Sky-high automobile insurance costs are driving more taxpayers from Baltimore than are the city's hefty property tax bills, Mayor Kurt L. Schmoke yesterday told a House panel considering insurance reform.
Armed with evidence that city residents routinely pay double what their Baltimore County counterparts are billed for car insurance, the mayor warned that the growing disparity has created a "serious disincentive to living in our city."
He urged members of the House Economic Matters Committee to adopt legislation supported by Gov. Parris N. Glendening that would force companies to write more policies in Baltimore. "The impact of these exorbitant rates cannot be minimized," Mr. Schmoke said.
At the heart of the governor's proposal is a requirement that major insurers who write policies in the Baltimore area meet a quota within the city. The goal would be set at 75 percent of an insurer's statewide market share.
A company that collects 10 percent of all the auto insurance premiums paid statewide would have to collect 7.5 percent of all the premiums paid in the city. Failing to meet the goal in three years could mean fines of up to $50,000, as well as regulations that would put a firm at a competitive disadvantage.
Administration officials believe that the bill would force greater competition for city business and drive down rates.
But insurance industry representatives have balked at the quotas, which they perceive as unprecedented government intervention. They claim the measure is more likely to drive companies away and raise rates for people who live outside the city.
"This is sending a message -- don't grow too much or get too committed to the Maryland market because if there's some social engineering goal, the state may knock on your door and tell you how to do business," said Keith Hopkinson, a lawyer with the National Association of Independent Insurers.
Mr. Hopkinson and others in the long line of insurance company executives, lobbyists and agents that appeared before the committee had numerous objections to the complex legislation.
The initial version of the bill would have forced thousands of the safest customers in the Maryland Automobile Insurance Fund (MAIF), the state-run company that underwrites high-risk drivers, be picked up by private insurers. Yesterday, administration aides offered an amendment to soften that requirement.
"Upon further discussion, it's apparent that MAIF's role in the market is a complicated one," said Steven B. Larsen, a legislative lobbyist for Mr. Glendening.
That did little to appease insurers, however. They would still be prohibited from refusing MAIF drivers who have gone accident-free for three years and would even have to compensate MAIF agents for forwarding these new customers.
"That wouldn't lower costs one bit," said Jeffrey D. Rouch, a lobbyist for Nationwide Insurance, who warned his company would sue the state over the agent compensation issue.
The governor's proposal would consolidate statewide fraud investigation efforts, and it would require MAIF to provide its lower-risk policyholders with the names of five companies that underwrite drivers in their neighborhood. Committee Chairman Michael E. Busch, an Anne Arundel County Democrat, predicted that at least some elements of the bill -- the anti-fraud program, for instance -- would likely be approved by the House. He said he is not yet persuaded that market quotas will work, however.
Insurance industry officials said they were frustrated by the fact that the bill does little to address many of the underlying causes of high insurance rates, such as theft and high litigation and repair costs.
Mr. Glendening expects to appoint a commission next week to study the issue and recommend ways to lower such costs. Also, a nonprofit buyers association is being formed in the city to help drivers purchase car insurance at a lower rate.
David M. Funk, a lawyer who has been named to chair the commission, admitted that the reasons behind the city's high insurance rates have so far proved difficult to quantify. Even Mayor Schmoke agreed that there is a possibility that the quota system could drive some insurance companies away from the city.
"We certainly don't want a market where there are fewer insurance companies," Mr. Schmoke said. "But if we don't take action, I think the chances are greater that we'll drive city residents away."