Section 113B: Classification of risks and premium charges in connection with motor vehicle liability policies or bonds
Section 113B. The commissioner shall, annually on or before December 15, after due hearing and investigation, fix and establish fair and reasonable classifications of risks, including classifications of risks based on accident involvement and adequate, just, reasonable and nondiscriminatory premium charges including commission allowance to be used and charged by companies in connection with the issue or execution of motor vehicle liability policies or bonds, both as defined in section 34A of chapter 90, to become effective on April 1 of the ensuing year or any part thereof. The commissioner upon the basis of information which shall be filed by the Massachusetts Automobile Rating and Accident Prevention Bureau or any successor organization thereto, shall determine whether insurance companies utilize adequate programs to control costs and expenses, in accordance with standards determined or approved by the commissioner. At a minimum, the programs shall be designed to have a material impact on premium charges by reducing costs and expenses incurred by insurance companies. In the event the Massachusetts Automobile Rating and Accident Prevention Bureau fails to make the filing, or if the commissioner determines that the filing is deficient or that the programs are inadequate, the commissioner shall limit in any manner he determines to be appropriate the amount of any adjustment in premium charges based upon changes in costs and expenses. The commissioner shall direct the plan created under section 113H to establish procedures for the implementation, monitoring and enforcement of programs to control costs and expenses identified by the commissioner in accordance with this paragraph, and shall report to the commissioner annually on the effectiveness of and the implementation by the various companies of the programs to control costs and expenses identified by the commissioner. In fixing and establishing premium charges in accordance with this section, if an insured having paid the premium on the insurance policy to the company or its agent, cancels his insurance policy within 30 days of the effective date or within 30 days of receipt of his insurance policy, whichever is later, the commissioner shall authorize that the insured receive a return premium prorated based on the actual calendar days of coverage; but if the insured cancels his insurance policy later than 30 days from its effective date or later than 30 days from receipt of the policy, whichever is later, the insured shall be entitled to a return premium after the monthly short rates, as determined by the commissioner, have been deducted from the time the policy shall have been in force. In fixing and establishing premium charges in accordance with this section, the deficit of the plan, established under section 113H, shall not be distributed to risks based on classification or territory. The effective dates of procurement or cancellation of insurance from insurance companies shall determine the cost to the insured for the coverage on an equal per diem basis established for the yearly cost of insurance policies. He shall, on or before that date, sign memoranda of the classifications and premium charges fixed and established by him in a form as he may prescribe and file the same in his office and cause a duly certified copy of the classifications and schedule of premium charges forthwith to be transmitted to each company authorized to issue the policies or to execute the bonds. During the year, the classifications and premium charges fixed and established by the commissioner for the policies shall be used by all companies issuing the policies, and the classifications and premium charges for the bonds shall be used by all companies acting as surety on the bonds, except that the company may make written application to the commissioner for permission to use, in place of the premium charges fixed and established by him as aforesaid, a percentage decrease from the premium charges which shall be uniform for all the classifications throughout the commonwealth. The deviations shall be allowed only if the commissioner finds that the premium charges the applicant desires to use are adequate, just, reasonable and nondiscriminatory and will not be used by the applicant as a means of attracting only the risks as are regarded as presenting less hazard of loss than other risks in the same classification. Every application for permission to so deviate shall be filed with the commissioner subsequent to and within 25 calendar days of his having filed in his office the memoranda aforesaid and shall specify the basis therefore and shall be accompanied by the data upon which the applicant relies. A copy of the application and data shall be sent by the company simultaneously to the Massachusetts Automobile Rating and Accident Prevention Bureau or any successor organization thereto. The commissioner may set the time and place for a hearing on the application if he determines that the application is significantly different from other such applications previously approved. At the hearing, the applicant and the Bureau or any member thereof may be heard. The time so established for the hearing shall not be later than 14 calendar days after the receipt by the commissioner of the application. If the commissioner finds that the deviation is justified and the resulting premium charges satisfy the requirements of this section, he shall issue an order permitting the deviation to be used by the applicant for the ensuing year beginning April 1; provided, however, that the approval of any deviation shall be issued within 10 calendar days of its filing if no hearing has been ordered for the application or within 10 calendar days of the date of a hearing on the application for which a hearing has been ordered.
In setting the claims frequency and cost trend and projection factors used to fix and establish classifications of risks and premium charges, the commissioner shall explicitly consider recent actual Massachusetts claims frequency, cost trend and loss data, and shall make express findings as to the claims frequency and cost trend and projection factors which such data would indicate for the respective coverages. He shall also consider such other evidence, argument and considerations as he finds credible and relevant. He shall justify the claims frequency and cost trend and projection factors which he uses with specific findings of fact and conclusions of law regarding all disputed material issues, and if the claims frequency, cost trend and projection factors which he uses materially deviate from the claims frequency, cost trend and projection factors derived from such recent Massachusetts data, he shall explicitly set forth the reasons therefore by making specific findings of fact and rulings, which shall justify the deviation and which shall be based on substantial evidence. For the purpose of evaluating any methodology proposed by a party to the rate hearing to be used for trending or projecting claims frequency or costs in setting the premium charges for the rate year in issue, if the commissioner makes specific findings that the same methodology was used in fixing and establishing premium charges in prior years in Massachusetts, a party may introduce into evidence the actual results caused by the use of that methodology in prior years.
In fixing and establishing classifications of risks, the commissioner shall establish rates for insureds age 65 or older, who otherwise qualify for the lowest rate classification applicable to drivers generally, which shall be 25 per cent less than the applicable rate for the classification.
In fixing and establishing classifications of risks, the commissioner shall establish rates for graduates of motorcycle rider training programs administered pursuant to section 35G of chapter 10 which shall be 10 per cent less than the applicable rate for the classification.
In fixing and establishing classifications of risks, the commissioner shall not group risks by sex or marital status, and shall not group risks by age except to provide the reduction in rates for insureds age 65 years or older required by this section.
All persons 65 years of age or older who are entitled to the reduction in rate, shall be notified annually of the reduction in rate. Those persons shall be reimbursed by the insurance carrier for all reductions in rate applicable to the driver from the time that they were 65 years of age which they did not receive. The percentage of the reduction for each coverage for an insured aged 65 or older shall be itemized on the motor vehicle liability policy. In the event that an insured reaches the age of 65 during the policy year, and is otherwise entitled to the reduction, the insured shall receive a reduction in premium on a pro rata basis for the remainder of the policy year.
In fixing and establishing classifications of risks, the commissioner may provide for appropriate reductions in the premium charges for the relevant coverages if he finds that vehicles are less damageable due to safety features incorporated into the vehicles or that the occupants of vehicles are less likely to suffer bodily injury due to safety features including, but not limited to, occupant crash protection devices, incorporated into the vehicles or that any optional policy provision will result in savings through reduced costs.
In fixing and establishing classifications of risks for comprehensive fire and theft coverage so-called to motor vehicles, the commissioner shall provide for appropriate reductions in the premium charges covering the vehicles if the vehicle is equipped with an anti-theft mechanism or device approved by the commissioner; but, the commissioner shall establish a specific reduction of a minimum of 25 per cent in said premium charges for vehicles equipped with both an anti-theft mechanism or device and an auto recovery system.
In fixing and establishing classifications of risks for personal injury protection, uninsured and underinsured motorist protection, and medical payments coverages so-called, the commissioner shall provide for appropriate reductions in premium charges covering vehicles equipped with 1 or more air bags or a passive restraint device approved by the commissioner.
In so fixing and establishing classifications of risks under this section, the commissioner shall establish a safe driver insurance plan to equitably reflect the driving records of insureds. The plan shall reflect an adjustment of insurance premium based on at-fault accidents, convictions of moving violations of motor vehicle laws, including payments pursuant to chapter 90C and assignments to driver alcohol education programs under section 24D of chapter 90, or any combination thereof; and based on 4 or more comprehensive claims totalling $2,000 or more unless fire, theft, comprehensive and collision coverages are not purchased by the insured; as compiled and recorded by the motor vehicle insurance merit rating board established pursuant to section 57A of chapter 6C. In establishing the 4 or more comprehensive claims totalling $2,000 or more, claims for damages caused by acts of God shall be excluded. Upon receiving notification from said merit rating board that a person has received 7 at-fault accidents or convictions of moving violations of motor vehicle laws, including payments pursuant to chapter 90C and assignments to driver alcohol education programs under section 24D of chapter 90 during any 3 year period, the registrar shall, after a hearing based solely on the accuracy of the merit rating board's records, suspend the license or right to operate a motor vehicle for 60 days. The cost of any hearings required by the provisions of this section shall be assumed by the merit rating board. The plan shall reflect an adjustment of insurance premium based on at-fault accidents, convictions of moving violations of motor vehicle laws, including payments pursuant to chapter 90C, assignment to a driver alcohol education program, or any combination thereof, and based on 4 or more comprehensive claims totalling $2,000 or more unless fire, theft, comprehensive and collision coverages are not purchased by the insured, as compiled and recorded by the motor vehicle insurance merit rating board established pursuant to section 57A of chapter 6C. The plan shall also reflect an adjustment for insurance premium based upon any motor vehicle violation reported to the registrar pursuant to the first paragraph of paragraph (c) of section 22.
Said plan shall also take into consideration convictions reported to the registry of motor vehicles as the result of any compact entered into by the secretary of public safety for the exchange of information between states.
The safe driver insurance plan shall provide for a series of driver classifications based upon driving record which shall reflect individual driving experience. The plan shall provide for upward premium adjustments for drivers who in the preceding 5 year period have accumulated 3 or more unsafe driver points based on 1 or more of the following surchargeable incidents: at–fault accidents, convictions of moving violations of motor vehicle laws, including payments pursuant to chapter 90C and assignments to driver alcohol education programs under the provisions of section 24D of chapter 90, or any combination thereof, or 4 or more comprehensive claims totalling $2,000 or more unless fire, theft, comprehensive and collision coverages are not purchased by the insured. For the purposes of determining upward premium adjustments, the plans made effective on or after January 1, 1991, shall consider only those surchargeable incidents with surcharge dates in the 5 year period immediately preceding the effective date of the policy. Notwithstanding the foregoing, with respect to the plan made effective on January 1, 1991, the premium adjustment for any class of driver, some or all members of which received a surcharge in 1990 attributable in whole or in part to surchargeable incidents with surcharge dates before January 1, 1985, shall be reduced to reflect the approximate dollar amount of the increase in surcharges paid by that class of driver to the extent that the increase was attributable to surchargeable incidents with surcharge dates before January 1, 1985. Pursuant to the plan the commissioner may place drivers who have accumulated fewer than 3 unsafe driver points, so-called, into classifications for which an upward premium adjustment is provided. The registrar shall develop a system for separately reporting violations for driving a motor vehicle which has an expired registration sticker affixed to the license plate. When the registrar has implemented the system, driving a motor vehicle which has an expired registration sticker affixed to the license plate shall not be considered a surchargeable incident.
There shall be a downward premium adjustment called an excellent driver award. The adjustment shall apply to every driver with no surchargeable incidents within the 5 years immediately preceding the applicable rate year. There shall also be larger adjustments made for drivers with no surchargeable incidents over a longer period or periods as the commissioner shall determine, and there may be such smaller adjustments for drivers with no surchargeable incidents over a shorter period or periods as the commissioner shall determine. The commissioner shall establish both the number of classifications, the size of the premium adjustments and initial classification assignment; but the plan shall be designed so that the decrease in aggregate premiums attributable to the downward adjustments within the plan equals the increase in aggregate premiums attributable to the upward adjustments in the plan. Insureds who have accumulated 3 or more unsafe driver points within the 5 years immediately preceding the applicable rate year shall be placed in classifications for which the upward premium adjustment is actuarially sound. Nothing in this section shall preclude the commissioner from also placing drivers who have accumulated fewer than 3 unsafe driver points, so-called, into classifications for which the upward premium adjustment is actuarially sound. The commissioner and the merit rating board shall develop a system for considering the driving experience of drivers previously licensed in states other than Massachusetts in order to provide upward or downward premium adjustments to those drivers.
Upon receiving notification from the merit rating board that a driver has had 3 surchargeable incidents within the past 24 months, the registrar shall, after a hearing based solely on the accuracy of the merit rating board's records, require the driver to participate in and complete a driver education program satisfactory to the registrar. If the driver fails to provide to the registrar proof of completion of the driver education program within 90 days after the registrar mails to the driver notice of the requirement, the registrar shall suspend the driver's license or right to operate a motor vehicle until the registrar receives proof of completion of the driver education program.
The commissioner shall establish reasonable rules to assure that all insureds are informed of any premium adjustments, and the reasons therefore, made as the result of this safe driver insurance plan.
In fixing and establishing classifications of risks, the commissioner shall establish a separate rate for coverage provided in paragraph (2) of section 113L.
If the method of operation of any company other than those operating pursuant to the so-called American Agency System results in excessive profits above 9 per cent return on its earned premiums averaged over 3 years, the commissioner shall order a refund or dividend to current policyholders in the amount of the profit attributable to the difference between the amount allowed for expenses including acquisition costs in the rates for motor vehicle insurance and the company's actual expenses including acquisition costs incurred over the same 3 year period; if the profits have not been previously returned to the holders of policies issued by the company.
In so fixing and establishing premium charges to be used and charged in accordance with the provisions of this section, the commissioner shall consider, in establishing the rates, the reduction of fraud achieved through the entity created pursuant to section 113H.
The commissioner shall, annually on or before December 15, after due hearing and investigation, fix and establish adequate, just, reasonable and nondiscriminatory premium charges to be used and charged by companies in connection with the issue or execution of liability policies or bonds, for the ensuing year or any part thereof, which provide indemnity for or protection to the insured or to the obligor and any person responsible for the operation of the motor vehicle of the insured or of the obligor with his express or implied consent against loss by reason of the liability to pay damages to others for bodily injuries, including death at any time resulting therefrom, or for injury to or destruction of property of others, or consequential damages consisting of expenses incurred by a husband, wife, parent or guardian for medical, nursing, hospital or surgical services in connection with or on account of the bodily injuries or death, sustained during the term of the policy or bonds by a guest occupant of the motor vehicle, as defined in section 34A of chapter 90, and arising out of the ownership, operation, maintenance, control or use upon the ways of the commonwealth of the motor vehicle; but, the parties to any such policy or bond may contract for the payment of a higher premium charge than that fixed and established as aforesaid. The provisions of this section applicable to motor vehicle liability policies or bonds, as defined in said section 34A, shall, so far as apt, apply to the premium charges fixed under this paragraph. He shall annually, at the time he fixes and establishes premium charges and classifications of risks, establish rules requiring companies to provide an information sheet of the provisions of the policies or bonds which outlines the various choices of coverage available to motorists and an approximation of the differences in cost between the various types of coverages. Every company, agent or broker shall forward this information sheet to every person it seeks to insure or renew at the time such person is provided with an application for the insurance. He shall promulgate a standard form of application to be used by companies for issuance and reissuance of the policies or bonds and all other coverages included within the policies or bonds, but any company issuing or reissuing the policies may do so without requiring the application. In fixing and establishing the charges, as provided in this paragraph, the commissioner shall take into account investment income from unearned premium and loss reserves.
The commissioner shall cause notice of every hearing to be given by advertising the date thereof once in at least 1 newspaper printed in each of the cities of Boston, Worcester, Springfield, Newburyport, Gloucester, Pittsfield, Fall River, New Bedford, Haverhill, Holyoke, Lawrence, Lowell and Lynn, and in the towns of Athol and Greenfield, at least 10 days before that date. The notice shall be in a form as the commissioner considers expedient.
The commissioner may make, and, at any time, alter or amend, reasonable rules and regulations to facilitate the operation of this section and enforce the application of the classifications and premium charges fixed and established by him, and to govern hearings and investigations under this section. He may at any time require any company to file with him the data, statistics, schedules or information as he considers proper or necessary to enable him to fix and establish or secure and maintain fair and reasonable classifications of risks and adequate, just, reasonable and non-discriminatory premium charges for the policies or bonds. Every company selling automobile insurance coverage in the commonwealth shall file with the commissioner complete financial records showing the amount of profit made on every line of automobile insurance during the previous year, and shall also file records showing profits from investment income, including investment income on net realized capital gains. He may issue orders as he finds proper, expedient or necessary to enforce and administer this section, to secure compliance with any rules or regulations made thereunder, and to enforce adherence to the classifications and premium charges fixed and established by him. The supreme judicial court for the county of Suffolk shall have jurisdiction in equity upon the petition of the commissioner and upon a summary hearing, to enforce all lawful orders of the commissioner. Memoranda of all actions, orders, findings and decisions of the commissioner shall be signed by him and filed in his office as public records open to public inspection.
Any person or company aggrieved by any action, order, finding or decision of the commissioner under this section may, within 20 days from the filing of the memorandum thereof in his office, file a petition in the supreme judicial court for the county of Suffolk for a review of the action, order, finding or decision. An order of notice returnable not later than 7 days from the filing of the petition shall forthwith issue and be served upon the commissioner. Within 10 days after the return of the order of notice, the petition shall be assigned for a speedy and summary hearing on the merits. The action, order, finding or decision of the commissioner shall remain in full force and effect pending the final decision of the court unless the court or a justice thereof after notice to the commissioner shall by a special order otherwise direct. The court shall have jurisdiction in equity to modify, amend, annul, reverse or affirm the action, order, finding or decision, shall review all questions of fact and of law involved therein and may make any appropriate order or decree. The decision of the court shall be final and conclusive on the parties. The court may make an order as to costs as it considers equitable. The court shall make rules or orders as it considers proper governing proceedings under this section to secure prompt and speedy hearings and to expedite final decisions thereon.
If, for any reason, classifications of risks and premium charges fixed and established as aforesaid on or before December 15 in any year for the ensuing year are not effective for the year, the classifications of risks and premium charges in effect for the then year shall remain in full force and effect, and shall be used and charged in connection with the issue or execution of motor vehicle liability policies or bonds for the ensuing year until classifications of risks and premium charges for the ensuing year are finally fixed and established. Classifications of risks and premium charges when finally fixed and established for said ensuing year shall become effective as of April 1 of the year, and all premium charges affected by any change thereby made which have been paid or incurred prior to the time when the charges are finally fixed and established shall be adjusted in accordance with the change, as of April 1.
The commissioner, his deputies or examiners shall at all times have access to the certificates defined in said section 34A filed with the registrar of motor vehicles.
Every mutual company issuing or executing motor vehicle liability policies or bonds, both as defined in said section 34A, shall constitute the policies or bonds as a separate class of business for the purpose of paying dividends. Any dividends on the policies or bonds shall be declared on the profits of the company from the class of business.
The original invoice rendered by an insurance company, insurance agent or broker to an insured for insurance in connection with a motor vehicle shall be so itemized as to separately indicate the premium charged for compulsory motor vehicle liability insurance.
This section shall not apply to classifications of risks and premium charges for policies and bonds issued to become effective January 1, 1977 and thereafter, except under circumstances described in section 5 of chapter 175E.
The safe driver insurance plan made effective on January 1, 1998, and all later plans shall provide that individuals that have been incarcerated pursuant to a criminal conviction shall not be considered to have experienced any incident-free period of driving during any period of incarceration of 1 year or more. In addition, the plans shall provide that, except as otherwise determined by the commissioner, any period of incarceration shall be excluded from the 5 year period within which surchargeable incidents may be considered. In implementing this paragraph, the commissioner, for the purposes of determining upward and downward premium adjustments, may adjust the surcharge date of any surchargeable incident in any manner considered appropriate, including adding any period of incarceration of 1 year or more to the surcharge date, and may consider surchargeable incidents with surcharge dates before the 5 year period immediately preceding the effective date of the policy. The commissioner of insurance and the secretary of public safety shall develop a system for providing the merit rating board the necessary information to adjust driving records for periods of incarceration in accordance with this paragraph and shall consider periods of incarceration in other jurisdictions to the extent practicable.
The commissioner shall not fix or establish any private passenger motor vehicle insurance rates, premium charges, premium adjustments or classifications of risks based, in whole or in part, on any credit information relating to an insured, including, but not limited to, a numerical credit-based insurance score or other credit rating of an insured; and provided, that no insurer, in connection with underwriting private passenger motor vehicle insurance or bonds based on the ownership or operation of a private passenger motor vehicle, shall refuse to issue or renew said insurance or bond based upon credit information, including, but not limited to, a numerical credit-based insurance score or other credit rating of an applicant or insured. Nothing in this paragraph shall be construed to restrict any insurer from obtaining or using its own payment history information or information contained in an insurance claims history report, a motor vehicle or driver history report or any other report from the registry of motor vehicles or its out-of-state equivalent.