Insurance relief for city drivers

January 11, 1994

Living in Baltimore City is a costly privilege.

Property taxes are twice as high as in any other Maryland jurisdiction. Automobile insurance rates also are the state's highest. Add to that inadequate public schools and the state's hTC worst crime problem and you have the reasons for the continuing exodus of middle-class residents to the neighboring counties, which is bleeding the city's tax base dry.

Nearly five years ago, a group called the City-Wide Insurance Coalition was formed to find a way for Baltimoreans to lower their car insurance rates. Its first proposal was to organize a new city-sponsored car insurance company. Nothing came of that harebrained idea. Meanwhile, the coalition's overall goal often seemed threatened because its founder, A. Robert Kaufman, incessantly fought with the city's political leaders.

Despite all this, the City-Wide Insurance Coalition has finally scored a victory.

The municipal government has decided to bankroll the formation of a buyers' club to see whether such an approach would result in lower car insurance rates for city residents.

The club would be similar to an arrangement the American Association of Retired Persons has with the Hartford Insurance Co. to provide coverage to its members at reduced rates. It would be open to any city resident who belongs to a community association and meets the underwriting guidelines for save driving.

If everything goes according to plans, the club should be in operation by Labor Day. Leslie L. Ransom, a consultant, believes as many as 15,000 people may participate in it in the first year and would have their premiums reduced by an average of 20 percent.

This is an intriguing experiment.

If the club idea works, it may weaken the current "territorial rating" practice insurance companies have used to defend their high rates in Baltimore City. It may reduce some policyholder's rates.

We caution against excessive optimism, however. To be able to offer lower rates, the club may employ underwriting guidelines so strict that it will result in "creaming" -- it will accept only drivers with spotless or near-perfect records, leaving other insurers with all the bad drivers.

If that happens, city drivers having had even minor fender-bender accidents or traffic tickets would get no relief whatsoever. In fact, their rates could well soar higher as the "good-risk" city drivers reap all the benefits.

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