Bartlett says state uses rate guidelines No hearings were held on soaring premiums for car, home policies

'May be too late,' Pica says

Homeowners, drivers stung with increases of 40% to 70%

November 20, 1996|By Dana Hedgpeth | Dana Hedgpeth,SUN STAFF

Maryland's insurance regulators -- stung by criticism over new laissez-faire system of insurance regulation that quickly led to soaring home and auto insurance premiums -- now say they're using a set of guidelines to evaluate companies' proposed rate increases.

Dwight K. Bartlett, Maryland Insurance Administration commissioner, said yesterday that these guidelines include subjecting to public hearings any insurance companies that want to raise their home or auto insurance rates by 15 percent or more.

Bartlett said the insurance administration has had in place these guidelines -- including the provision for public hearings -- since the "competitive rating" system of regulating the state insurance industry went into effect in 1995.

The agency also has had the ability since then to reject any rate increases that its regulators deem unreasonably high, he said.

But the insurance administration did not hold public hearings earlier this year when it allowed the Allstate Insurance Co. to put into effect increases in its homeowner insurance rates in some parts of the state that ran as much as 44 percent.

Auto insurance rates from Allstate and State Farm Insurance Co. have been allowed to increase as much as 70 percent in some parts of the state without hearings.

The agency will hold a hearing Jan. 6 in Baltimore to discuss a new competitive-rating system and the guidelines, insurance officials said yesterday.

"Things are very ambiguous now as to what's deemed a high rate," MIA actuary Alan Clark said. "These conditions clearly spell it out so that the insurance companies, the consumers and the regulators know where we stand."

Several state legislators -- who already are drafting legislation to return to the state's stricter "prior approval" system of regulating consumer insurance rates -- said yesterday that they feel the announcement of the MIA guidelines come too late.

"We've gotten to a start, but then there's still everything under 15 percent that should be questioned, and it may be too late as some consumers have already seen drastic increases in their homeowners' and car insurance rates," said state Sen. John A. Pica Jr., a Baltimore Democrat and member of the Senate Finance Committee, which deals with insurance matters.

"The insurance commission already winked at 40 percent rate increases for some without the public having the benefit of the rate being scrutinized. We've already seen incidents where rates have slipped through the crack," Pica said. "We'll have to see how these guidelines change it."

State Sen. Paul G. Pinsky added: "They [the insurance companies] had a carte blanche before. Now we've got some guidelines, but it's still not back to a strict prior approval.

"It's better than unlimited rate hikes," the Prince George's County Democrat said. "It is a midpoint to calm down any opposition."

But insurance lobbyists said yesterday that the new guidelines are leaving the rating system in limbo between prior approval and competitive rating -- defeating the free market system that the switch to competitive rating was to bring.

"They're saying you can have competitive rating except when you want a big rate increase, then we're going back to prior approval," said Leo Doyle, a lobbyist for the National Association of Independent Insurers in Washington. "When a company really needs a rate increase to keep solvent, they're going to scrutinize it.

"Whenever there's a time you need haste, it's then."

The "competitive rating" system was aggressively sought by insurance industry lobbyists in the 1995 legislative session. It allows companies to raise car and homeowners' insurance rates without prior approval of Maryland's insurance commissioner, except in rare instances where the increases are deemed "unreasonably high."

The new law essentially left the setting of car and homeowners' insurance rates in the hands of insurance companies.

Under the new guidelines, filings for rate increases of less than 15 percent -- or that would result in company losses totaling less than 65 percent of premiums -- still will not trigger hearings, insurance regulators said.

Earlier this fall, insurance administration officials had been saying that the legislation allowing the competitive-rating system would expire on its own in July, but they later acknowledged that the law will remain in place unless there is new legislative action.

Pub Date: 11/20/96

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