(The following is a reformatted version of a press release
issued by the Office of Massachusetts Attorney General Martha
Coakley and received via electronic mail. The release was
confirmed by the sender.)
October 17, 2013
PREMIUM FINANCE COMPANY TO PAY $160,000 FOR PREMATURELY
CANCELING AUTO INSURANCE POLICIES
Company Failed to Give Required Notice Before Canceling Policies
of Close to 100 Massachusetts Customers
BOSTON - A New York-based premium financing provider has agreed
to pay $160,000 to resolve allegations that it illegally
cancelled certain financed auto insurance policies affecting
close to 100 Massachusetts customers, Attorney General Martha
Coakley announced today.
According to the assurance of discontinuance, filed in Suffolk
Superior Court on Wednesday, AICCO, Inc., a subsidiary of
American International Group, Inc. (AIG), issued cancellation
requests to insurance companies with an effective date that was
just three days after the date of the notice. State law requires
premium financing providers to give at least a 20-day notice to
the insurance company that issues the policy.
“Massachusetts customers should receive proper notice of auto
insurance cancellations so they can determine an appropriate
solution for continued coverage,” AG Coakley said. “Our office
will continue to ensure that these providers are complying with
state insurances laws, not prematurely pulling the plug on these
This statute works in conjunction with other provisions to
ensure that customers have adequate time to bring their accounts
current before their policies lapse and they are forced to take
vehicles off the road or seek replacement coverage.
A premium finance company provides loans that enable people to
pay their insurance premiums in installments. The company uses
the unearned premium on the policy as collateral for the loan.
If a customer misses a scheduled payment, the premium financing
provider may seek to cancel the policy.
Under the terms of the settlement, AICCO will make payments
totaling more than $125,000 to roughly 100 customers in
Massachusetts whose policies AICCO allegedly prematurely
cancelled or sought to prematurely cancel in violation of state
law, in addition to a $35,000 payment to the Commonwealth.
The AG’s Office began its investigation of illegal cancellation
practices by premium financing providers in 2011. This is the
third investigation to result in refunds to Massachusetts
customers. In 2011, IPFS Corporation paid $82,000 to settle
similar allegations. In January 2013, Flatiron agreed to pay
This matter was handled by Assistant Attorney General Jenny
Wojewoda with assistance from Investigations Supervisor Arwen
Thoman and Mathematician Burt Feinberg of Attorney General
Coakley’s Insurance and Financial Services Division.
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