July 15, 2014 Page 2 Just as we were preparing to send this letter to you, we received yet another complaint from an agent whose customer requested a quote from GEICO and got a policy he did not request. This seems to be an all-to-common occurrence; an occurrence which is particularly frustrating to agents since the Transfer of Insurer prepared by GEICO is sent directly to the insurer and not the prior producer of record (see Item 3 below). 2. Policy Cancellation Letter: GEICO s most recent filing placed on file at the Division of Insurance contains a form Policy Cancellation letter. The letter reads as follows: Date: Policy Cancellation Letter To Whom It May Concern: I am writing to inform you that as of (Effective date of GEICO policy), I am cancelling the insurance policy I currently have with you. My insurance policy number (Prior carrier policy number) has been replaced with a GEICO policy effective (Date). Please promptly refund the unused portion of my premium directly to me at: Name: Street Address: City, State, Zip Code: Signed: The cancellation letter that GEICO provides to new clients does not meet the policy cancellation requirements of M.G.L. c. 175, 113A (See example 1 above). In addition, that statute also provides the following: That the policy shall terminate upon a sale or transfer by the owner thereof of the motor vehicle or trailer covered thereby, or upon his surrender to the registrar of motor vehicles of the registration plates issued to him by said registrar... or upon the filing of a certificate as defined in section thirty-four A of chapter ninety of another company covering the same motor vehicle or trailer, and that upon a termination of the policy as aforesaid, the insured shall, if he has paid the premium on the policy as provided in provision (s), be entitled to receive a return premium computed as in the case of a cancellation of the policy by the insured under said provision (2) The prior carrier cannot issue return premium without evidence that the vehicle has been sold, that there is a new policy in place or the plates have been returned to the RMV. See the following language from the statute:
July 15, 2014 Page 3 The company shall not issue a return premium upon cancellation of the policy until the insured has presented to the company a receipt or other document showing that the number plates assigned to the insured motor vehicle have been returned to the registry of motor vehicles; provided however, that a company shall return a premium upon cancellation of the policy to an agent or broker or premium financial company without said receipt. 3. Documenting Transfers of Private Passenger Motor Vehicle Insurance: At the outset of managed competition, former Commissioner Nonnie Burnes issued Bulletin 2008-10. Among other things, the bulletin spelled out specific criteria for documenting transfers: The producer of record for the new policy must notify the prior producer of record, if known, or the prior insurer of the transfer of coverage as soon as possible. Prior producers of record must accept the notices of transfer or other forms of insurance verification from insureds, insurers or producers of record for the new policies, provided the notices meet at least the following standards: (1) The notice must be signed by the producer of record for the new policy or, it must be on the company s letterhead, if it is issued by the new insurer; and (2) The notice must bear the registry stamp of the new insurer. The stamp may be in electronic format. Producers must accept these notices regardless of whether they are generated in hard copy or in electronic format. They must forward such notices to the prior insurer as soon as possible so that consumers rights are not affected negatively. Producers also are expected to assist their customers to correct any perceived inaccurate information on a notice of transfer rather than reject these notices automatically. As far as we know, this bulletin is still active; however, at least one company (Progressive) will only provide notification to the prior carrier (not the producer) and only at the specific request of the consumer. If there is no notification of the change of carrier, the prior producer/carrier has no idea that the policy has been replaced. This situation can have an extremely negative impact on the credit rating or credit score of consumers who are then cancelled by the prior insurer for non-payment of premium or who have the premium automatically deducted from their bank account by the prior carrier and the automatic deduction continues after the consumer has purchased a new policy. 4. Named Insured/Loss Payee/Secured Lender: Both GEICO and Progressive permit applicants to insure vehicles they don t own. A recent quote provided by GEICO brought the situation to light again. The quote was for a policy with three vehicles listed and would be written in the name of a single individual. The three vehicles are owned by three individuals the applicant, his wife and his son; however, the policy was written only in the name of the applicant. As we have noted in past complaints, we are concerned that this is inappropriate. These vehicles were previously insured on two separate policies. The first policy was written in the name of the husband and wife insuring a vehicle owned by the husband and a vehicle owned by the wife. The second household policy was written in the son s name insuring a vehicle owned by the son. GEICO provided the former company with a Transfer of Insurer Form which included the three vehicles owned by three different owners insured on a policy in the name of one of the owners. The agent is asking if this is a valid Transfer of Insurer notice since the owner of the prior policy is NOT the owner of the new GEICO policy, and the new policyholder is not the owner of two of the three vehicles to be insured on the GEICO policy. We also question whether this meets the requirements for the Automatic Termination provision in the MA Auto policy which says:
July 15, 2014 Page 4 Automatic Termination Massachusetts law provides that your policy automatically terminates and a Notice of Cancellation will not be sent to you when: 1. You return the registration plates for your auto to the Registry of Motor Vehicles. 2. You purchase a new policy with another company covering your auto and a new Certificate of Insurance is filed with the Registry of Motor Vehicles. 3. You transfer title to your auto, and you do not register another auto. In this case, the policy will terminate 30 days from the date of transfer of title. However, if more than one auto is described on the Coverage Selections Page, the termination of coverage applies only to the auto involved in any of the situations described above. Our opinion is that the GEICO policy purchased by the husband/father for all three individuallyowned vehicles does not meet the criteria spelled out in the Automatic Termination provision of the policy because the YOU in the GEICO policy is not the YOU in the previous policy. In addition, since the prior MA Auto Policies in the names of the wife and son are contracts between the wife and son and their respective insurance companies and may only be cancelled by the insurer and the policyholder not the husband/father of the vehicle owners or GEICO. In addition, how does a policy owned by a non-owner handle payment of a claim. Is the check made out to the policyholder or the vehicle owner? How does it handle a lienholder or leasing company? Since the owner or lessee of a vehicle no longer MAIA has control of the policy insuring the vehicle, they risk not being in compliance with the loan or lease agreement due to changes in coverage made by the policyholder. The other major issues we have with an insurer writing a policy in the name of someone other than the owner are: a. Insurable interest Does a non-owner have an insurable interest in a vehicle owned by someone else? b. Exclusions If non-owners are permitted to insure vehicles they don t own, there could be some serious coverage gaps for the owner. For instance, let s say a company insures two vehicles owned by a boyfriend and girlfriend on one policy in the name of the boyfriend. Since she does not meet the definition of household member, the girlfriend (owner of one of the vehicles) is covered when she is physically in her own vehicle covered on the boyfriend s policy, but where does she got for coverage if she s injured as a passenger in someone else s vehicle or as a pedestrian? Where does she go for coverage if she rents a car on vacation? What happens if they break up and the claim check for the damage to the ex-girlfriend s car is made out to the ex-boyfriend? An adult child whose owned vehicle is insured on a policy in the name of the father would also find some coverage gaps should the child move out on his own, taking the vehicle insured on the father s policy with him. 5. Null and Void Letter: Another form in GEICO s most recent filing is their Null and Void letter, which provides that the policy is null and void and never took effect because the applicant s financial institution did not honor payment of the down payment. We are puzzled by this letter for a couple of reasons.
July15,2014 Page 5 If GEICO has issued a Transfer of Insurer notice to the prior producer or insurer so that the prior carrier's policy is cancelled, have they also notified the RMV of the new GEICO policy and do they notify the RMV again that there is no valid GEICO policy so that the RMV begins the plate revocation procedure? If GEICO has certified an RMV document for the applicant, the stamp on that document is valid for 30 days, so the consumer could register the vehicle even though a policy was never in force. Does GEICO issue a 20 day legal notice of cancellation with the cancellation date back to inception or is the Null and Void letter provide that 20 day notice? Are lienholders provided with a copy of the Null and Void letter? We believe a Null and Void letter sets a new precedent in MA IF there is no cancellation notice to the RMV or any lienholder, since the lack of compulsory coverage on the vehicle puts the consumer in violation of M.G.L. c. 90, 34A and the lack of physical damage coverage most likely puts the consumer in violation of his/her finance agreement. 6. Shared Liability Limits: We have received a number of questions from agents regarding GEICO quotes. Recently, some quotes have included multiple vehicles listed but only one premium for all listed vehicles for Parts 1,2,3,4,5,6 and 12. So far, we have not seen anything in the GEICO filings which would provide for a single premium charge for these coverages for the entire policy. The coverage selections page placed on file for GEICO includes a separate premium charge for each coverage for each of the vehicles listed on the policy. As always, please feel free to contact me if you have any questions or need additional information. Also, we would welcome the opportunity to discuss these issues with you or your representative. Very truly yours, Donna M. McKenna Vice President of Communications