Four auto insurance carriers have agreed to pay fines totaling at least $120,000 and issue refunds to Massachusetts drivers who were hit with costly surcharges even after a state board found they were not at fault for accidents, the Attorney General’s office said Thursday.
The announcement comes just two months after another insurer, Metropolitan Property and Casualty Insurance Co., a unit of MetLife Inc. of New York, struck a similar deal with the attorney general’s office and agreed to pay at least $50,000 in penalties, plus an unspecified amount of refunds.
The latest deals, filed in Suffolk Superior Court this week, involve the Premier Insurance Co. of Massachusetts (better known as Travelers of Massachusetts, part of the Travelers Cos. of Hartford, Conn.); Massachusetts Homeland Insurance Co. (part of Tower Group Cos. of New York); Plymouth Rock Assurance Corp. and Plymouth Rock’s sister company, Pilgrim Insurance Co, both of Boston. Travelers and Plymouth Rock/Pilgrim agreed to pay $50,000 in penalties, while Massachusetts Homeland promised to pay $20,000.
Under the terms of the settlements, the four insurance carriers agreed to conduct audits of policies since 2003 and issue refunds to customers who were wrongly charged the surcharges, plus 6 percent interest. Depending on the findings of the audits, the companies could also be forced to pay additional fines on top of the amounts they have already agreed on.
In addition, the Attorney General’s office is continuing to examine whether other insurers had similar problems.
“Our investigation has revealed troubling defects in the policy processing systems used by auto insurance companies,” Attorney General Martha Coakley said in a statement. “While we are pleased to have secured the return of these overcharges for Massachusetts consumers, these cases underscore the need for insurance transparency and oversight.”
Travelers spokesman Gary Griffin said the company is “working closely with the state of Massachusetts to resolve this issue and will refund affected customers.” Griffin said the company has fixed its systems to make sure customers are charged correctly going forward.
Paula Gold, chief regulatory counsel for Plymouth Rock, said the overcharges were inadvertent and the company corrected the problem as soon as it was alerted to the issue. “There was a glitch in our system and we are sorry that it happened,” she said.
Massachusetts Homeland could not be reached for comment.
Coakley’s office originally began the investigation after receiving a complaint from a MetLife customer who successfully appealed a surcharge to the state’s Board of Appeal in 2010. Even after the customer won the case, MetLife failed to refund him more than $700 in surcharges.
By law, insurance companies are required to issue refunds if the Board of Appeal finds customers were not at fault for crashes. Over the past decade, the board has overturned 40,000 surcharges – but the state is still trying to determine how many customers continued to be charged or did not receive refunds.