Grand theft MAIF

Our view: Taking surplus from insurer is a wrong turn

April 02, 2008

Maryland drivers are in danger of something close to highway robbery - and a particularly sneaky version of it at that. Under a proposal being discussed this week in Annapolis, $35 million would be removed from the Maryland Automobile Insurance Fund, an independent agency that serves as the state's insurer of last resort, to help balance next year's state budget.

That's not only bad policy - and unprecedented in the agency's 36-year history - but it could also result in a hidden tax on all Maryland drivers.

Here's why:

MAIF doesn't get a dime of taxpayers' money. It amassed a $176 million surplus largely on premiums and good returns on investment. The agency needs a surplus to anticipate sharp increases in future claims because, unlike private insurers, MAIF can't refuse new customers.

But a downturn in the stock market is expected to shrink the MAIF surplus (it's already dropped $18 million in value over the past six months). And if the surplus shrinks below $40 million, state law requires that privately insured drivers make up the difference through an added charge on their premiums.

That some legislators want to take the money from MAIF should come as no surprise. It's the kind of short-term fix that the public won't even notice.

But the drivers who should be most angry about this plan are those insured by MAIF. If there's an excess in the surplus, it belongs first and foremost to them.

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