FAIR Plan insurance rates ripped
By ROBERT GOLD
May 30, 2013 2:00 AM
HYANNIS — The FAIR Plan’s latest request to raise homeowner insurance rates statewide and across the Cape and Islands drew sharp criticism from homeowners, legislators and the attorney general’s office Wednesday during a public hearing held by the state Division of Insurance.
“The Cape and Islands homeowners are being robbed,” Paula Aschettino, chairwoman of the Cape-based Citizens for Homeowners Insurance Reform, said during the hearing at Barnstable Town Hall.
The FAIR Plan filed a proposal last month with the state insurance division to raise home-owners insurance rates by 6.8 percent statewide. Homeowners on the Cape and Islands and in the New Bedford area are among those who would be hit with a 9.9 percent increase, the highest of any of the state’s regions.
Opponents of the rate hike raised several objections on Wednesday, including the amount of the FAIR Plan’s profits in recent years, the misguided notion that Cape and Islands residents are all affluent, and inaccuracies in storm models used to predict liability.
The FAIR Plan, formerly known as the Massachusetts Property Insurance Underwriting Association, last sought a rate hike in 2011. That year, officials asked for a 6.7 percent rate increase on the Cape and Islands, translating to a 7.2 percent hike statewide. That request was denied by Insurance Commissioner Joseph G. Murphy in January 2012.
The FAIR Plan, a pool of private insurance companies, is often considered the insurer of last resort for homeowners unable to purchase policies elsewhere. Many Cape and Islands homeowners have been forced onto the plan after insurance companies cancelled policies based on high estimates of damage from wind.
About 55,000 households on the Cape and Islands are insured by the plan, according to Robert Tommasino, its general counsel.
The attorney’s general office opposes the current proposed increases, Assistant Attorney General Monica Brookman said. The FAIR Plan made more than $250 million in profits between the 2007 and 2012 fiscal years, she said, adding that FAIR Plan rates are supposed to allow homeowners insurance at a “reasonable cost.”
State Rep. Timothy Madden, D-Nantucket, said the FAIR Plan should seek a decrease in rates. Part of the problem is the stereotype that Cape and Islands residents are all wealthy and can easily pay more, he said.
“We are people working hard for our money,” he said.
Hearings will be held today in Boston and Friday in Springfield. More hearings are planned where representatives of the FAIR Plan will testify about their rationale for the rate requests.
Tommasino told the Times last month that without the plan’s current 9.9 percent cap, the formula would have called for a 13.3 percent rate increase on the Cape and Islands.
The higher request for the Cape is due in part to hurricane models predicting more damage here than in other parts of the state, Tommasino said. He also pointed to higher reinsurance rates on the Cape. Reinsurance companies insure the insurance companies.
Aschettino said the hurricane models used by the insurance companies are seriously flawed. Massachusetts is part of a “Northeast” region, she said. Historically, Connecticut and New York have seen more hurricanes that are stronger, she argued, adding that Massachusetts suffers by being grouped into the same region.
State Sen. Daniel Wolf, D-Harwich, said insurance rates should be reduced for weather events that aren’t issues on the Cape, such as ice storms and tornadoes.
John Temple, a resident of Barnstable, urged more information to be made public about the hurricane models used by the FAIR Plan and other insurance companies.
“I think a little more transparency would serve everyone,” he said.
Fair Plan Rates
Fair Plan rates vary according to regions. The following is
how the Cape and Islands percentages compare
with the overall state rate.
Statewide request Actual C&I request Actual
2003 3.88% 2.8% 4.7% 4.7%
2005 12.5% 12.4% 24.6% 24.6%
2007 13.2 % Rejected 24.7% Rejected
2009 1.9% -1.0% 2.2% -0.2%
2011 7.2% Rejected 6.7% Rejected
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