Govt Abstract
The Massachusetts Lawyer Normal has issued laws on “junk charges” (940 CMR 38.00) that took impact in February 2024, with enforcement starting September 2, 2025.
These laws basically change how Massachusetts companies should disclose pricing to shoppers.
Insurance coverage brokers and firms ought to be aware the regulation’s prohibitions although the junk payment laws might not instantly have an effect on their operations or enterprise practices.
Insurance coverage business stakeholders efficiently advocated for particular lodging, recognizing the distinctive nature of insurance coverage underwriting and pricing. This text briefly summarizes the laws, their software to insurance coverage transactions, and the way they work together with current Division of Insurance coverage (DOI) steering on producer charges (DOI Bulletin 2013-09).
Understanding the Core Necessities
The Lawyer Normal’s junk payment laws (940 CMR 38.00) search to fight any hidden or misleading charges throughout Massachusetts companies. Key provisions embody:
- Whole Value Disclosure: Companies should clearly and conspicuously disclose the Whole Value of services or products on the time of preliminary worth presentation.
- Price Transparency: The character, goal, and quantity of all charges have to be clearly disclosed. Elective or waivable charges have to be recognized as such, with directions on how shoppers can keep away from them.
- Disclosure Timing: Whole Value disclosure should happen earlier than gathering private info from shoppers (with necessary exceptions for insurance coverage, mentioned beneath).
- Prominence Necessities: The Whole Value have to be displayed extra prominently than some other pricing info, making certain shoppers aren’t misled by artificially low marketed costs.
- Unfavorable Choice Options: Companies providing trial intervals or recurring costs should present clear phrases, easy cancellation mechanisms, and advance notification earlier than recurring costs.
Insurance coverage Business Lodging
The insurance coverage business lobbied for and obtained modifications to the unique proposed laws. The ultimate laws acknowledge that correct underwriting and pricing typically require gathering private info earlier than a last worth may be decided:
- Private Info Assortment Exception: Insurers might accumulate private info earlier than disclosing the Whole Value if the data is particularly mandatory for:
- Underwriting
- Figuring out product availability
- Making certain the legality of the sale
- Computing pricing points beforehand permitted by Commonwealth’s insurance coverage or monetary regulatory businesses
- Value Change Provisions: Modifications to the Whole Value ensuing from info used to compute regulatory-approved pricing points gained’t represent a violation if:
- The up to date Whole Value can be supplied as quickly as possible
- Customers are warned about potential modifications when the preliminary Whole Value is introduced
These lodging strike a steadiness between shopper transparency and the sensible realities of insurance coverage pricing mechanisms, stopping pointless disruption to the business whereas sustaining the laws’ core transparency targets.
Relationship with DOI Bulletin 2013-09 on Producer Charges
The junk payment laws don’t create any exception for current steering from the Massachusetts Division of Insurance coverage on producer charges. See Owen Gallagher’s Company Checklists’ October 8, 2013 article “DOI Bulletin Allows Producers To Charge Fees..”
DOI Bulletin 2013-09 permits insurance coverage producers to cost charges to insurance coverage consumers separate from coverage premiums, supplied they meet particular disclosure necessities:
- The aim and quantity of the payment have to be disclosed in writing to the purchaser earlier than the sale
- The payment should not be included within the coverage premium established by the insurer
- The payment have to be individually itemized on coverage documentation
The variations between the Lawyer Normal regulation and the DOI bulletin seem within the following desk:
| Facet | DOI Bulletin 2013-09 | AG’s Junk Price Rules (940 CMR 38.00) |
| Focus | Producer-charged charges separate from premiums | Whole worth transparency for all obligatory charges |
| Scope | Restricted to producer charges | Complete protection of all charges related to insurance coverage transactions |
| Timing | Written disclosure earlier than the sale | Clear and conspicuous disclosure on the preliminary worth presentation (with insurance-specific exceptions) |
| Itemization | Required coverage documentation | Extends past documentation to all pricing communications |
Regulatory Authority Distinction
An necessary authorized distinction exists between the Lawyer Normal’s junk payment regulation and the DOI’s pointers for producer charges.
The Lawyer Normal’s junk payment laws (940 CMR 38.00) have the total drive of legislation. These laws had been formally promulgated underneath the Lawyer Normal’s authority to outline unfair and misleading enterprise practices underneath Massachusetts Normal Legislation Chapter 93A. Violations can lead to enforcement actions, together with civil penalties, restitution, and injunctive aid.
Whereas offering regulatory steering on producer charges, DOI Bulletin 2013-09 doesn’t have the drive of legislation. Bulletins symbolize the Division’s interpretation and steering on current statutory provisions however don’t create new legally binding necessities. They function regulatory statements that inform business practices and set expectations for compliance. See Owen Gallagher’s Company Checklists’ August 11, 2011 article “Division of Insurance Bulletins Do Not Have the Force of Law.”
The Lawyer Normal’s Regulation Takes Priority Over The DOI’s Bulletin
The Lawyer Normal and the insurance coverage commissioner have established requirements for charging charges. Nonetheless, the Lawyer Normal’s laws set up actionable authorized obligations that may have severe penalties for violations. Any insurance coverage enterprise charging charges should adjust to the AG’s laws phrases first and the DOI steering second.
Suppose there’s a battle between the Lawyer Normal’s regulation phrases and the DOI’s bulletin’s phrases in any insurance coverage payment transaction. In that case, the Lawyer Normal’s regulation’s phrases will apply to the transaction to the exclusion of the DOI bulletin’s phrases.
