MIF supports use of standard hurricane models in the Massachusetts homeowners insurance market

Massachusetts InsurancePRESS RELEASE: Massachusetts Insurance Federation Executive Director James T. Harrington refuted claims made  by Attorney General Martha Coakley’s office in a letter to the State Rating Bureau of the Division of Insurance in which the Rating Bureau is requested to initiate proceedings to review homeowners’ insurance rates currently in effect. “We believe such proceedings would be unprecedented and are certainly not warranted by anything in the letter from the Attorney General’s office,” Harrington said. “Her claim that insurance companies in this state are using untested and unsupported hurricane models that result in excessive homeowners’ insurance rates is both inaccurate and misleading, which is further attested by the lack of any empirical data provided by her office.”

The use of modeling for catastrophic prediction is standard, accepted practice and utilized extensively everywhere throughout the property and casualty and reinsurance industries, Harrington explained. “In fact, the Attorney General effectively and implicitly accepted the use of a model by one of the firms criticized in the letter to the State Rating Bureau in entering into a stipulation on FAIR Plan rates that was approved by the Commissioner in January 2010.” Harrington noted. Harrington added that so-called “excess” charges alleged in the letter by the Attorney General’s office appear primarily to be reinsurance expenses and costs that insurers have to pay to reinsurers.

“At the end of the day, consumers need to be concerned that the Attorney General may precipitate a process in which costs associated with catastrophic losses in hurricane-prone areas are disproportionately and unfairly shifted from regions likely to experience such losses to areas less likely to experience such losses,” Harrington said. ”Consumers in non-hurricane prone areas should not be forced to bear the costs associated with covering losses in high-risk areas because the Attorney General has decided to criticize the use of hurricane models that have withstood the test of time and scrutiny. “

Harrington concluded by stating that he hoped that the Division of Insurance would take into account the effect on capacity in the market and consumer choice of such an unprecedented, retroactive review of rates. “Several new companies have come into the homeowners’ insurance market in recent years specifically focused on coastal communities, and those new entrants have given homeowners additional choices,” Harrington stated. “It would be extremely unfortunate and harmful to the market and consumers if the Attorney General’s request discouraged other new entrants or caused companies to reconsider their willingness to write in these markets.”

 

NOTE: This is a press release submitted from an outside party. It does not reflect the opinion of nor was it written by any of the staff at Live Insurance News.

 

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