State Senate panel seeks rate-setting reforms

April 30--With minimal oversight and no public input, Massachusetts homeowners insurance costs have been allowed to increase at an "astounding" rate in recent years, far outpacing inflation. At the same time, insurers in the state are much more profitable than those in other parts of the country.

Those were two of many findings detailed in a 77-page report (the full-text of which is at the bottom of this story) released Thursday by the Massachusetts Senate Post Audit and Oversight Committee that called for significant changes in how the state's Division of Insurance operates.

"I am very happy this has come forward and I'm not surprised with the results," said Paula Aschettino of Eastham, president and founder of Citizens for Homeowners Insurance Reform, who has been campaigning for reform for years.

In 2015, the Division of Insurance granted requests from several of the state's biggest insurers to raise their rates by as much a 9 percent.

"These were substantial adjustments, affecting a considerable number of residents. Yet neither the public, nor state legislators, nor insurance experts in the state attorney general's office were informed of the requests," the report states.

Once the rate increases were approved and staff members with the attorney general's office were able to analyze them, they concluded two of the increases were "unlawfully excessive."

Concerned about the lack of advance notice for rate hikes, the Senate Post Audit and Oversight Committee, chaired by Sen. Mike Barrett, D-Lexington, held a hearing in September and began its investigation into the rate-setting process.

The report concluded that the Division of Insurance has discretion to provide public notice and allow public input into rate-setting deliberations but "doesn't use it." It also found that the division doesn't properly evaluate rate-hike requests or even provide consumers with information to help them make informed insurance purchase decisions.

As a result, from 2007 through 2013, average Massachusetts premiums for regular homeowners insurance rose 21.6 percent, outpacing inflation, which was 12.9 percent over the period.

"During the same dismal stretch, average Massachusetts home values fell 11 percent and median household income fell 4. 7 percent and auto insurance crept up a modest 2.8 percent," the report states.

The report outlines a number of recommendations. It encourages the insurance division to use its existing authority to "open up the process," but also says the Legislature should require the agency to operate in a more transparent way.

It further recommends that the Legislature give the attorney general authorization to order a limited number of hearings on rate filings, that either the division or the Legislature should "compel insurers" to notify people of new rates, that the division should push harder to require insurers to use appropriate loss models, and that it should create an "online premium comparison tool" for consumers to use when buying insurance.

In February, Barrett offered an amendment to the Senate's version of public records reform legislation that would make industry requests for rate increases "public records" as soon as they are filed and require all rate filings to be posted online within three business days.

In a press statement announcing the release of the report, which is titled "Behind Closed Doors: Rate-Setting for Homeowners Insurance in Massachusetts," Barrett said the proposal, now sitting in a conference committee, would be "a major win for homeowners."

While praising Barrett and his staff for the report and other work on the issue, Aschettino said she wants the consumer protection process to go even further.

She encouraged everyone, including lawmakers, to read the Senate Post Audit and Oversight Committee report and then contact their state representatives to urge them to support the measure.

Filed more than a year ago by state Rep. Sarah Peake, D-Provincetown, the legislation would require insurers to justify extra charges for hurricane coverage, limit reinsurance charges to the consumer, require insurers to credit homeowners for taking steps to protect their property from hurricane losses and more.

"They did a great job with the report," Aschettino said. "We just need to get some teeth into it. Citizens cannot just accept things the way they are."

--Follow Lorelei Stevens on Twitter: @CCTLorelei.

Report on home insurance rates by Cape Cod Times

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