There is no lack of competition in the insurance industry and no need to fiddle with the insurance industry's exemption from Maryland's antitrust law, according to a draft report of the Governor's Commission on Insurance, which was expected to be made final late last week.
In fact, repealing the exemption would only hurt smaller insurers and possibly even drive some out of business, the commission's antitrust subcommittee said in the report, which was obtained by The Sun.
Gov. William Donald Schaefer appointed the commission in May to draft recommendations on a variety of insurance issues, including antitrust, solvency, insurance fraud and no-fault insurance.
After seven months of work, the 11-member commission has come under fire for being dominated by the insurance industry and for producing an accompanying report on Maryland's auto-insurance system that was prepared by a company hand-picked by the industry.
One commission member, Janelle Cousino of Maryland Citizen Action Coalition, cited the solvency committee's original call for the insurance commissioner to publicly oppose mandated, unsupported rate rollbacks, such as California's Proposition 103.
That opposition should be expressed at national insurance commissioners' meetings and before the Maryland General Assembly, if necessary, the panel said. The recommendation reportedly was dropped during a committee vote Friday.
The commission's chairman, A. Samuel Penn, "was gleeful when somebody passed around an editorial that criticized [consumer activist] Ralph Nader," Ms. Cousino said. "I think he's worn his opinion on his sleeve."
Mr. Penn vehemently denied charges of industry bias on the commission. He said, for instance, that Tillinghast, the subsidiary of Towers, Perrin, Forster & Crosby Inc. that prepared the auto-insurance report, was selected through open bidding in which all of the commission members participated, and that in fact Ms. Cousino had developed the bid specifications.
"Nothing, absolutely nothing, has been more fair, more open than this commission," Mr. Penn said.
Barbara Gregg, director of the Montgomery County Office of Consumer Affairs, said she did not wantto characterize the commission as being either pro-industry or pro-consumer. She said she agreed with Ms. Cousino that a competing bid to do the auto-insurance report submitted by Deloitte & Touche should have been compared with Tillinghast's price.
The commission rejected the Deloitte bid because it failed to meet certain bid criteria, Mr. Penn said.
The Tillinghast bid was $25,000 higher than the Deloitte bid, according to Ms. Cousino. Mr. Penn said it was only about $10,000 higher, and a Deloitte spokesman said it was about $20,000 higher.
All of the subcommittees except the one studying no-fault insurance have prepared draft versions of reports to be sent to Mr. Schaefer before the 1991 legislative session, according to Mr. Penn. The no-fault committee is "just not ready," he said.
Hearings never were held on another issue the group originally intended to study, the collateral-source rule. The rule concerns whether an
insurance plaintiff's award of money from one source may be used to reduce the size of an award from another source.
Along with the antitrust panel's recommendation, the fraud subcommittee suggested that Maryland:
* Make attempted insurance fraud a felony offense, rather than a misdemeanor.
* Adopt guidelines for proper medical costs, such as the one for the Medicaid system, and create a panel or procedure to decide whether treatment is reasonable when it exceeds the guidelines.
* Require insurers to submit anti-fraud plans to the insurance division.
* Allow the division to investigate reported fraud against companies with the help of a specially assigned assistant attorney general.
The subcommittee on solvency recommended that:
* Insurers be required to increase their minimum capital and surplus by five times the current amounts.
* Maryland impose criminal
sanctions on insurance officers who fail to report their companies' financial difficulties to the state.
* The insurance division complete National Association of Insurance Commissioners accreditation requirements, most of which Maryland is working toward now.
* The insurance division conduct extensive financial and criminal background checks on insurers' officers and directors.
* The insurance commissioner be given broader authority effectively to take control of a company to prevent an insolvency, rather than after it goes under.
The solvency subcommittee also wants Maryland's insurance commissioner to regulate managing general agents, which technically are not insurance companies but are given authority by insurers to perform many of their functions.
"In effect, MGAs are acting as unregulated insurers," the draft report reads, "and their status as such is unacceptable in any scheme designed to ensure solvency."