Mass. Gets $160K Settlement with Premium Finance Company

Massachusetts Attorney General Martha Coakley announced the state will not prosecute premium finance company AICCO for prematurely canceling the auto policies it financed for about 100 motorists and small business owners. In exchange, AICCO will pay those former policyholders, on average, $1,250 and pay the state a fine.

Premium finance companies like AICCO loan small businesses owners and other motorists the money to pay their auto insurance premiums. The company pays the entire premium up-front, with the consumer paying the loan company back to continue their insurance coverage. If the policyholder doesn’t make their payments on time, the loan company can then cancel the coverage and have the unused premium refunded.

According to the settlement agreement filed in a state court, AICCO canceled insurance services to policyholders who fell behind on their premium payments without giving those policyholders proper notice.

Premium finance companies in Massachusetts must give those policyholders notice of cancellation a total of at least 30 days before coverage is cut off. That rule is designed to give consumers a chance to catch up on their payments and keep their auto coverage current.

However, Coakley’s office states in the court findings that AICCO only gave a three-day notice.

“Massachusetts customers should receive proper notice of auto insurance cancellations so they can determine an appropriate solution for continued coverage,” Coakley said in a statement posted on the Attorney General’s website.

AICCO no longer finances premiums for Massachusetts drivers. According to court documents, the violations happened before the company was sold to another company called Premium Financing Specialists in 2010.

AICCO will also pay the state a total of $35,000 as part of the settlement. If the company re-enters the Massachusetts market, it must “comply with all applicable statutes and regulations.” The settlement also guarantees Attorney General Coakley will take no further action against AICCO for the cancellations.

The charges against AICCO are part of a larger investigation into premium finance companies’ cancellation practices that Coakley’s office started back in 2011.

Two companies—Flatiron Capital and IPFS—have already been charged and fined for similar practices.

“Our office will continue to ensure that these providers are complying with state insurances laws, not prematurely pulling the plug on these policies,” Coakley said.

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