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Commissioner Says Annual Policy May Be Converted to Six-Month Policy By Optional
Endorsement
DOI Issues Bulletin 2008-07 Regarding Requirements for Private Passenger
Motor Vehicle Insurance Policies Issued for Terms of Six Months
Today, Insurance Commissioner Nonnie S. Burnes issued Bulletin 2008-07 in which
she acknowledges that MA statute [G.L. c. 175, § 113A(2)A(6)¶8] requires
insurers to provide an annual policy, but that the Division would permit an
insurer to file for approval to limit the policy term to six months by optional
endorsement. The following is the complete text of the bulletin: This Bulletin
informs insurance producers and insurance companies who sell or service private
passenger motor vehicle insurance policies about the Division of Insurance’s
(“Division”) requirements for an optional endorsement that limits the term of a
voluntary private passenger motor vehicle insurance policy to a period of six
consecutive months.
Massachusetts law requires private passenger motor vehicle insurers to provide
twelve-month term private passenger motor vehicle insurance policies to
applicants and policyholders who request them (“the standard private passenger
motor vehicle insurance policy”). G.L. c. 175, § 113A(2)A(6)¶8. Insurers may
submit a form filing to the Division offering a private passenger motor vehicle
insurance endorsement that limits the term of the standard private passenger
motor vehicle insurance policy to six months, provided that such form filing
includes a process by which the insurer first obtains the written
acknowledgement from a current policyholder or a new applicant that indicates
that he or she understands that:
- the law requires that every insurance company offer twelve-month term private
passenger motor vehicle insurance policies at the option of its customers;
- a six-month term policy is shorter than a twelve-month term policy;
- a six-month term policy will have a premium that is half as much as a
twelve-month term policy; and
- the premium for a renewal of the policy for an additional six-month term will be
based on the rates in effect for that insurance company on the renewal effective
date.
This written acknowledgement is required only from a policyholder of, or an
applicant to, an insurer if the policyholder's, or applicant's, current or prior
private passenger motor vehicle insurance policy was for a twelve-month term.
Insurers that elect to offer an endorsement for a six-month policy term shall
comply with the following requirements:
- Insurers must offer private passenger motor vehicle insurance policies for
twelve month policy terms and cannot offer private passenger motor vehicle
insurance policies for terms in excess of two years. No insurer may decline to
issue or nonrenew a private passenger motor vehicle insurance policy solely on
the basis of the length of the policy term selected by the policyholder or
applicant unless such term is longer than two years.
- The rates in effect on the policy effective date shall be the rates that apply
to that policy for the duration of the policy term. No insurer may change an
in-force twelvemonth policy's term to a six-month term unless the policyholder
specifically requests such endorsement within 30 days of the policy effective
date and the policyholder provides the written acknowledgement described above
to the insurer. If a policyholder wants to change from a twelve-month term
policy to a six-month term policy after the twelve-month term policy has been in
force for more than 30 days, the policyholder must cancel the existing
twelve-month term policy and apply for a new six-month term policy.
- An endorsement that limits the term of the standard private passenger motor
vehicle insurance policy to six months may not modify the terms and conditions
of coverage provided under that policy in any other manner.
- The premium for a private passenger motor vehicle insurance policy endorsed to a
six-month policy term shall be one half of the otherwise applicable premium for
a policy issued for a twelve-month term.
Special requirements apply to policies with less than twelve-month terms for
motorcycles, trailers and other recreational type vehicles, as is provided in
G.L. c. 175, § 113A(2)A(6)¶9. If you have any questions regarding this Bulletin,
please contact Kevin Beagan, Director of the State Rating Bureau, at
617-521-7323 or at
Kevin.Beagan@state.ma.us.