Insurance Cancellations Spur Inquiry; Company to Pay $42K

About 50 policyholders in Massachusetts will be getting at total of $32,000 in payments from Flatiron Capital after an investigation alleged the premium financier prematurely canceled contracts, the state’s attorney general announced Tuesday.

The Colorado-based premium finance company will also have to pay a $10,000 fine to the state.

Companies like Flatiron Capital offer to pay policyholders’ premiums up front and then collect the premium amount and loan fees from the policyholders in installments over the course of the policy. Premium finance companies can seek cancellation of a policy if the policyholder misses a loan payment.

State insurance codes mandate that premium financing providers give insurers at least a 20-day notice when seeking a policy’s cancellation. However, the effective date on Flatiron Capital’s cancellation requests were the same as the date the requests were issued, according to the announcement from Attorney General Martha Coakley.

“We allege that Flatiron failed to provide enough time to Massachusetts customers to seek replacement coverage before canceling their auto insurance,” Coakley said in a statement. “It is important that these providers play by the rules and give customers adequate time to bring their accounts current before they face costly interruptions.”

Other AG Settlements Produced Repayments for Massachusetts Consumers

The Flatiron Capital case was a part of a broader, continuing investigation of premium financiers that began in 2011 and produced an $82,000 settlement that year from IPFS Corporation.

Currently, “several other premium finance companies remain under investigation,” according to the attorney general’s office.

In an unrelated case, Metropolitan Property & Casualty (Met P&C) agreed to an audit earlier this month after the attorney general’s office alleged that the company, which had the sixth-largest share of the Massachusetts car insurance market in 2010, failed to repay a policyholder more than $700 in surcharge premiums that were nullified by the state Board of Appeal.

The audit was a part of a settlement between Met P&C and the attorney general’s office, which also charged the company a $50,000 fine in addition to the repayments, including 6 percent interest, which will go to overcharged policyholders who are identified in the audit.

Investigators will also be looking at other auto insurers to identify similar situations where vacated premium surcharges were unpaid, according to Coakley.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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