Panel backs independent insurance agency Private industry offers to help fund state division

January 25, 1992|By David Conn | David Conn,Annapolis Bureau of The Sun

ANNAPOLIS -- With broad industry backing, a House committee yesterday approved a proposal to make the state insurance division an independent agency, to beef up protection against insurance fraud, and to give the agency enough money to win much-needed national accreditation.

Indeed, Maryland's insurance industry likes the proposal so much, it has agreed to help fund the division to make it a reality.

The industry here has agreed to back the House Economic Matters Committee plan by supplying whatever funding the insurance agency needs beyond what is budgeted by the General Assembly each year, according to Jack A. Andryszak, vice president for government affairs at USF&G Corp., the giant Baltimore-based insurer.

The funding plan calls for the industry to pay a "regulatory surtax" into a fund that would go directly to the insurance division.

The surtax would raise no more than $2 million the first year and would probably never raise more than $4 million, Mr. Andryszak said. The surtax a company would pay would be based on the amount of insurance it sells in Maryland.

"Everybody who's regulated by the insurance department domestically has signed onto this," Mr. Andryszak said.

The insurance division's funding this year is $8.1 million, but Insurance Commissioner John A. Donaho has said repeatedly that he needs between $1 million and $2 million more to do his job correctly and to secure accreditation from the National Association of Insurance Commissioners, a group formed by the top insurance regulators across the country.

If the division fails to win NAIC approval by the association's 1994 deadline, regulators might not allow insurers based in Maryland to operate in their states, Mr. Donaho has said.

"Our goal is to have the insurance department accredited by the NAIC," Mr. Andryszak said. "What that ultimately means is effective regulation."

But William A. Fogle Jr., secretary of licensing and regulation, has consistently opposed making the insurance division independent. He said in an interview this week that a surtax on insurers to fund such a plan would only be passed on to consumers.

The three-part proposal, which also includes setting up an anti-fraud unit within the insurance division, was carried in a report prepared by an economic matters subcommittee, which had been looking into a recent legislative audit of the insurance division.

The full committee, which oversees the insurance industry on the House side, approved the report unanimously yesterday and agreed to present it to the General Assembly's leadership committee Monday, according to committee Chairman Casper R. Taylor Jr., D-Allegany.

He said it remained to be determined whether Gov. William Donald Schaefer would agree to sponsor a bill that would pull the insurance division out of the Department of Licensing and Regulation and make it an independent agency.

David Iannucci, Mr. Schaefer's chief legislative officer, said the governor hadn't decided whether he would sponsor or support the concept.

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