ANNAPOLIS -- Maryland's chief insurance regulator argued yesterday that his agency ought to be independent of the Department of Licensing and Regulation, and prominent members of the insurance industry promised to help pay the way.
Legislation requested by Gov. William Donald Schaefer would remove the state Insurance Division from the licensing department and create an independent Maryland Insurance Administration with an anti-fraud bureau.
The legislation also would impose on Maryland-based insurers an annual surtax that would fill the gap between what the
agency collects in fees and penalties and what the governor and General Assembly agree is appropriate funding. The bill would not allow the industry to pay more than 30 percent of the agency's total budget.
The idea of a regulatory agency partly financed by the industry it oversees had some lawmakers concerned.
"If Mr. Donaho believes that the state's insurance companies want to give money so they can be more closely regulated, then he believes in the tooth fairy," Senate President Thomas V. Mike Miller Jr., D-Prince George's, said last week, referring to Insurance Commissioner John A. Donaho.
But that is exactly what Maryland's insurance industry has in mind, some of its leaders told the House Economic Matters Committee yesterday.
"Fundamentally, it all is geared toward effective regulation and toward the lowering of insurance costs in general," said Norman P. Blake Jr., chairman and chief executive of USF&G Corp., which would pay a surtax of about $80,000 the first year the bill took effect.
William B. Snyder, chairman of GEICO Corp., said the bill would cost his company $300,000 this year. "But we think it's needed," he said, partly to protect against insolvencies, for which all insurers would pay through a state guaranty fund.
The insurers and Mr. Donaho said the extra funding also is needed to help the agency meet the standards needed for accreditation from a national regulatory group, the National Association of Insurance Commissioners.
Committee Chairman Casper R. Taylor Jr., D-Allegany, said he has heard the criticism that "the industry that's being regulated somehow compromises the regulatory process by contributing to the funding" of its regulator. He noted that the same criticism is not leveled at the Public Service Commission, also funded by the utilities it regulates.