Rate regulation is shelved State lawmakers kill measures that would scrutinize increases

February 20, 1997|By Dana Hedgpeth | Dana Hedgpeth,SUN STAFF

State legislators have killed three bills to change the state's new, relatively laissez-faire system of regulating auto and homeowners' insurance rates, but a fourth bill that would give refunds to consumers of excessive rate increases is still alive.

Members of the state Senate Finance Committee voted Tuesday against the three bills, each of which would have changed the state's market-driven "competitive rating" system to a more regulated system requiring state approval for any rate changes.

The fourth bill -- requiring insurance companies to return funds to consumers if their rate increases are later deemed too large -- will be voted on by the Senate committee within weeks.

"I'm not happy the bills on getting rid of competitive rating failed, but at the very least we need to give the insurance commissioner a tool that discourages companies from filing excessive rates. We're fooling around with people's pocketbooks here," said Sen. George W. Della Jr., a Democrat representing parts of Baltimore and Baltimore County and a sponsor of two of the bills that failed and of the one still under consideration.

Della said the remaining bill would discourage insurance companies from filing large rate changes, as they would know that they might have to return excessive charges to consumers.

Insurance lobbyists last week argued against changing to a more regulated system, saying it was premature and would not control rate increases.

One of the senators opposed to changing the system, Prince George's Sen. Arthur Dorman, a Democrat and vice chairman of the Senate Finance Committee, said yesterday that it's too early to tell if competitive rating is effective.

"We haven't had enough time to see how the competitive rating system works fully," Dorman said. "We're looking at it and we'll continue to look at it. If we find it was a mistake, we'll undo it, but at this point we're not sure."

But some other legislators and consumer groups said they are disappointed that the bills on competitive rating failed.

"Obviously it's disappointing to see the bills to change back to competitive rating die," said Prince George's Sen. Paul Pinsky. "I don't know how much more consumers have to suffer or how much more pain they have to face with higher insurance rates before my colleagues will change."

In 1995, state legislators passed a competitive-rating law, allowing companies to raise auto and home insurance rates without hearings or approval from the Maryland Insurance Administration -- except in rare instances where the increases are deemed "unreasonably high."

Maryland has switched insurance regulation systems three times since 1986, seesawing between a stricter system requiring state approval of rate changes and a competitive-rating system in which the marketplace rules. No other state has switched as much.

The last switch to the competitive-rating system was quickly followed by large increases in some major companies' rates.

For example, Allstate Insurance Co. raised its homeowners' insurance premiums statewide an average of 17 percent and its statewide auto insurance rates an average of 5.5 percent. State Farm Insurance Co.'s statewide increases for home insurance averaged 8 percent and, for autos, 5 percent since the last switch to competitive rating.

Since then, the state has forced just one company, Bankers Independent of Gaithersburg, to refund part of an rate increase to homeowners -- a move affecting fewer than 100 policyholders.

Pub Date: 2/20/97

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