Attorney General Martha Coakley has settled with the Massachusetts Property Insurance Underwriters Association, also known as the FAIR Plan, to lower rates for homeowners obtaining insurance from the residual market by a .72 percent average statewide.

The FAIR Plan, which stands for Fair Access to Insurance Requirements, had proposed increasing homeowners’ insurance rates by 2.2 percent. The settlement, which was filed yesterday at the Division of Insurance, will save homeowners more than $7 million compared to the rates sought by the insurance companies.

"We believe this settlement protects consumers from the unwarranted rate increases sought by the industry," said Coakley. "In these tough economic times, it’s important that consumers not be overcharged for insurance."

The FAIR Plan, which is made up of the state’s insurance companies, is designed to provide homeowner insurance to consumers who could not otherwise obtain it in the private market at reasonable rates. The plan covers more than 150,000 urban and coastal homeowners, according to a statement.

The FAIR Plan submitted a request for a rate hike to the Division of Insurance on Oct. 30, 2009. Its proposal included 10 percent rate increases for New Bedford, Lawrence, Lowell, Newton, Springfield, Chicopee, Holyoke, parts of Worcester and Bristol County.

The industry also sought a 2.4 percent increase in rates for more than 70,000 Cape Cod and other coastal homeowners. The industry recognized the need for rate decreases for Boston, and dropped rates between 3 percent to 10 percent in these areas.

Coakley’s office was able to block proposed rate increases for Cape Cod, Fall River, Lynn, Cambridge, Somerville, Hampshire, Newton, Franklin, Berkshire, Chicopee and Holyoke. Under the settlement, New Bedford, Lawrence, Lowell, Springfield and Worcester rates will increase 5 percent instead of the 10 percent as the FAIR Plan was seeking.

In 2007, the FAIR Plan requested an overall rate increase of 13.6 percent, with a 25 percent increase for policies covering property in Cape Cod, New Bedford and Fall River. Coakley’s office challenged this request, and the FAIR Plan’s proposal was subsequently denied by the Commissioner of Insurance. In 2006, the commissioner approved a rate hike that allowed homeowners’ rates in the Cape and Islands to increase 25 percent.