This is the second part of a four-part look at the Commissioner’s Annual Report on Home Insurance in Massachusetts. Since 1996, the DOI has been required to produce a home insurance report pursuant to M.G.L. c. 175 Sec. 4A & 4B.
Unlike the private passenger auto insurance marketplace in Massachusetts, however, there are no specific laws requiring that a property owner have home insurance. Please note all of the charts and graphs discussed in our articles comes courtesy of the Annual Home Insurance Report published by the Massachusetts Division of Insurance.
What is the FAIR Plan and what does it do in Massachusetts?
The FAIR Plan is a residual market mechanism that was created by Massachusetts law in the Acts1968 c. 731. Substantially restructured in 1976, and then again in 1996, it is now known as the Massachusetts Property Insurance and Underwriting Association (“MPIUA”).
Under its rules of promulgation, the FAIR Plan offers coverage for those homes which cannot obtain coverage from a traditional homeowner’s insurance company. If unable to obtain coverage in the marketplace, homeowners may apply to the Massachusetts Property and Underwriting Association which is required by statute to provide a homeowner’s policy with a replacement cost of up to $1 million dollars. Traditionally waterfront properties that may have a value of more than 1 million dollars, a homeowner must seek coverage via the surplus lines market.
FAIR Plan Participation
For the calendar year 2021, the FAIR Plan did not as sharp a decrease in participation as it had seen from 2019 to 2020. Overall, FAIR Plan participation decreased by 6,307 policies between the fiscal years of 2020 and 2021.
As a result of this drop in participation, the FAIR Plan represented just 8.8% of all written premium in Massachusetts for 2021. For comparison purposes, at its peak participation levels in 2007, the FAIR Plan represented 16.1% of a written premium.
FAIR Plan’s Financial Results
Underwriting profit for the FAIR Plan for the fiscal year, 2021, was $31,386,000. The following charts reproduced from the DOI Annual Report show the FAIR Plan results on a direct basis but “do not reflect reinsurance premiums paid by the FAIR Plan or reinsurance recoveries.”
The rise and fall of FAIR Plan Policies over the past decade
The following graph, using data from the DOI Report, represents the number of FAIR Plan Policies during the Fiscal Years 2007-2021 (meaning from October 1st of the previous year to September 30th of the noted year). As can be seen from the graph below, 2021 is the year with the lowest number of policies.
FAIR Plan Homeowners Insurance Market Share by Territory
Breaking it down by territory, the following chart highlights the MPIUA’s written premium for 2019 in each sector, along with its corresponding market share vis-à-vis the voluntary market written premium numbers for the same area.
| TERRITORY | MPIUA WRITTEN PREMIUM | VOLUNTARY MARKET WRITTEN PREMIUM | FAIR PLAN MARKET SHARE BY TERRITORY |
|---|---|---|---|
| Boston District A | 10,732,629 | 20,577,670 | 34.3% |
| Boston District B | 265,465 | 10,852,421 | 2.4% |
| Boston District C | 5,979,506 | 5,266,642 | 53.2% |
| Suffolk Remainder | 7,678,500 | 33,922,907 | 18.5% |
| Rest of Boston | 10,929,978 | 88,040,219 | 11.0% |
| Brookline | 268,850 | 26,286,061 | 1.0% |
| Quincy | 2,507,950 | 25,833,953 | 8.8% |
| Norfolk Remainder | 6,793,626 | 242,131,024 | 2.7% |
| Fall River | 4,659,538 | 18,255,402 | 20.3% |
| New Bedford | 9,580,506 | 16,506,036 | 36.7% |
| Bristol Remainder | 9,079,496 | 163,570,152 | 5.3% |
| Brockton | 4,844,268 | 24,832,605 | 16.3% |
| Plymouth Remainder | 22,750,081 | 220,960,039 | 9.3% |
| Barnstable,Dukes,Nantucket | 89,139,796 | 296,676,657 | 23.1% |
| Lawrence | 4,059,691 | 10,240,651 | 28.4% |
| Lynn | 6,352,078 | 23,305,896 | 21.4% |
| Essex Remainder | 12,627,940 | 260,468,177 | 4.6% |
| Cambridge & Somerville | 2,025,154 | 41,504,374 | 4.7% |
| Lowell | 1,841,273 | 19,576,490 | 8.6% |
| Newton | 605,126 | 44,928,333 | 1.3% |
| Middlesex Remainder | 10,033,323 | 450,969,279 | 2.2% |
| Worcester City | 3,828,515 | 40,113,445 | 8.7% |
| Worcester Remainder | 8,221,536 | 236,535,656 | 3.4% |
| Springfield | 2,844,030 | 33,032,673 | 7.9% |
| Chicopee & Holyoke | 1,360,641 | 20,544,685 | 6.2% |
| Hampshire & Hampden Rem | 4,152,346 | 121,324,573 | 3.3% |
| Franklin & Berkshire | 4,905,959 | 83,943,322 | 5.5% |
| TOTAL | 248,067,801 | 2,580,199,342 | 8.8% |
How the FAIR Plan fits within the MA Homeowners’ insurance marketplace
MAPFRE continues to be the largest homeowner insurer in Massachusetts. Following MAPFRE, the rest of the top ten insurers averaged between 3.8% and 9.2% of the voluntary market. In total, the top 25 home insurers account for 91.2% of the market. The remaining 45 insurers writing this line of business out of a total of 70 insurers account for less than 1.0% of the non-FAIR Plan home insurance market.
As noted in the DOI Report, unlike other states, the homeowners’ insurance marketplace is mainly dominated by regional carriers, however, more national carriers have now entered and claim a presence in this marketplace. For example, out of the top 10 home insurance companies, only five write home insurance nationally, with remaining insurers being regional companies offering their products mainly in the Northeast.
FAIR Plan Home Insurance Rates Retrospective
The year 2013 was the last year in which the FAIR Plan submitted an overall state-wide rate increase of 6.8%. In 2014, the Commissioner denied the rate increase, stating that the FAIR Plan had failed to meet its burden of support in demonstrating that its rate increase satisfied the statutory requirements. The last time that a rate increase was approved was in 2005 when the FAIR Plan was granted a 12.42% state-wide increase in rates, along with a 25.0% increase in Barnstable, Dukes, and Nantucket.
The following chart is a ten-year retrospective the Division created representing FAIR Plan Home Insurance Rate Changes.
FAIR Plan Home Insurance Rate Change
| EFFECTIVE DATE | PERCENT |
|---|---|
| 12/31/1996 | 5.3% |
| 12/31/1997 | 2.2% |
| 12/31/1998 | 0.9% |
| 12/31/1999 | 0.1% |
| 12/31/2000 | -0.5% |
| 12/31/2001 | -0.2% |
| 12/31/2002 | 1.9% |
| 12/31/2003 | 2.8% |
| 12/31/2004 | 3.2% |
| 10/01/2006 | 12.4% |
| 03/31/2010 | -0.7% |
The FAIR Plan Clearinghouse
In order to address the issue of how many homes insured by the MA FAIR Plan could potentially qualify for voluntary market coverage from a licensed Massachusetts insurer, the Division noted that in July 2018, the MPIUA Board of Directors “…authorized and implemented the clearinghouse initiative to help insurance companies work with homeowners’ producers to give more residual market (i.e., FAIR Plan) policyholders the opportunity to find coverage in the voluntary market.” The aim of the initiative is to continue the depopulation of the Massachusetts FAIR Plan.
According to the report, in order to participate in the Clearinghouse, an insurer must comply with the following:
- Be an admitted carrier,
- Be licensed to write homeowners insurance in Massachusetts, and
- Must sign a Clearinghouse Agreement containing the terms and conditions under which the MPIUA will provide information the company.
The DOI notes that while the information provided to companies does not include any personally identifiable information it does include “…certain information about the insured and about the property to assist the member company in determining whether to offer homeowners insurance, through the policy’s listed producer, to an existing FAIR Plan policyholder.” The Division, however, did not report any activity with respect to the FAIR Plan Clearinghouse for the fiscal year 2020 which is the subject of this year’s report.
