State Senate to review home insurance rate increases
The Massachusetts Senate is launching an inquiry into what its leaders call troubling home insurance rate increases that several of the state’s largest insurers plan to put into place to recoup losses from last winter’s record snowfall.
Insurers including Mapfre USA Corp., formerly Commerce Insurance, and Boston-based Safety Insurance Co. plan to raise rates by an average of 9 percent.
Bunker Hill Insurance Co. in Boston, a subsidiary of Plymouth Rock Co., has raised its premiums by an average of 7.8 percent.
Some increase is to be expected, said state Senator Michael J. Barrett, chairman of the Post Audit and Oversight Committee, but legislators want to make sure insurance companies aren’t taking advantage of the snow to raise their premium base. Barrett, a Lexington Democrat, said he will hold a hearing in September.
“We want to make sure they didn’t use a good crisis to get themselves a very good outcome,” Barrett said.
The committee, which has subpoena power, wants explanations from insurance executives about why such premium increases were necessary and why state regulators accepted them without seeking comment from consumers, Barrett said.
“I hope the Division of Insurance went to town with its due diligence before approving these big increases,” he said. “I am concerned about the degree of rigor that is brought to bear.”
The Division of Insurance can hold a public hearing if regulators believe proposed increases are not justified, said Pete Fullerton, a spokesman for the agency.
“The Division will not approve such filings if they are not actuarially sound, excessive, inadequate, unreasonable, or unfairly discriminatory,” Fullerton said in a statement. “This was not the case with the filings in question.”
Traditionally, insurance premiums have risen 2 to 3 percent a year, but companies said the 110.6 inches of snow that hit the Boston area last winter caused huge losses. Many of the losses were caused by ice dams, which formed on roofs and prevented melting snow from draining. That caused water to leak into houses and soak walls and ceilings.
Safety Insurance, for example, estimated that the damage from snow and ice dams cost it $82 million, compared to $20 million in 2011, according to documents filed with the Division of Insurance. For the first time, the company was forced to submit claims to its own insurance plan to cover its losses.
The insurance companies that are raising rates are doing so based on past loss history and future needs, said John P. Murphy, executive director of the Massachusetts Insurance Federation, an industry lobbying group.
If consumers aren’t happy with their premiums, they should shop for better rates from competitors, he said.
The state has licensed 76 companies to write homeowner insurance policies in Massachusetts.
“We still have a marketplace,” Murphy said. “For consumers, shopping around can be beneficial.”