ANNAPOLIS -- As a step toward heading off insurance failures in Maryland, the amount of capital an insurer in the state must keep would increase to as much as three times the current levels under a bill the House of Delegates passed yesterday.
The House also passed yesterday bills that would:
* Prevent policyholders from protesting the non-renewal of their policies if the insurance company is withdrawing from the state, has fileda plan of withdrawal and gives its customers 45 days' notice.
* Prohibit physicians from being partners or a co-owner of pharmacies or employing a pharmacist to run a pharmacy. The bill is intended to prevent physicians from having a direct financial interest in how drugs are prescribed.
* Prohibit real estate brokers from requiring homebuyers to use a particular mortgage company as a condition of buying the house.
The insurance bill is part of a package of legislation aimed at protecting against insurance insolvencies. Other bills, still to be voted on by House and Senate committees, would give the insurance commissioner more leeway to take over an ailing insurer, and would target fraud committed against insurance companies.
Despite some concerns voiced on the House floor about the possible anti-competitive effects of the bill, the legislators voted 132-0 for the measure.
It was the first of a package of insurance-related bills submitted bythe governor to make it to the floor of either house and is one of a number of measures that would contribute to Maryland's accreditation by the National Association of Insurance Commissioners.
Though there have been only two insolvencies of Maryland insurers in the last 15 years or so, the rising tide of insolvencies nationwide led a commission appointed by Gov. William Donald Schaefer to recommend thelegislation.
The bill, H.B. 205, would require insurers new to the state to keep at least $1.5 million in capital on hand, rather than the current $500,000, if they write life insurance, or if they offer two or more lines of any type of insurance. Companies that write only one line of most other types of coverage would have to keep $750,000 in capital, up from $250,000.
Insurers already doing business in Maryland would be given 10 years to comply with the new capital levels, under the legislation. And the bill would require the insurance commissioner to examine Maryland-based insurance companies atleast once every three years, rather than every five years.
Delegate Ellen R. Sauerbrey, R-Baltimore County, questioned the two-tier treatment of insurers based on whether they have been doing business in Maryland. "It does seem like you are intentionally discouraging competition with this bill," she said before the House vote.
But Delegate Casper R. Taylor Jr., D-Allegany, chairman of the Economic Matters Committee, which approved the bill last week, said Maryland always has maintained a two-tier regulatory system. "Everybody in the entire industry that testified on the bill testified in favor of it," he said.