Auto Insurance Reform?

January 28, 1995

Will this be the year of the great auto insurance reform?

Don't bet on it. The General Assembly in recent years has repeatedly defeated attempts to abolish "territorial rating" in pricing. Nevertheless, it is both interesting and significant that Gov. Parris N. Glendening chose auto insurance reform as one of his very first initiatives.

In a way this is natural. Mr. Glendening's home county, Prince George's, has some of the highest auto insurance rates in Maryland -- after Baltimore City. Since both of those jurisdictions contributed mightily to the governor's slim victory, the least he could do is keep his promise and deal with the auto insurance issue forthwith.

The governor's initiative must be particularly gratifying for Mayor Kurt L. Schmoke, who is running for a third term and faces a populist challenge from City Council President Mary Pat Clarke. Auto insurance is a big issue in the city, where many residents pay up to four times more for coverage than rural or suburban Marylanders.

The Glendening proposal has two main thrusts. The governor would require major companies to underwrite more policies in Baltimore City, based on their overall percentage of the auto-insurance market in Maryland, or face penalties.

He would also curb the state-run Maryland Automobile Insurance Fund, which has grown from a program for high-risk drivers unable to get coverage elsewhere to a bureaucracy insuring 4.5 percent of all drivers in the state. "The original intent has been lost," the governor said. "Maryland is running a large and bureaucratic insurance company. Selling insurance ought not to be our job."

We support the governor on both counts.

Market-driven quotas that increase competition in Baltimore City seem desirable as long as they are reasonable. As for MAIF, we think it ought to return to its original, limited function as the insurer of last resort. That move would open up a new, profitable market for private insurers -- city drivers with good records now ,, covered by MAIF.

And yet Sen. Thomas L. Bromwell, chairman of the Senate Finance Committee, thinks that taking good drivers out of MAIF is "the wrong way." He maintains that "you can't give lower rates in the city without someone paying."

We hope Governor Glendening's initiatives -- and the committee he has appointed to study the issue -- will focus so much attention on geographic disparities in auto insurance rates that corrective action results. An encouraging sign is that some insurance agencies are already diverting from strict territorial rating systems in some areas of the city. With a non-profit city insurance club set to start later this year, competition for the coverage of good drivers is likely to increase further.

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