Panel urges stricter rules for insurers

January 11, 1991|By David Conn | David Conn,Annapolis Bureau of The Sun

ANNAPOLIS -- Insurance companies would have to increase their capital and surplus levels fivefold and submit anti-fraud plans to the state Insurance Division, and their officers would have to undergo fingerprinting and FBI-style background checks to sell insurance in Maryland.

Those recommendations and others are part of a package of legislation the Governor's Commission on Insurance presented to members of the Senate Finance Committee yesterday. The commission was appointed to address growing fears of financial problems in the insurance industry and to improve state regulation of insurers.

A legislative aide to Gov. William Donald Schaefer said the recommendations have been incorporated into the governor's overall legislative package, which is to be introduced late next week.

The commission's suggestions did not include any decision on whether Maryland should adopt a no-fault auto-insurance system. Such a system prohibits drivers from suing one another for property damages or injury.

Policy-holders collect the cost of damages from their own insurers in exchange for lower premiums.

Insurance Commissioner John A. Donaho, under lawmakers' questioning, said the commission has yet to decide on no-fault because it needs time to study the results of an actuarial report on auto insurance in Maryland.

Chairman A. Samuel Penn said that under other recommendations the commission presented to the governor after its eight months of work:

* Attempted insurance fraud would become a felony, rather than a misdemeanor. Mr. Penn told the legislators that fraud costs Maryland insurance companies an estimated $100 million a year.

* An assistant attorney general would be assigned to the Insurance Division to investigate fraud.

* The insurance commissioner would be given broader authority to take control of an ailing insurer before it became insolvent.

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