Insurance rate cuts termed feasible Actuarial study puts savings at 10%-20% for drivers statewide

Baltimore figure 24.2%

Conclusions may help passage of legislation planned by governor

November 03, 1995|By Peter Jensen | Peter Jensen,SUN STAFF

Efforts to reduce high car insurance costs in Baltimore could yield a significant bonus for drivers elsewhere across the state -- a 10 percent to 20 percent savings in their own car insurance premiums.

That is the conclusion of a new study analyzing recommendations made earlier this year by a gubernatorial commission on auto insurance reform. The report presented to the panel yesterday concludes that city drivers could save as much as 24.2 percent on their car insurance if the proposed reforms are adopted.

"I held my breath for two months until I got this report," said David M. Funk, the commission's chairman. "I think we are well along to the position the governor wanted us to achieve."

The report was prepared by independent actuaries under a state contract. It is based on a long list of task force recommendations, many of which would require General Assembly approval.

The commission proposed reducing certain types of mandatory coverage, eliminating multiple recoveries for an injury, reducing medical and legal costs, fighting insurance fraud and reducing accident costs.

Many of the proposals would face stiff opposition from special-interest groups in Annapolis. But commission members

said the report's conclusion that drivers statewide would receive significant savings is a powerful lobbying tool.

"This shows there's a financial benefit to consumers," said Jeffrey D. Rouch, a lobbyist for Nationwide Insurance. "The commission's recommendations will be taken seriously. They'll have some momentum."

Gov. Parris N. Glendening was handed the task force's preliminary findings two months ago. They will provide the framework for auto insurance reform legislation that he expects to submit to the General Assembly next year, but the governor hasn't yet decided on specifics, said Steve Larsen, a legislative aide.

By far, the greatest savings yielded by the task force's recommendations is from the elimination of multiple recoveries for the same injury, the report concluded.

This controversial measure, often referred to as the "collateral source rule," would mean accident victims could no longer have medical bills or lost wages refunded by two or more insurance sources.

The General Assembly has not shown much interest in collateral source proposals in the past, largely because of opposition from trial lawyers. The law would mean smaller damage awards for accident victims and less incentive for litigation.

Mr. Larsen said Governor Glendening intends to pursue some form of collateral source legislation in his comprehensive bill.

"Collateral source legislation has the biggest potential for cost savings to consumers," Mr. Larsen said. "It hasn't been presented to the legislature in that context before."

The report's authors cautioned, however, that some of the savings the proposals would create are actually the result of cost-shifting. If the recommendations were adopted, more of the costs of car accidents in Maryland would likely be covered by health insurance and workers compensation. The savings also would not be spread among drivers evenly. The potential 20 percent to 24 percent reduction in premiums applies only to mandatory levels of car insurance. Drivers who elect to have more than the minimum coverage for their cars may average savings closer to 10 percent to 12 percent.

The report does not predict any savings from the commission's recommendations on fraud and accident costs. Those proposals include creating a civilian accident reporting unit in the city Police Department, banning "runners" who direct accident victims to attorneys or doctors, and banning radar detectors.

"They may have some impact, but we can't measure them," said Ollie L. Sherman Jr. of the Tillinghast company, an author of the report.

But Mr. Sherman did expect most other proposals to yield some modest savings, including the commission's recommendation to allow drivers to fully waive personal injury protection and uninsured motorists benefits.

While that could save money in premiums, it also could limit medical care and other payments for some accident victims, insurance industry officials said.

The commission also recommended prohibiting lawyers from mailing solicitations to accident victims or their families for 30 days after a collision. The proposal, modeled after a Florida law upheld earlier this year by the Supreme Court, might save consumers about 1 percent in premiums, the report noted.

But it concludes that the commission's proposals would not do much to correct the disparity between car insurance rates in the city vs. the rest of the state. City drivers now often pay two or three times more than drivers elsewhere, and it was that imbalance that led Mr. Glendening to create the commission 10 months ago.

Mr. Funk said he was hopeful that the anti-fraud recommendations would have a "substantial impact" on the city. He said he was also confident that legislators will eventually support many of his task force's findings.

"Since auto insurance is mandatory, reducing auto insurance premiums is akin to giving tax relief," said Mr. Funk, a city resident and lawyer in the firm of Shapiro and Olander.

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