Schaefer bills seek tighter insurance regulation

January 23, 1991|By David Conn | David Conn,Annapolis Bureau of The Sun John W. Frece of The Sun's Annapolis Bureau contributed to this article.

ANNAPOLIS -- The Schaefer administration revealed its insurance legislative agenda this week, filing a raft of bills that would do everything from tightening regulators' grip on ailing insurers to protecting insurance companies from attempted fraud by customers.

The legislative package is based on recommendations of the Governor's Commission on Insurance, which has been meeting for nine months to address a variety of insurance-related issues.

Among the highlights in the package are bills that would:

* Require the chief executive offi

cer of an insurer to notify the insurance commissioner if the company's assets become "financially impaired."

* Increase the amount of capital an insurer must retain and impose minimum capital requirements on insurers based in Maryland.

* Change from every five years to every three the frequency of state examinations of Maryland insurers.

* Expand the authority of the insurance commissioner to rehabilitate or liquidate impaired insurance companies.

* Require managing general agents -- independent companies that do much of the underwriting work of insurers -- to be licensed with the state.

* Require insurers to institute anti-fraud plans that protect against losses from customers who file fraudulent claims.

Missing from the package, introduced to the Senate Monday night and assigned to the Finance Committee, was any mention of a no-fault auto-insurance system, one that would guarantee lower premiums in exchange for a prohibition on lawsuits by drivers.

The commission, headed by A. Samuel Penn, an instructor at the College of Notre Dame of Maryland, has yet to come up with a recommendation on no-fault, but members said the group is still studying the issue.

In the meantime, Delegate John W. Douglass, D-Baltimore, said yesterday that he has drafted an "optional no-fault" bill to be introduced by Feb. 1.

The bill would allow drivers to choose between the current "tort" nTC system -- in which any driver may sue another for medical, property, or non-economic "pain and suffering" damages -- and a no-fault system that guarantees 20 percent lower premiums but requires drivers to collect only medical and property damages, from their own insurers, regardless of who was at fault in an accident.

And an aide to Sen. Michael J. Wagner, D-Anne Arundel, said the senator agreed yesterday to sponsor two versions of optional no-fault bills, one of which would guarantee those who choose no-fault that their premiums would be 25 percent lower.

Yesterday was the deadline to submit bills to the Department of Legislative Reference and still guarantee their being printed and submitted before Feb. 1, after which bills are no longer ensured a hearing in committee.

Opponents of no-fault, most prominently plaintiffs' attorneys, were exulting yesterday over a study released last month without fanfare by the Legislative Reference Department. The study, which compared certain no-fault states to those with a traditional tort system, concluded that from 1984 to 1989, average premiums in the no-fault states were more than $23 higher than in the tort states.

"The report says exactly what we've been telling the public since we got involved in the [no-fault] process," said Dennis McCoy, lobbyist for the Maryland Trial Lawyers Association, which includes more than 1,500 plaintiffs attorneys.

"Not only are you losing valuable rights people fought and died for, but it is going to cost you more money," Mr. McCoy said.

The study focused on "in balance" no-fault states, those where the dollar amount of claims per vehicle was equal to or less than what it would have been if the state had a tort insurance system, all other factors being equal.

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