noted on page 6 of its July 16th MAIP decision that “[i]nsurers are no longer required to provide a written explanation of the reasons for declining coverage in the voluntary market.” The Division went on to state on pages 8 and 9 of Appendix A of that decision that “the Commissioner expects insurers to provide honest answers to consumers when they ask why they were turned down for voluntary coverage.”
This approach is clearly not in the best interest of consumers and should be repealed by reinserting the initially proposed language of Rule 23. Limiting notice to those instances in which consumers ask why they were rejected would undoubtedly cause most consumers not to receive such a notice. Whenever any insurer rejects a driver, whether it is for a new or a renewal policy, the driver should receive a written, standardized notice setting forth the specific reasons for the rejection. This is basic, common sense consumer disclosure. Moreover, for renewal policies, such a notice is currently required by Section 22E of Chapter 175 of the General Laws.
If competitive rating is to work to benefit consumers as much as insurers, consumers must have meaningful access to information. The reasons why an applicant is denied insurance in the voluntary market are indeed vital for the consumer to know in order to make an informed choice and to allow the market to encourage pro-consumer practices. Furthermore, review of the reasons for denial can shape and improve insurer behavior by informing insureds and regulators of factors that harm consumers and can also serve to alert consumers to any information that is inaccurate or incomplete. In addition, in a regulatory framework that does not require insurers to file or disclose underwriting factors, mandatory disclosure of the specific reasons for denial is a critical component in overseeing industry practices and guarding against any unfair practices.
During the transition from a reinsurance pool to an assigned risk plan, and in the context of a complete overhaul of our rate setting process, we must pay extra attention to protecting consumers and providing them with necessary information in a format that is standardized and understandable.
MASSPIRG and the Center for Insurance Research urge the Division to correct Rule 23 and reinsert the original language, which requires insurers to provide written notice to all applicants to whom they choose not to issue or renew a policy.
Thank you for the opportunity to testify today.
Deirdre Cummings
Legislative Director
MASSPIRG
Boston, MA
(617) 292-4800
Stephen D'Amato
Consultant
Center for Insurance Research
Cambridge, MA
(617) 441-2900
