P&CMAmedium
Under MA rate regulation, a P&C rate is considered 'inadequate' when which of the following is most accurate?
AAny policyholder requests a lower premium
BThe rate is identical to another insurer's filed rate, which by itself proves inadequate under the statute regardless of loss sufficiency or competitive impact
The rate is insufficient to sustain projected losses and expenses or would tend to substantially lessen competition
DThe rate is lower than the prior year's filed rate, which automatically renders it inadequate without any showing of insolvency risk or competitive harm
Why this is the answer
Massachusetts rate law (M.G.L. c. 174A §5, c. 175A §5 and, for motor vehicle rates, c. 175E §4) prohibits inadequate rates as well as excessive ones; c. 175E §4(a) treats a rate as inadequate when it is unreasonably low and either endangers the insurer's solvency or has the effect of destroying competition or creating a monopoly. DOI applies this prong to prevent destructive underpricing that could destabilize the MA market, regardless of whether individual consumers would prefer the lower premium.
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