Soaring home insurance rates questioned

Posted Sep. 19, 2015 at 10:15 AM

SOMERVILLE

Following a winter that caused an estimated $2.4 billion in losses in the Northeast, a recent spike in Massachusetts home insurance premiums is drawing the scrutiny of lawmakers and consumer advocates alike.

“I’m keeping an open mind here, so I’m stopping short of saying any particular rate increase is excessive,” said state Sen. Michael Barrett, D-Lexington, chairman of the Senate Committee on Post Audit and Oversight. “But what’s unsettling is the lack of an even fight between those who would like to maximize rate increases and those who would like to minimize them.”

Barrett’s committee is holding a hearing next Tuesday (Sept. 22) to publicly examine the premium hikes and the review process the Division of Insurance used in approving new rates. Under state law, rates cannot be “excessive, unreasonable, inadequate or unfairly discriminatory.”

On the heels of a historically severe winter that saw insurers pay out hundreds of millions in claims, state regulators this spring and summer effectively approved average rate increases from several major insurers — some topping 9 percent — in a process primarily conducted behind closed doors.

“It was certainly an unpleasant surprise to see the increase in insurance rates after this past winter,” Sen. Pat Jehlen, D-Somerville, told the Journal. “I’ll be very interested to see the results of the Post Audit report once it is released.”

Rising rates

Unlike consumer rates for auto insurance, electricity service and other state-regulated industries, a filed rate increase for homeowners insurance doesn’t automatically trigger a hearing in Massachusetts. After new rates are filed, they can take effect without a record of an explicit affirmative approval from state regulators.

In total, 13 insurers, including some of the state’s largest, have had rate increases this year, according to the state Division of Insurance.

With more than 214,000 customers in Massachusetts, MapFre, the state’s largest home insurer, raised its average rates by 8.9 percent effective Aug. 1. Boston-based Safety Insurance’s average rates are rising by 9.1 percent, while Plymouth Rock’s rates are increasing by an average of 7.7 percent. USAA is raising its average rates by 6.3 percent, according to the Division of Insurance.

In recent years, insurance companies’ rate increases have typically hovered in the 2-3 percent range in Massachusetts.

Collectively, the new charges will add approximately $100 to annual insurance bills for many Massachusetts homeowners, who typically pay approximately $1,200 per year for home insurance.

“As a membership-based association, USAA is committed to helping our members recover when they suffer a loss, so our property insurance rates must reflect the projected cost of our members’ claims,” said USAA spokesman Rich Johnson, who added that the company hadn’t previously requested a rate increase in Massachusetts in more than three years and has rates that are below projected costs.