Under the proposal, Springfield would have received a 9-percent rate increase, Chicopee and Holyoke a 1.6 percent increase and the rest of Hampden County 1.5 percent.
Joseph G. MurphyMassachusetts residents who have to buy their homeowners, condominium or renter’s insurance through the state’s high-risk pool won’t see a price hike at least for now.
The state Division of Insurance rejected Friday a proposal from the Massachusetts Property Insurance Underwriters Association , which runs the FAIR Plan, for an average 7.2-percent premium hike across the state.
The previous rates, an average of $1,615 for homeowners, renter’s and condominium policies, will remain in place until the comes back with another rate plan that meets with the state’s approval, said Joseph G. Murphy, state commissioner of insurance.
He said FAIR rates are figured by location. Springfield , New Bedford and Worcester were in for a 9-percent rate hike. Rates would have gone up 1.6 percent in Chicopee and Holyoke and 1.5 percent in Hampden County communities that are not Chicopee, Holyoke or Springfield.
High-risk property insurance pools like FAIR started in the late 1960s after regular insurers stopped writing coverage in urban areas for fear of riots and arson, Murphy said. In Massachusetts, FAIR is often the only option available to people living in coastal areas, including Cape Cod and the islands, where insurers fear floods and wind damage.
With about 200,150 policies with the FAIR plan, Murphy said. It’s about 13 or 14 percent of the market making it the state’s largest issuer of home insurance.
Executives at Massachusetts Property Insurance Underwriters Association didn’t return calls for comment Friday afternoon.
According to documents provided by Murphy, the Massachusetts Property Insurance Underwriters Association based its argument for higher rates in part on meteorological models that show an increased risk of damage from hurricanes. But Murphy said that Massachusetts Property Insurance Underwriters Association didn’t include enough information to back up its contention.
David M. Hess, an agent with Southwick Insurance, said some people end up turning to FAIR because they have a dog that might be considered a high risk.
Murphy said risks also extend to in-ground swimming pools or trampolines.
Insurance rates for everyone, auto property and homeowners, are inching upwards due to the high number of claims field here last year. But Murphy said it should take years to feel the impact of the tornadoes, Hurricane Irene and the October snow storm and the snowstorms in February 2011. It shouldn’t happen all at once.
Hess said reinsurance is also driving up costs. Reinsurance is the process of insurance companies paying to insure themselves against excessive loss, is getting more expensive due to the financial markets.