MAIA Asks Commissioner to Keep Standards of Fault/Appeals Process
But Give Companies "Wiggle Room" in Determining Fault
In A letter to Insurance Commissioner Nonnie S. Burns, MAIA President and CEO Francis A. Mancini, Esq. asked the Commissioner to retain the Standards of Fault for determining who is at-fault in an accident. At the same time, the MAIA executive asked the Commissioner to allow companies to decide whether or not to surcharge an insured based on the merits of the case and allow insureds who are not happy with the company's decision to then appeal to the Board of Appeals.
The system suggested by MAIA differs slightly from the appeals process under the fix and establish statute in that it would allow a company to use its own judgment in assessing a surcharge. Under the former appeal process, companies had no "wiggle room" to make a judgment call and could be fined if they did.
The complete text of MAIA's letter is at the end of this bulletin.
In its October 22, 2008, The Boston Herald featured a story by Hillary Chabot. The headline and complete article appear below:
October 14, 2008
The Honorable Nonnie S. Burnes
Commissioner of Insurance
Massachusetts Division of Insurance
One South Station, 5th Floor
Boston, MA 02110-2208
Dear Commissioner Burnes:
It has been clear to us for some time that the ability of a Massachusetts driver to appeal a surcharge for an at-fault accident assessed by an insurer is in jeopardy. This consequence of the movement to managed competition must be addressed and clarified as soon as possible by the Division of Insurance (DOI).
In our judgment, the DOI must be proactive in continuing a process whereby Massachusetts drivers are able to appeal determinations of fault resulting in increased premium. Failure to take this action will allow insurers to be the judge, jury and executioner of thousands of drivers who receive surcharges each year.
Merit Rating Board records indicate that of the 50,000 surcharge appeals reviewed each year by the Board of Appeals, 45% are reversed. Without this impartial third party reviewing the decision of an insurer to find a driver more than 50% at fault in an accident, more than 20,000 drivers each year will be charged higher premiums for accidents that were not their fault or were caused by weather conditions or other occurrences that were beyond the driver’s control.
Maintaining an appeal process for at-fault accidents would not prohibit an insurer from filing its own merit rating plan that includes first accident forgiveness or a shorter experience period. The appeal process simply gives every driver whose premium would increase because of an accident the opportunity to have an impartial third-party review the facts of the accident and make the final decision.
The current standards of fault, which are also no longer operational under managed competition, result in only one driver being surcharged for any one accident. If individual insurers are able to set their own standards of fault, every driver involved in an accident could experience premium increases based on the discretion of their own insurer. And, without the appeal to the Board of Appeals, their only appeal would be to the insurer that made the original determination.
We strongly support maintaining universal standards of fault. Since insurers must file their own merit rating plans, they have the option to include in their plans “forgiveness factors” for the first at-fault as well as certain types of accidents (weather related, etc.).
The appeal process provides Massachusetts drivers with an inexpensive, relatively timely method to have their appeal heard before an impartial third party. The historical results of successful appeals indicate that, in almost half of the cases, the imposition of a surcharge was reversed. Massachusetts drivers deserve to have this right of review maintained in the managed competition environment.
Maintaining the appeal process should not adversely impact the ability of insurers to compete. Insurers' merit rating plans can be unique, with all of the bells and whistles they desire. The only common provision would be an appeal process for any at-fault accident determination resulting in increased premium.
Commissioner, we encourage you to comment on this matter in the near term. There is confusion in the marketplace at this time regarding appeals of surcharges issued on policies effective on or after April 1, 2008. Further, as we move toward the end of the transition year of managed competition, insurers will need guidance as they prepare their rating filings for 2009.
Thank you for your consideration.
Francis A. Mancini, Esq.
President and Chief Executive Officer