Almost exactly a year to the date that she first put the state’s auto insurers on notice, Attorney General Maura Healey again wants those companies, which she claims have reaped hundreds of millions of dollars in extra profits during this year-plus pandemic, to return most of that money to motorists in the form of refunds and lower premiums.
In a March 31 letter to the state Division of Insurance, Healey urged that agency to “stop’’ insurers from “continuing’’ to “overcharge’’ consumers.
The AG’s Insurance and Financial Services Division represents the public interest in rate hearings.
Back in April 2020, when lockdowns and stay-at-home directives had been in place for barely a month, Healey led the call for auto insurers to give back some of the money they’d already saved from idled vehicles.
Many companies, either voluntarily or after some prodding, did compensate policyholders last spring in varying degrees, including USAA, Allstate, Geico, and Liberty Mutual, citing the pronounced, obviously observed decrease in vehicle traffic on the state’s roadways.
Before the auto insurance industry in Massachusetts was deregulated in 2008, the insurance commissioner controlled how much insurers could increase their premiums.
Now, insurers can set their own rates, but the commissioner retains the authority to review them, and withhold approval if deemed too excessive.
More than 12 months into this pandemic, the cumulative effect of learning and working from home has certainly padded insurers’ pockets far beyond what Healey could have contemplated when she first publicized this imbalance in the auto-insurance marketplace.
Healey’s office now contends data show a reduction in driving in 2020 of about 50%, and that as a result there were fewer crashes, fewer claims, and fewer payouts by insurers.
By any measure, this extended lack of vehicle activity has translated into a significant boost to insurers’ bottom lines, bordering on the confiscatory, primarily due to that dramatic dip in accident claims.
“This drop in loss ratio resulted in additional profits for insurance companies of about $700 million,’’ according to the letter signed by Glenn Kaplan, chief of the AG’s Insurance and Financial Services Division.
State lawmakers representing economically disadvantaged communities have also pressed insurers to do right by their lower-income clients, who already pay inordinately high premiums.
Healey’s position has received support from several legislators, led by state Sen. Barry Finegold, an Andover Democrat whose district includes Lawrence, one of the communities hardest hit by the pandemic; he wrote to the commission in December that high premiums in the face of reduced driving “disproportionally hurts communities that have been hardest hit by COVID-19,’’ such as “low-income urban communities and communities of color.’’
But don’t expect the auto-insurance industry to open their wallets without a fight.
Christopher Stark, executive director of the Massachusetts Insurance Federation, a lobbying group, responded that auto insurers have done their part during this public-health crisis by providing refunds, suspending policy cancellations, and offering payment plans for policyholders unable to immediately pay premiums.
He also questioned the attorney general’s calculations, saying insurance industry losses for 2020 may be higher than the figures cited by others.
Stark also pointed out that insurers don’t ask for increases in premiums retroactively after losses exceed what they expected, which seems to imply the same should apply when profits exceed expectations.
We expect auto insurers to admit the obvious, and deliver premium relief commensurate with the excessive profits they’ve made during this pandemic.
With an average annual auto premium in this state pegged around $1,000, policyholders should see rebates or credits in the hundreds, and not a one- or two-month discount of 10-15%.