STATE RATE MATTERS The Commonwealth of Massachusetts In accordance with our telephone conversation of even date, I am enclosing a copy of my REPORT, OPINION AND DECISION rendered in connection with our automobile insurance rate hearings that were held near the end of 1969. I am also attaching copies of my letters to the Insurance Rating Board disapproving the proposed rate revision for automobile physical damage that was filed with this Department late in 1969 to go into effect immediately. As you may have read in the trade press, my REPORT, OPINION AND DECISION, and my action in connection with the auto physical damage rate proposal have been appealed to the Supreme Judicial Court of this Commonwealth. ery truly yours, C. Eugene Farnam Commissioner of Insurance COMMONWEALTH OF MASSACHUSETTS DEPARTMENT OF BANKING AND INSURANCE DIVISION OF INSURANCE REPORT, OPINION AND DECISION BY C. EUGENE FARNAM, COMMISSIONER OF INSURANCE Re: Automobile Insurance Rate Filings That Were the Subject of the Hearings Before the Commissioner of Insurance Beginning November 7, 1969. A public hearing was held in the Division of Insurance, as required by M.G.L. c. 175, s. 113B, to consider the identical filings of the Insurance Rating Board, a voluntary association of stock insurance companies, and the Mutual Insurance Rating Bureau, an association of mutual insurance companies, for increasing automobile property damage liability insurance rates for private passenger automobiles, commercial cars and miscellaneous other motor vehicle classifications, and the proposal of the Massachusetts Automobile Rating and Accident Prevention Bureau for revising automobile liability insurance rates to be charged for Basic Limits Guest and Extra-Territorial (Optional Coverage B) insurance, for certain medical payments coverage available at the option of an insured who purchases compulsory automobile liability insurance and for increased limits bodily injury liability coverage. The proposed rates are to apply to only those insurance coverages and limits of liabilit as are identified and set forth in M.G.L. c. 175, s. 113C. At the hearing, motions to dismiss the rate filings as submitted because they were incomplete, were not prepared in accordance with generally accepted accounting practices, contain a mixture of inconsistent accounting methods, and, up to the time of hearing, were not supplemented by additional information as requested by the commissioner and the interested parties presenting the motions, were made and accepted. A ruling was deferred although arguments from all parties in interest were heard. Upon consideration of the arguments, a review of the filings as originally submitted, an examination of the supplementary material filed during the hearing consisting of oral testimony and additional exhibits from all parties, I find that the filings are properly before me and are to be given the due and deliberate consideration all filings receive in the Division of Insurance by the commissioner. In addition to the aforesaid motions to dismiss, we have received requests for rulings. We have examined the requests and it is our opinion that such requests are inappropriate for this proceeding. This matter is required to be conducted as a public hearing. Such hearings are held to receive as much information as the public may disclose to the hearing officer, To this end a general notice was given by newspaper publication. Individual notices were sent by letter to those people and organizations previously expressing a desire and request for such special notice. Every person and organization was given the opportunity to examine the filing prior to the hearing and to present information, data and views relating to the proposal. We have made every effort to be as fully and completely informed on this matter as is humanly possible. On the basis of the information produced from all sources and recorded in the transcript of this proceeding, we shall render a decision consistent with findings of fact adduced from the information in evidence. Before proceeding with our formal consideration of the filings, we wish to establish for the record that all the rating bureaus participating and preparing the various filings are licensed as insurance rating bureaus under M.G.L. c. 175A, the Casualty and Surety Rate Regulatory Law, that the hearing for this matter was held pursuant to M.G.L. c. 175, s. 113B and 1130. Neither of the aforesaid sections make reference to filings by rating bureaus. Nonetheless, we have considered the filings as being permitted by our laws and as not in violation of our statutes prohibiting concert of action in restraint of trade. We mention this matter at the outset because we were notified early in these proceedings that the statistics used by the bureaus are not solely those of their respective members and subscribers but rather a compilation of the statistics reported by all insurance companies writing automobile liability insurance in the Commonwealth. Suffice for the moment to make it clear that we have before us all of the experience reported by insurance companies doing an automobile insurance business in the state, However, the proposed rates of a particular bureau would be available only to those companies which have an affiliation with the filing bureau. The filing which shall be first considered is an identical proposal affecting property damage liability insurance to a limit of liability of $5,000. The filing was made jointly by two rating bureaus, one sponsored by the stock insurance companies (Board), and the other by the mutual companies (Bureau). The private passenger portion of the proposal was prepared and defended by an actuary employed by the Board, while the commercial, garage dealers and the other miscellaneous classes were the responsibility of the Bureau and its actuary. The statistical approach and the actuarial method employed by each filer in arriving at the rates were the same. The commentary which follows is therefore applicable to the entire filing. In preparing this report, opinion and decision, we have perforce examined and reviewed all the testimony, exhibits and record of the case. Our careful attention has been focused directly upon the filing and the supporting data. upon: The rates proposed by the Board and the Bureau are based 1. 1968 Policy (Accident) year experience. 2. Losses Incurred evaluated to March, 1969. 3. Pure Premiums that have been adjusted for a Massachusetts peculiarity with respect to short term-short rate and developed by factors to the loss level expected for the year 1970. 4. Adjustments for claim costs. 5. Recommended rate level changes for the different classes. 39-280 O 71 pt. 17A - 50 |