Fireman's Fund Supports Auto Insurance Reform in Testimony at the C.A.R. Hearings

NOVATO, Calif.--July 22, 2004--A representative for the Fireman's Fund Insurance Companies today testified in support of personal automobile insurance reform measures currently under consideration by the Massachusetts Division of Insurance Commissioner Julianne Bowler and the Commonwealth Automobile Reinsurance (CAR) Governing Committee.

Boston attorney Ed Donahue, Jr. spoke on behalf of Fireman's Fund Insurance Companies in support of the CAR reforms. Donahue began by thanking the Commissioner for her determined pursuit of automobile reform and stated that Fireman's Fund, a top national writer of property and casualty insurance, fully supports the CAR reform package.

"Massachusetts is a challenging marketplace for personal automobile insurance," said Donahue. "During the past years, Fireman's Fund has experienced significant losses in this line. In particular, the CAR system, as currently structured, significantly compounds these losses in the way that it assigns exclusive representative producers and assesses losses from business placed by these producers." ("Producers" is a standard insurance industry term for insurance agents, the intermediary between policyholders and insurers.)

Donahue noted that personal automobile insurance assignments from CAR caused Fireman's Fund to sustain severe losses, negatively impacting its regional results. Donahue said that the reforms under consideration establish an equitable and fair system for the assignment of individual policies to carriers based upon market share. Donahue said that Fireman's Fund supports the changes to the plan of operation (Rule 11 - Assessments and Participation), and believes that the Commissioner has the statutory authority to adopt and implement these changes.

"The proposed reforms will spread the losses on accounts written by the exclusive representative producers with the most losses on their books to CAR servicing carriers based upon their market share, and will create an assigned risk program similar to other states with very successful assigned risks programs," Donahue said. "It will bring to Massachusetts a level playing field, making the Commonwealth a more open and attractive market for personal automobile insurance."

On behalf of Fireman's Fund, Donahue applauded Commissioner Bowler's "courage and efforts in working with the CAR Governing Committee, the Division of Insurance and the insurance industry to develop a reform package fair both to customers and insurers. The reforms will do much to alleviate the current inequitable practices. Fireman's Fund supports and encourages the immediate adoption and implementation of this reform package."

Fireman's Fund last month gave notice to Massachusetts officials of its intention to withdraw from the state's personal automobile insurance market because of continuing uncertainty in implementing personal automobile insurance reform. Fireman's Fund indicated that it would rescind its withdrawal if Massachusetts implements a reform package.

Fireman's Fund currently offers personal automobile insurance coverage to approximately 22,000 customers in Massachusetts, representing less than one percent of the state's auto market. The withdrawal from personal automobile insurance will not affect any other lines of commercial or personal lines coverage offered by Fireman's Fund in Massachusetts.

Fireman's Fund Insurance Companies is a premier property and casualty insurance company providing personal, commercial, marine, excess and surplus lines and agribusiness insurance products nationwide. Fireman's Fund is a member of the Allianz Group, one of the world's largest providers of property and casualty insurance and other financial services.