December 28, 2017

Insurance coverage discounts at risk

Flickr/Tim Sackton
Since 1997, the Legislature has suspended a requirement that group marketing discounts for insurance reach a certain threshold of members buying coverage. That could end if no action is taken this week.

Massachusetts drivers and homeowners risk losing out on millions of dollars' worth of insurance coverage discounts if lawmakers end their two-decade tradition of regularly suspending a unique statutory requirement, according to an insurance trade group.

The discounts would start disappearing Jan. 1 without action by the House and Senate, which are scheduled to meet Thursday.

Insurance companies make special offers through companies, unions and other organizations – such as alumni associations – that typically provide discounts of 5 to 8 percent on premiums for home and car insurance, said John Murphy, executive director of the Massachusetts Insurance Federation.

Under the statute regulating those group marketing plans, at least 35 percent of the eligible group members must buy coverage from the insurer within two years of the effective date of the plan. That 35 percent threshold is the highest in the country and it is "almost impossible" to reach, said Murphy, who said it "is basically unheard of anywhere else in the country."

Since 1997, the Legislature has continually suspended the requirement, allowing group plans to continue even if they fall short of the threshold, according to Murphy. Murphy said he is not sure what the rationale was to install a threshold of coverage.

The House on Tuesday passed legislation that would postpone the requirement another two years. The bill would need approval by the Senate and additional action in the House to make it to Gov. Charlie Baker's desk. The Senate wants to enact the legislation Thursday, according to the acting Senate president's office. The governor signed a similar bill at the end of 2015.

"This is something that comes up every session," said Frank O'Brien, vice president of state government relations for the Property Casualty Insurers Association of America.

If the New Year begins without a new law postponing the requirement, people will start losing their discounts when their policies comes up for renewal, which is usually an annual exercise, Murphy said. He said, "Frankly a lot of people will start losing this discount" unless the requirement is postponed.

The group discounts on auto insurance are offered through 3,752 entities and the homeowner discounts are offered through 2,364 groups, according to the insurance federation. If the 35 percent requirement took effect, nearly 95 percent of the homeowner groups and about 89 percent of the auto insurance groups would not satisfy the requirement, according to the federation, which cited a 2014 report from the Division of Insurance. That would zero out the discount on more than 322,000 vehicles and 142,000 homes, according to the federation, which has 27 member companies.

"It's time to permanently remove this onerous requirement from the statutes," Murphy said in a statement about the bill.

Legislation filed by Wareham Republican Rep. Susan Gifford would have permanently removed the 35 percent requirement. The bill was redrafted by the Financial Services Committee and reported out on Dec. 18.

The 35 percent requirement was included in a 1973 law that the late Gov. Frank Sargent vetoed. The Legislature overrode the veto in November of that year.

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