HRC order sought to ease auto rates BALTIMORE CITY

March 23, 1993|By Eric Siegel | Eric Siegel,Staff Writer

A Baltimore citizens group is asking the Maryland Human Relations Commission to order one of the state's biggest insurers to stop setting automobile rates based on the territory in which a driver lives because the practice is racially discriminatory.

In a complaint filed yesterday against GEICO Corp., the group charges that the insurer's "territorial rate-setting scheme unfairly applies the highest premium rates to predominantly African-American communities," in violation of state anti-discrimination laws.

Arguing that the rates set by the Chevy Chase-based insurer for its three territories in Baltimore City would decrease by up to 50 percent if territorial rating were abolished, the complaint asks the HRC to order GEICO to consider other factors that would spread the premiums more evenly.

City Council President Mary Pat Clarke -- who signed the complaint as head of Baltimore FAIR (Fair Automobile Insurance Rates) and led a procession of group and Council members to deliver the complaint to the HRC -- said the action was an attempt to get city drivers "insurance rates set based on how we drive, not where we live."

In December 1990, Maryland Insurance Commissioner John A. Donaho ruled that territorial rating was legal under state insurance laws. But, at a press conference before yesterday's complaint was filed, Ms. Clarke belittled the ruling, saying that the commissioner "is a product of the industry."

She said she hoped the HRC would accept FAIR's contention and apply its findings to other companies besides GEICO.

FAIR's complaint drew an angry response from GEICO group vice president August P. Alegi, who at a City Council hearing last month defended his company's practice of setting territorial rates.

"The charge is nonsense. We intend to vigorously defend this," Mr. Alegi said. "This is a very old issue. They're just trying to put old wine in new bottles."

Mr. Alegi said several of his company's territorial lines cut across city boundaries.

Rates tend to be higher in Baltimore than elsewhere in the state, he said, because the city has more accidents and higher claims -- the latter a result of the fact that more city drivers tend to represented by lawyers. To lower rates, Mr. Alegi said, the state should adopt a no-fault insurance law and step up efforts to "get fraud out of the system."

Legislation that would have required insurance companies to charge rates based only partially on where a driver lives was killed in committee before both houses of the General Assembly.

Studies have shown that city drivers pay an average about $1,300 per car in insurance rates, about twice the rate of their suburban counterparts.

Councilman Martin O'Malley, D-3rd, a lawyer who helped draft the complaint, said FAIR chose to go to HRC rather than file suit in federal court because HRC has the investigative powers and it can also issue cease and desist orders. He said he did not expect a ruling for several months.

In a related action, the City Council last night adopted a resolution calling on city businesses and unions to help fund two studies that would lay the groundwork for setting up a nonprofit company to insure city drivers.

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