Warning: Insurance rate increase ahead

Our view: Motorists should beware efforts to raise the cost of car insurance

March 22, 2010

Maryland lawmakers have been adamant about not raising taxes this year, particularly in a weak economy and with a restless electorate heading to the polls this fall. But legislation moving forward in Annapolis could prove as costly to motorists as any proposed tax or fee, and it appears elected officials are hoping no one will notice.

The proposal would raise the minimum amount of automobile liability insurance for bodily harm from $20,000 to $30,000 for an individual and from $40,000 to $60,000 for incidents where more than one person is injured. That would give Maryland some of the highest liability coverage requirements in the country.

No state bordering Maryland requires this much insurance coverage. In Pennsylvania and Delaware, the minimums are $15,000 and $30,000. West Virginia's are $20,000 and $40,000. Virginia's are currently the highest at $25,000 and $50,000.

For the majority of car owners, the change in the law would have no effect on rates whatsoever because they choose higher liability coverage voluntarily. But for low-income drivers, particularly those who are insured through the Maryland Automobile Insurance Fund or MAIF, the state-sanctioned insurer of last resort, the impact would be substantial.

According to an analysis by the Maryland Insurance Administration, auto insurance rates would rise 5 percent to 15 percent for the 240,000 families that have elected minimum liability coverage (or about 98 percent of MAIF policyholders). For a 20-year-old city resident, annual insurance costs would rise from $3,255 to $3,577, an increase of $322 or nearly 10 percent.

For low-income families, that large an insurance bill could be devastating. It could spell the difference between whether a car is affordable or not - and, in turn, whether it's possible to get to a job or not.

Such a substantial increase is also bound to cause some to drop their insurance altogether, state laws requiring it notwithstanding. The recession and rising unemployment have already caused a rise in uninsured motorists on the road, a far more serious financial threat than potential under-insurance.

Why raise the mandatory minimum for liability coverage? It's clearly not because the current level is inadequate. According to MAIF, 99 percent of claims are settled within today's existing limits. The average settlement for a MAIF liability claim is $5,745. That's a lot less than the $20,000 minimum coverage we already have.

At a hearing last month, the measure's sole supporters were representatives of the Maryland Association for Justice, the organization that advocates for the state's trial attorneys. With higher insurance minimums, payouts (and legal fees) are likely to climb.

Enriching trial attorneys is not sufficient cause for a change in insurance requirements. Yet the measure won preliminary approval in the House last Thursday and is expected to receive final House passage tomorrow. That suggests that the state's Democratic leaders are looking to please some of their most reliable campaign contributors.

Perhaps sensing public disapproval, delegates made one small change to the measure last week - they moved the effective date from October until January. Will voters fail to notice a $300 insurance bill if it doesn't come due until after the election? Clearly, some elected officials are counting on just that.

Readers respond
It would appear the legislature is more concerned with taking care of one of its biggest campaign contributors than the citizens who elected them. Anyone who votes for this bill from either party should be voted out of office.


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