GEICO Enters Market

GEICO entered the MA private passenger auto insurance market and wrote
its first policy on Monday, May 18, 2009. As soon as we were permitted by the
Division of Insurance to do so, MAIA obtained a copy of the filing — as we do
with every company filing — and began the tedious task of reviewing the forms,
endorsements and rules.

On “launch day,” your editor obtained a quote from the GEICO website. The
good news is that is was NOT cheaper! It was difficult to determine exactly how much MORE expensive the GEICO policy was because the quote included a $100 PIP deductible (??), NO Waiver of Deductible, NO Medical Payments and NO Substitute Transportation.

Our review of their filing revealed some interesting changes. GEICO has
made a number of changes to the Massachusetts Auto Policy (MAP). Most
notable is that the definition of YOUR AUTO does not include a motorcycle. In
addition, the following sentence has been added to the Trailer definition: “The
trailer must be pulled by your auto.”

GEICO has added the following exclusion to Part 4. Damage to Someone
Else’s Property: “In addition to the above exclusion for the business or selling,
servicing, repairing or parking autos, while anyone is using a vehicle in the
course of any business. This exclusion also applies to private passenger autos,
pick-up trucks, vans, and similar vehicles used for the delivery or transportation of goods or materials unless such use is incidental to your business of installing, maintaining, or repairing furnishings or equipment.”

Interestingly, the exception for delivery or transportation of goods which is incidental to your business of installing, maintaining, or repairing furnishing or equipment above seems to conflict with the second part of GEICO’s private passenger automobile definition in Rule PPA-01: B. utility vehicle of the pick-up, panel or van body type with a gross vehicle weight of 15,000 pounds or less, that is not used as a public or livery conveyance for passengers, but rather is used for personal and family pleasure, commuting and/or business purposes. A utility vehicle that is customarily used for wholesale or retail delivery or commercial transportation of property is excluded from the private passenger automobile definition.

GEICO has added the following language to Part 7. Collision, Part 8. Limited
Collision and Part 9. Comprehensive: “The cost to physically repair the auto is
limited to the prevailing competitive price, which is the price we can secure
from a competent repair facility conveniently located to you …”

GEICO has replaced Part 10. Substitute Transportation with Rental
Reimbursement and has defined when reimbursement of rental expenses ends:
“Reimbursement for rental charges and transportation expenses shall end the
earliest of when your auto has been: 1. Returned to you; 2. Repaired;
3. Replaced; or 4. If your auto is deemed by us to be a total loss, then seventy
two (72) hours after we pay the applicable limit of liability under Part 7, Part 8
or Part 9.

GEICO has replaced Towing and Labor with Part 11. Emergency Road Service. We have included the complete text of this new coverage in our online GEICO Executive Summary.

GEICO has made changes in the Cancellation and Renewal section of the policy. The first two reasons for cancellation of the entire policy in the Seventh and Eighth Edition MAP were retained; however, the following reasons were either replaced or added:

3. There is a suspension or revocation during the policy period of the operator’s license or motor vehicle registration of you or any other person residing in the same household as you and who usually operates a motor vehicle insured under the policy.
4. You fail to comply with a request for a motor vehicle safety inspection test for a vehicle that was previously totaled in a prior accident.
5. Your failure to complete and furnish us with a renewal application on a form prescribed by the Commissioner at least 30 days before the expiration of the previous policy period.

GEICO also added the following reasons for cancellation:

􀂲 If the driver’s license or auto registration of anyone residing in your household who usually
operates your auto has been under suspension or revocation during the policy period, we may
suspend coverage for that person under any of the Optional Insurance Parts of the policy. We may also reduce the limits for that person under Bodily Injury Caused By An Uninsured Auto and Damage to Someone Else’s Property (Parts 3 and 4) to the minimum limits we are required to sell.
􀂲 We can cancel Emergency Road Service (Part 11) for reasons other than those listed above if we do so within the first 90 days of the policy period.
􀂲 We can cancel, for reasons other than those listed above if we do so within the first 90 days of the policy period, coverage limits which are higher than the limits we are required by law to sell you and any coverage designed to reduce the deductibles set by law.
􀂲 Under the automatic policy termination clause, GEICO has removed the provision that the policy automatically terminates 30 days after you sell your vehicle and do not register another, leaving only the provision that your policy terminates automatically when you sell your auto and do not register another auto.

We are concerned that the GEICO website and all applications and questionnaires improperly require the applicant to submit the date of birth, sex and marital status of all drivers. We will express our concerns about this and other issues to the Commissioner of Insurance.
Some other random items contained in GEICO’s manual of rules include:

1. All cancellations and changes are pro-rata.
2. All coverages except Comprehensive can be suspended by the insured. Obviously, we are concerned about whether GEICO plans to report this to the RMV.
3. Rounding is to the nearest whole penny.
4. Under Driver Definitions, a “rated driver” is “any licensed driver listed on a policy who is not classified as cancelled, excluded, deceased, deployed, having other insurance, or having a learner’s permit.
5. The operator assignment rule provides:
􀂲 Unless otherwise noted, the driver who primarily operates the automobile will be assigned to that auto.
􀂲 Active military are not considered for assignment unless they customarily drives the auto.
􀂲 Inexperienced drivers more than 100 miles away attending a recognized college or educational institution will not be rated unless they customarily drives the auto.
􀂲 When a vehicle is used by both an experienced and an inexperienced operator, the inexperienced operator will be assigned to that vehicle if that is the vehicle the inexperienced driver primarily operates.
􀂲 When there are more vehicles than drivers, excess vehicles will be assigned Class 15 provided that there is a Class 15 driver listed on the policy and all listed drivers have 6 or more years
experience. If there are no Class 15 drivers, Class 10 will apply to the excess vehicles.
􀂲 A vehicle will be rated with the merit points from the operator assigned to that vehicle. Merit points for unassigned Rated Drivers are assigned to the car they operator the most. These merit points are added to the points from the assigned driver.
􀂲 GEICO obtains merit rating information: the company’s own records, motor vehicle records,
applicant’s statements or insured’s statement on self-reporting forms, C.L.U.E., and current
carrier.
􀂲 The GEICO plan includes a 5-year experience period—6 if earliest year is clean
􀂲 Major and Minor accidents are defined the same as 2006 Plan
􀂲 Major Violations include: Driving to Endanger or Reckless Driving; Leaving Scene of Accident
after Property Damage or Personal Injury and Death; Liquor and Narcotics, Operating Under the Influence; Liquor and Narcotics, Operating Under the Influence of and Reckless Operation Causing Serious Injury; Operating after Revocation of License; Operating after Suspension of Drivers License; Refusing to Stop for Officer; Vehicular Homicide; Manslaughter (only if by Motor Vehicle). Out-of-State Major Incidents: Operating under the influence of Liquor and/or narcotics; Vehicular Homicide. Additional Incidents (on or after 10/28/2005: OUI while License Suspended for OUI; Child endangerment while OUI; Manslaughter while OUI.

Additional Incidents (after 1/1/2006):

Permit Unlicensed Suspended Operator of Motor Vehicle; Permit Operation Without Ignition
Interlock; Operate Without Ignition Interlock; Tamper with Ignition Interlock; Bypass Ignition
Interlock for another. All other traffic convictions are minor violations.
􀂲 GEICO’s merit rating plan also includes the following: “Convictions include those violations for
which the applicant or any Rated Driver of the vehicle has been convicted or paid a fine.
Convictions also include violations for which there have been a forfeiture of bail or collateral, a
plea of nolo contendere, or a prayer for judgment continued.”
􀂲 Merit Point Calculation follows the 2006 Plan.
􀂲 Finally, GEICO uses following characteristics: cancellation notices, convictions, current insurance status, days quoted in advance of current policy expiration, lending losses (accident while operated by unlisted driver), length of current residence, negligent accidents, non-negligent accidents, number of drivers, number of drivers added, number of vehicles, number of vehicles added, prior limits of liability, reissues, suspensions, theft/vandalism claims, years insured with current insurer, years licensed, and years with GEICO.

Feel free to visit massagent.com to review the entire GEICO filing or the filing of any other MA auto carrier. As always, you may contact Donna McKenna or Kathy Cormier by phone at 800.974.9312 or 508.634.3900 or by email at dmckenna@massagent.com or kcormier@massagent.com.