Reform insurance

September 18, 1990

Suppose that the state of Maryland decided, with no rational explanation, to charge car owners in Hagerstown $25 for their license plates while charging car owners in Salisbury $50 for the same plates. Or suppose that the state charged drivers in Towson $10 to renew their drivers' licenses but drivers in Dundalk $20.

If such blatant, arbitrary and mindless fee distinctions were put into effect, we can be certain a citizen revolt would ensue. And even if the legislature did not respond to grievances, it is likely the courts would swiftly strike down this discrimination.

And yet this is precisely what happens with respect to auto insurance rates. Baltimore city drivers routinely pay twice as much, even more, than drivers in other parts of the state. And when liability insurance is required by law as a condition for driving, it becomes, for all intents and purposes, the equivalent of a tax. This being so, charging Baltimore city drivers twice as much for mandatory liability insurance is exactly the same as DTC charging twice as much for tags or drivers licenses.

The first stirrings of a Baltimore citizen revolt against discriminatory insurance rates are now being seen through the efforts of a struggling group called the City Wide Insurance Coalition. The group deserves support.

Insurance underwriters maintain, of course, that the rate disparity is not based on mindless discrimination or price-gouging, but rather on the demonstrable fact that more accidents occur in the city, resulting in costlier repairs and greater litigation costs. And, they maintain further, there is rampant insurance fraud in a variety of forms in the city.

They are, of course, entirely correct. But the fact remains that the very definition of insurance is sharing of risk based on loss experience in a given geographical area. The question becomes, then, who defines the geographical region and to what extent can the region be fragmented? If Baltimore city can be separated from Baltimore County, for instance, then does it not follow that the city itself can be fragmented? If drivers in the city can be charged insurance rates twice as high as drivers in the county, then couldn't drivers in one block of the city be charged four times as much as drivers in the next block? Even though their driving records may be identical?

If the state did not require all drivers to carry liability insurance, then we could let the competitive market work freely and private insurers could charge whatever the traffic would bear. But as long as the state does require the coverage, mechanisms must be developed to insure a measure of fairness. The disparity between insurance rates in the city and other parts of the state is only going to grow worse until the General Assembly confronts the issue squarely and makes the fundamental reforms that are necessary to make state-required liability insurance fair, equitable and affordable in all jurisdictions of Maryland.

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