Proposed Change In Wind Coverage Could Increase Massachusetts Insurance Rates

Feb. 06--The state's so-called "insurer of last resort," which covers two out of every five home insurance policies on the Cape and Islands, is proposing a change in its wind-related damage coverage that could bump up rates across the state.

The Massachusetts Property Insurance Underwriting Association, also known as the FAIR Plan, has proposed changing its wind deductible to a named-storm deductible, which would apply a lower deductible threshold to wind-related damage unless it results from a named tropical storm or hurricane, according to documents filed with the Massachusetts Division of Insurance.

To cover the costs of the change, the insurance association is seeking to raise its premiums, on average, 0.8 percent, although the increases could go as high as 2.9 percent, according to the filing with the state.

MPIUA Filing byCape Cod Times on Scribd

Under the current wind deductible system, any wind-related damage is subject to a deductible that ranges as high as $5,000 or from 1 to 5 percent of the home's coverage amount; the amount can be thousands of dollars higher than the "all other perils" deductible that covers most losses. Moving to a named-storm deductible would subject most wind-related damage to the lower deductible.

Robert Tommasino, senior vice president and general counsel of the Massachusetts Property Insurance Underwriting Association, said the change to a named-storm deductible was proposed to keep up with industry trends for insurance companies operating in the Northeast.

"We try to be as consistent as possible with what other (insurance) writers are doing," he said.

But Paula Aschettino, an Eastham resident who is chairwoman of the advocacy group Citizens for Homeowners Insurance Reform, said the insurance association should change the plan at no cost to its customers given its years of multimillion-dollar profits. She also believes the Cape and Islands will bear the brunt of the rate increases.

"The FAIR Plan was created not to be a profit-maker but to be a company made up of all the insurers doing business in Massachusetts," she said. "They have made unbelievable profits, and they do not deserve a rate increase for this language change."

In its fiscal year ending Sept. 30, 2016, the FAIR Plan had an underwriting profits of $22 million, or $119 per policy, according to its annual report. In its prior 10 fiscal years, it has registered a loss in only two of them.

Aschettino has been granted the right to serve as an intervenor in a Feb. 23 public hearing in Boston, which allows her to have a more active role in the hearing than just offering testimony. She is asking other Cape property owners to testify or submit comments urging the Division of Insurance, which must approve the insurance association's request, to deny it the rate increase but to push forward the named-storm deductible rule.

"Why should we have to have a rate increase for something that's so reasonable when, all these years, we have been paying out-of-pocket for wind damage?" she said.

Tommasino said the insurance association's profits serve as a cushion for years in which it suffers high losses, as it did in 2015 to the tune of nearly $57 million when heavy snow and ice storms plagued Massachusetts.

"It is fair to say that when the wind does not blow in a significant way, because of our significant market share in the commonwealth, we are going to make money," he said. "When the next hurricane hits, that's when the losses come in. Those profits help withstand that."

-- Follow Sean F. Driscoll on Twitter: @seanfdriscoll.

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