A bill that would have allowed the Maryland Automobile Insurance Fund to offer insurance policies on an installment plan, saving many high-risk drivers $140 a year, has been killed by the House of Delegates Economic Matters Committee.
The full House, meanwhile, has passed a bill that would require agents selling MAIF insurance policies to disclose to customers any additional insurance coverage not mandated by law that they tack onto a customer's bill. That measure is now pending in the state Senate.
The bill to allow installment payments was killed last week, while the bill requiring disclosure of so-called add-on coverage was passed by the House on Monday.
MAIF is the state agency that provides automobile insurance to high-risk drivers who cannot find coverage with private insurers. About 118,000 people in Maryland have policies with MAIF, 13,500 of them in Baltimore.
Since MAIF is prohibited from offering installment payment plans, 95 percent of the policies are paid for with loans from premium financing companies.
With the average MAIF annual premium in Baltimore at $1,827, policyholders pay an additional $180.73 in finance charges and fees as the result of premium financing, according to David C. Trageser, director of operations for MAIF. If MAIF could offer installment payments, the annual charge would be $40, he said.
Besides paying the additional finance charges, MAIF customers often pay for coverage added by the private agents who write MAIF policies. This coverage, called add-ons, ranges from towing service to legal plans and sometimes duplicates other coverage held by the policyholder. MAIF officials say many customers do not realize they are getting the additional insurance, which can cost hundreds of dollars a year.
The bill requiring disclosure of those add-on policies, in its original version, would have required agents to put the additional coverages on separate finance agreements, removing them from the MAIF policy agreement. Legislators, however, amended the bill to require that insurance agents get a signed statement from customers saying they know the cost and nature of the add-ons. Customers also would have to be notified that the coverage is optional and not required by law.
At a March 14 hearing, opponents said the bills were an attack on private enterprise.
"I don't think the proponents have said anything to show where private industry isn't doing the job well," said J. William Pitcher, a lobbyist representing the Commonwealth Mutual Co. of Baltimore. "They are just saying they can do it cheaper. I could, too, if I were handed a subsidy."
Legislators were also concerned that a one-time charge of $10 would be levied against all private insurance policyholders to make up any possible cash storage in the MAIF fund that might result from an installment-payment plan. Under state law, losses at MAIF are made up by an assessment on private automobile insurance policyholders.
A report from the state Department of Fiscal Services said the MAIF installment plan would cost more than $500,000 to implement.
However, supporters of the bill said MAIF was in the best position it has ever been to implement an installment plan because MAIF has a $40 million surplus.
Even though the add-ons bill was amended, the requirement that all additional coverage be disclosed is welcomed, according to Janelle Cousino, executive director of the Maryland Citizen Action Coalition. "Knowing how things move slowly down here, we are one baby step ahead," she said.