Liberating the insurance division

February 18, 1992

Once again, a plan has surfaced to liberate the state Insurance Division from the Department of Licensing and Regulation. On its last airing two years ago, we opposed the idea on the grounds that it was the right solution to the wrong problem -- errant leadership.

Little has changed on that front. Secretary William A. Fogle continues to play the role of obstructionist to Insurance Commissioner John A. Donaho's attempts to upgrade the agency. Worse, Mr. Fogle has little credibility in Annapolis and hasn't been particularly helpful in getting funds for his second-largest division. The long-running animus between these two men is unacceptable and demands immediate and decisive action.

In a perfect world, the obvious solution would be to move Mr. Fogle to another position in state government. But there is little that is obvious or perfect in Annapolis. Gov. William Donald Schaefer continues to display intense -- if misplaced -- loyalty toward Mr. Fogle. Yet even he recognizes that this deeply dysfunctional relationship poorly serves Maryland insurers and consumers.

Reversing his earlier position, the governor has thrown his support behind a bill that would make the state Insurance Division an independent agency. The money to pull this off would come from a surcharge on insurers expected to raise between $2 million and $4 million a year. In the absence of any real solution -- Mr. Folger's ouster -- we support this bill. The surcharge would bridge the division's perpetual funding gap. That, together with making the unit an independent entity, would allow this important regulator to get on with the crucial business of automating and streamlining its operations.

Time is short. Maryland's domestic insurance industry is operating under considerable financial strain. Worse, local insurers face the threat of losing national accreditation -- and the ability to do business in other states -- unless Maryland regulators improve monitoring and processing capabilities. The National Association of Insurance Commissioners has warned that after Jan. 1, 1994, companies based in non-accredited states won't be able to do business elsewhere.

Mr. Schaefer's change of heart is a promising sign. So is the industry's eager embrace of a premium tax as well as support from the House Economic Matters Committee. But the plan could be torpedoed in the state Senate, which has long opposed the idea of an independent insurance regulator.

There are compelling reasons to back this proposal, not the least of which is the health of a major state employer that brings in $160 million a year in premium taxes. The promised overhaul of the state Insurance Division has dragged on long enough. It is time that Mr. Donaho got the tools he needs to modernize his agency.

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