More Insurers Settle With Mass. AG For Overcharging Motorcyclists

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Massachusetts Attorney General Martha Coakley’s Office has reached settlements with four more auto insurers in cases alleging they overcharged consumers for motorcycle insurance.

The cases settled today allege that Metropolitan Property & Casualty Insurance Co., Plymouth Rock Assurance, Pilgrim Insurance Co. and the United Services Automobile Association (USAA) used inflated motorcycle values to calculate premiums for many of their Massachusetts customers, resulting in millions of dollars in insurance premium overcharges.

The settlements are expected to return $9 million to consumers, on the heels of settlements with three other insurers last month that are expected to return $11 million to consumers.

“We are pleased that these insurance companies will return $9 million in insurance premium overcharges to affected motorcycle owners,” said Coakley. “While we appreciate that these companies cooperated with our investigation, it remains troubling that they systemically overcharged their customers on such a large scale. Our office will continue to investigate other companies engaged in this type of behavior. In order to thwart and correct practices like this, consumers and regulators need transparency and access to information in the auto insurance rating process.”

Under the terms of the settlements in Suffolk Superior Court, Metropolitan Property & Casualty is expected to return $3.5 million, Plymouth Rock Assurance and Pilgrim Insurance together will return $3.6 million, and USAA will return $2.3 million to policyholders.

The insurance companies will also make payments to the state totaling more than $500,000 and adopt conduct reforms.

The office launched its investigation into motorcycle rating practices in the fall of 2008 after receiving a complaint from the owners of a 1999 Harley Davidson Road King Classic. The owners alleged that Safety had valued the bike at $20,000 in each year between 2003 and 2008, but had offered the owners less than $11,000 to settle their claim after the motorcycle was stolen. After the owners sought a $20,000 settlement, Safety tried to refund over $1,500 in premiums to them based on the errant $20,000 value that Safety had used to rate their policy.

Based on this complaint, the Attorney General’s Office became concerned that Safety was violating its rating manual, which required Safety to use current motorcycle book values to calculate the premiums charged to consumers.

After finding that Safety had used inflated and un-depreciated motorcycle values to rate coverage for thousands of its policyholders, the office expanded its review to other insurance companies. The investigation found that many auto insurers operating in the Massachusetts marketplace had used inflated, out-of-date values for motorcycles they insured.

Liberty Mutual, which settled in January, will begin paying refunds in May; the remaining insurers are expected to send checks to consumers in the fall. Projected average refunds to consumers are expected to be about $300; however some consumers will receive thousands of dollars based on several factors, such as the length of their policy and the price of their motorcycle. To be eligible for settlement funds, a consumer’s motorcycle must have been overvalued by their insurance company and the consumer must have purchased either collision or comprehensive coverage. Tens of thousands of policies are believed to have been affected.

These cases were handled by Investigations Supervisor Arwen Thoman, Mathematician Burt Feinberg, Economist Bryan Lincoln, and Assistant Attorney General Glenn Kaplan, all of Attorney General Coakley’s Insurance & Financial Services Division. The original consumer complaint was handled by Mediator Rebecca Dutra also of Attorney General Coakley’s Insurance & Financial Services Division.