City drivers might save on policies

Bill would `flatten' auto insurance rates across the state

`Huge variations' targeted

Companies oppose measure, say claims vary by geography

March 09, 2001|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

Reopening an issue that has divided the legislature for 20 years, Baltimore officials and the state insurance commissioner called yesterday for a change in Maryland law that would lead to lower automobile insurance rates for city residents.

Steven B. Larsen, the insurance commissioner, said he has grown frustrated watching the General Assembly do little to bring rates down for city residents, who often pay hundreds of dollars more a year in premiums than residents of suburban or rural areas.

That means the poor often pay more than the middle-class or affluent, Larsen told the House Economic Matters Committee.

"Those that make the most pay the least, and those that make the least pay the most," Larsen said.

Larsen testified in support of a bill sponsored by Del. Cornell Dypski, an East Baltimore Democrat, that would limit the differences in rates that could be charged in different areas of the state.

The bill would prohibit an insurance company from charging premiums in an area that are more than 10 percent higher than those for a comparable driver in an adjoining rating area.

The effect of such a move would be to "flatten" rates around the state, Larsen told the panel.

"This doesn't say you can't have higher rates in the city, but at least it's something so you don't have these huge variations in rates," Larsen said.

But representatives of the insurance industry came out strongly against the bill and defended their use of geography to help set premiums.

They noted that Baltimore residents have sharply higher accident rates and that their cases tend to lead to more expensive payouts.

Marta D. Harding, a lobbyist for State Farm Insurance Co., said, for example, that for every 1,000 cars the company insured in Baltimore in 1999, the company received 81 claims. Statewide, the company handled 55 such claims for every 1,000 cars that year, she said.

"It's a dramatic difference," Harding said.

And zeroing in on the political consequences of Dypski's bill, Harding made clear that any legislation that reduces rates in Baltimore will lead to higher rates elsewhere.

"It's very clearly a cost-shifting bill," she said.

Larsen produced statistics showing that residents of ZIP code 21208 in northwest Baltimore County pay an average premium per car of between $1,000 and $1,050. Next door in ZIP code 21215 in the northwest corner of the city, residents pay on average $200 more per car.

Baltimore lawmakers have long complained about such discrepancies.

The biggest push to reduce premiums for city drivers came in 1996, when Gov. Parris N. Glendening backed legislation designed to cut rates by 15 percent statewide.

But the Assembly gutted the measure amid heavy opposition from the insurance industry.

Del. Michael E. Busch, the chairman of the Economic Matters Committee, said that he is sympathetic to the plight of city residents, but that major change was unlikely this year if it would lead to higher rates for other areas of Maryland.

"There's no one from other areas of the state who is going to raise the premiums for their constituents to allow reductions from other areas of the state," said Busch, an Anne Arundel County Democrat.

Dypski acknowledged that the bill could mean higher rates for drivers outside the city, but said lawmakers should realize that rejuvenating Baltimore is a state priority.

"I hope the legislature will realize it's not just a city problem," Dypski said. "What happens in the city affects the counties, too."

Joining Larsen in support of Dypski's bill was Aaron J. Greenfield, a lobbyist for Baltimore Mayor Martin O'Malley, who said car insurance rates are a major financial worry for many city residents.

"We get countless letters and calls from our constituents questioning why they pay higher rates and we have no answer," Greenfield told the committee. "It does drive people out of the city."

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