In recent months, insurers jacked up home insurance rates across Massachusetts. Auto insurance rates are increasing for at least the third consecutive year. And Liberty Mutual, one of the state's largest insurance companies, disclosed that it paid its top executive roughly $50 million a year, rather than returning money to the policyholders who own it.
The response of the Massachusetts Division of Insurance? Critics say not much.
This apparent lack of action has sparked criticism from Attorney General Martha Coakley and consumer advocates, who argue that Insurance Commissioner Joseph G. Murphy and his agency have not aggressively challenged rate increases and executive pay.
"This is a serious issue," said Paula Aschettino, founder of Citizens for Homeowners Insurance Reform, a nonprofit advocacy group seeking lower home insurance rates in the state, especially along the coast, where insurance can be difficult and expensive to obtain. "The commissioner of insurance is not using the powers of his office to protect citizens from excessive rates."
At issue is the role of the division, and whether it should actively use its powers to reject rate increases and rein in compensation, or instead focus on promoting competition — which industry officials say ultimately means a better deal for consumers.
Murphy, who became the state's insurance commissioner two years ago, said he is doing his best to balance competing responsibilities to insurers and customers. Although the most recent criticism has come from consumer groups, Murphy noted that he angered insurers two years ago when he rejected hundreds of health insurance rate increases.
"Our role here is not to be Mr. Congeniality," Murphy said. "If insurers and others are upset, we are probably doing our job."
The Division of Insurance is charged with licensing insurance companies, ensuring they are solvent and able to pay claims, reviewing rates and business practices, and helping consumers find information or file complaints about companies.
Many of Murphy's practices appear consistent with those of past commissioners, who approved most rate increases after staff reviews. Murphy has also allowed auto insurers wide latitude to set rates, maintaining the partially deregulated market established four years ago by his predecessor, Nonnie Burnes.
Murphy said his office carefully reviews rate hikes and frequently raises questions, but must typically approve personal auto and home rates, so long as they comply with state regulations and are not excessive, inadequate, or discriminatory.
Some consumer advocates have said that's not enough. Coakley, who is charged with representing customers in insurance proceedings, suggested in an April letter to Murphy that he was essentially rubber-stamping auto rates, allowing one insurer to boost rates by 30 percent over the past two years without even holding hearings. Coakley declined requests for an interview.
Many companies have also raised home insurance premiums recently, citing a jump in weather-related claims last year. Bunker Hill Insurance Co., which insures about 34,000 homes in Massachusetts, recently raised rates by nearly 10 percent. Andover Cos., with more than 100,000 customers in the state, raised homeowners' insurance rates by an average of 9 percent in March.
Coakley has blamed "untested and discredited hurricane models" used by insurers for contributing to rate increases in home insurance and called on Murphy to hold hearings on the issue. Her staff argued the computer models overstate the potential risk from storms and may have led to $500 million in overcharges to home insurance policyholders over the past six years.
The agency rejected Coakley's request to immediately hold hearings on the rate increases, but said it plans a public hearing later this year to consider concerns about hurricane models, which forecast the potential risk from the storms.
Murphy admitted he rarely rejects home and auto rate increases. But he insisted his agency reviews the filings, which sometimes leads companies to revise rate requests before they are finalized and made public. The agency estimated that companies make changes in about one in five auto insurance filings.
"There's back and forth and there are adjustments made," Murphy said. "If I were to reject a rate increase outright, and call for a hearing, this agency would grind to a halt. We'd be having hearings or filings all the time."
Murphy added that giving auto insurers more freedom to set rates has helped consumers, bringing more than a dozen new competitors to Massachusetts and lowering auto premiums by 7 percent from 2007 to 2011.
Murphy has also been criticized for doing too little to protect the ownership interests of policyholders of mutual insurance agencies, such as Liberty Mutual Holding Co. The Globe, citing filings with the insurance division and interviews with company officials, reported that Liberty Mutual paid former chief executive Edmund F. Kelly $200 million over four years, making him one of the highest paid chief executives in the country. Watchdogs and customers said at a least some of that money should have gone to policyholders, who, under the mutual corporate structure, own the company.
But Murphy said he doesn't feel it's his role to tell companies how much to pay executives, unless the costs threaten the firms' solvency and ability to serve customers. Despite the high pay to Kelly, Liberty Mutual remains profitable with $18 billion in equity.
Many insurance executives and industry observers, meanwhile, praise Murphy's office for its professionalism and fairness. "The insurance division has always done a good job of both protecting consumers and maintaining good relations with the business community it oversees," said Erin L. Ayers, editor of The Standard, an insurance trade publication.
Even some health insurance executives, who slammed Murphy two years ago for rejecting their rate increases, praised the agency's willingness to work with the industry to find ways to make premiums more affordable. Health insurers have since sought much more modest increases.
Murphy said that much of his agency's most important work occurs behind the scenes, including the regular financial examinations of insurers for solvency. In addition, the office said it handled about 1,600 consumer complaints in 2010 and was able to help consumers win a settlement or other relief in about one-third of those cases. Similar data from 2011 was not available.
Murphy also has the confidence of Governor Deval Patrick, who appointed him two years ago. In a statement, Patrick called Murphy "an exceptional insurance commissioner," who has helped consumers save hundreds of millions of dollars while strengthening the industry.
As for the constant barrage of criticism, Murphy said, it's just part of the job. To remind him of that, he keeps a small slip of paper in his wallet with a quote from one of his predecessors, Linda Ruthardt: "Whoever is commissioner of insurance is automatically the most hated person in the Commonwealth."
Todd Wallack can be reached at twallack@globe.com. Follow him on Twitter @twallack.
© Copyright 2012 Globe Newspaper Company.
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