Karon Law Blog

What Does the Massachusetts Division of Insurance Do?

By Jonathan A. Karon

I have no idea. Which is disturbing, because I have been practicing plaintiff’s personal injury law for most of my career and I have never heard of the Massachusetts Division of Insurance taking enforcement action against an insurer for an illegal or anti-consumer claims practice.

Just after finishing a recent trial against a major automobile insurance company in a case alleging unfair and deceptive claims handling practices, I read a front page article in the  April 29th Boston Globe about how some Massachusetts auto insurers were improperly surcharging their policyholders in violation of Massachusetts law.   When the Globe contacted the Division of Insurance, they were told that the Division would be holding a hearing on this issue sometime this summer “to offer companies and consumers more clarity”. Despite the fact that these insurance companies admitted what they were doing and it seems to clearly violate the law, the Division of Insurance seemed to lack any interest in protecting consumers.

There is a concept known as “regulatory capture” where agencies that are supposed to regulate industries, instead view their role as promoting and protecting the industry. You could make a good argument that this is how the Massachusetts Division of Insurance sees its role. Although the Commissioner of Insurance has the power to rescind insurance rate increases, according to an earlier Globe article this virtually never happens. Thus, for example, when insurers raised homeowner’s premiums following the severe winter (and accompanying damage) in 2015, it was the Massachusetts Attorney General’s Office who complained that the increases were excessive, not the Division of Insurance.

Another troubling example is the Division’s approval of amendments to the standard Massachusetts auto policy. Under state law, the Division is supposed to approve any changes to the form of an automobile insurance policy issued in Massachusetts. For years that meant that every policy was essentially the same and had the same provisions. Over the last few years, however, the Division has approved proposed amendments to the policy offered by different insurers. These amendments frequently attempt to add anti-consumer provisions that limit coverage or purport to limit the statute of limitations for bringing claims against an insurance company. These provisions, some of which arguably conflict with Massachusetts law, have been approved with essentially no publicity or meaningful public input.

When it comes to insurance companies’ claims handling practices, the lack of interest by the Division of Insurance creates a regulatory black hole. If an insurance company treats you unfairly, you can complain to the Division, but, according to its website, only if you don’t have a lawyer. I suppose it’s possible that the Division has helped people without attorneys obtain meaningful and prompt relief, but again, I’ve never heard of it. This lack of interest by the supposed regulator causes a severe systemic problem. In lawsuits brought against insurance companies for bad faith claims handling, the companies routinely object to producing any information about other claims brought against them and all to often, courts uphold this objection. Which means that in an individual lawsuit it is very difficult to demonstrate a systemic pattern of taking advantage of policyholders. Moreover, the threat of a judgment in a single suit brought by an individual policyholder may not be sufficient to deter illegal, but profitable, wide-spread conduct. In theory, these are exactly the type of issues that a consumer oriented regulator should be addressing. But, as far as I can tell, the Division has no interest in doing this.

So, what does the Massachusetts Division of Insurance do? I can’t tell you. But I can tell you what it doesn’t do. It doesn’t properly look out for consumers. Some states elect their Insurance Commissioners. Perhaps we should consider that in Massachusetts.