Schaefer backs plan to make Insurance Division independent Surtax on insurers would provide funds for new agency.

February 04, 1992|By David Conn | David Conn,Annapolis Bureau

ANNAPOLIS PHC B — ANNAPOLIS -- A plan to make the state Insurance Division an independent agency, with the needed financing provided by a surtax on all Maryland insurers, will be introduced in the General Assembly this week with the governor's support.

The bill will include an annual surtax on all insurers based in Maryland and "most likely" will remove the Insurance Division from the Department of Licensing and Regulation, David Iannucci, Gov. William Donald Schaefer's chief legislative officer, said yesterday.

Proponents think an insurance agency removed from the politics and budget decisions of a full department would be better able to focus on its mission.

The surtax idea actually came from insurance executives, who made the proposal in a meeting with the governor last month. They agreed to provide whatever money the insurance regulator needs and that the state is unable to provide, they said.

The division receives about $8 million each year, but Commissioner John A. Donaho has asked repeatedly for an additional $1 million to $2 million a year.

Jack Andryszak, a vice president of USF&G Corp., said the surtax would be based on the amount of insurance a company sold in Maryland and probably would raise $2 million to $4 million a year.

In Annapolis, the move to make the agency independent has derived much of its force from Del. Casper R. Taylor Jr., D-Allegany, chairman of the House Economic Matters Committee. That panel voted last week in support of the proposal, which also calls for the creation of an anti-fraud unit within the insurance agency.

Even with the governor's imprimatur, the proposal faces a rocky road in the Senate, which long has opposed the idea of an independent insurance regulator. Licensing and Regulation Secretary William A. Fogle Jr. also has opposed the idea in the past.

The insurance agency is seeking accreditation from the National Association of Insurance Commissioners, an organization formed by the top insurance regulators.

"I believe that Chairman Taylor believes it's an integral part to making the Insurance Division accredited," Mr. Iannucci said.

"You essentially have the insurance industry asking to be taxed to fully fund the Insurance Division," Mr. Iannucci noted. "They thought this was a good investment."

That's because the division's failure to win accreditation could threaten the ability of Maryland companies to do business in other states.

The National Association of Insurance Commissioners has warned that after Jan. 1, 1994, commissioners might not authorize companies that are based in non-accredited states.

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