Glendening seeks to cut city rates for car insurance Changes proposed for MAIF, private policy providers

January 25, 1995|By Peter Jensen | Peter Jensen,Sun Staff Writer

Offering potential relief to long-suffering city motorists, Gov. Parris N. Glendening yesterday unveiled plans designed to make it easier and cheaper to buy private car insurance in Baltimore.

Proposed legislation would give incentives to major insurance companies to market their services as aggressively in the city as they do elsewhere across the state. A company that insures 10 percent of all Maryland drivers, for instance, would be expected to sell policies to at least 7.5 percent of all city drivers by 1998. If it did not, it would face financial penalties.

Governor Glendening said his initiative should bring competitiveness back to the city, where drivers pay premiums "two, three and even four times" the rates comparable drivers face elsewhere in Maryland.

"In the city, insurance is often not affordable and often not available from the private sector," Mr. Glendening said at an afternoon news conference at the World Trade Center downtown.

"The excessive cost is not only a financial burden to the city, but it helps drive middle-class families out of Baltimore," he said.

But lowering city rates artificially could result in raising rates for 11 drivers elsewhere -- at least that was the warning sounded yesterday by critics within the legislature and the insurance industry.

"Give people inside the Beltway a break and people outside the Beltway will pay," said Sen. Thomas L. Bromwell, D-Baltimore County, chairman of the Senate Finance Committee, which oversees insurance law. "It's like a balloon. You press in here, it comes out there. In this case, it comes out of everybody's pockets."

In a related move, Mr. Glendening proposed curbing a state program that insures high-risk drivers. The governor said too many good drivers are enrolled in the Maryland Automobile Insurance Fund (MAIF), the nation's only state-run auto liability insurer.

The program was created more than 20 years ago to underwrite people with poor driving records who were rejected by at least two private carriers.

But now MAIF has about 135,000 policyholders or 4.5 percent of all drivers in Maryland, making it one of the largest auto insurance providers in the state. Many of its policy holders have clean driving records and could be insured by private companies, Mr. Glendening said.

"The original intent has been lost," he said. "Maryland is running a large and bureaucratic insurance company. Selling insurance ought not to be our job."

Mr. Glendening also said he would seek to spend $1 million more per year on efforts to fight insurance fraud and reorganize anti-fraud organizations within the government in a single office under the state insurance commissioner.

He proposed creating a 13-member commission to study the problem of high city car insurance rates in more detail and recommend improvements. The commission, chaired by David M. Funk, a city resident and attorney with the firm of Shapiro & Olander, would be expected to complete a preliminary report by July.

The governor said he also wants to allow companies to set rates and get the necessary approval later, instead of the current system of applying to the state insurance commissioner prior to any rate change.

Administration officials said they don't know how much money city drivers would save through the various proposals, some of which would require approval from the legislature.

One of the proposed MAIF reforms would require private carriers fTC to pick up MAIF customers with a three-year clean driving record, offering them rates at least as good as what MAIF offers. That would affect about 12,000 policyholders.

MAIF has been heavily debated in the 2-week-old legislative session. Mr. Glendening has proposed taking $60 million from MAIF reserves to help balance his budget. Specifically, it would pay for $40 million in school construction and $20 million in police aid to be divided among Baltimore City and Prince George's and Montgomery counties.

Currently, MAIF has a $112 million surplus, but it needs at least $37 million of that to guard against future claims and another $11.5 million to cover its 1994 operating deficit, said David C. Trageser, the fund's executive director.

Insurance executives and lawmakers had mixed reactions to the governor's proposals. Most welcomed the commission's study and any efforts to curb fraud, but the MAIF reforms and the concept of forcing companies to write more policies in the city were less well received.

"We are opposed to mandatory quotas," said Andrea M. Covell, vice president and legislative counsel to GEICO Corp., which has more than 200,000 policyholders in Maryland. "I don't think Baltimore faces an availability problem. It has an affordability problem."

Randy Garrett, deputy regional vice president for State Farm Insurance Cos., said he has some "concerns" about that provision. State Farm, Maryland's largest insurer, covers 20 percent of the state's population and about 13 percent of city drivers, he said.

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