Insurers Urge Md. to Attack Costs, Trim Mandates to Lower Urban Rates

October 18, 2005

Insurance companies are urging Maryland officials looking for ways to reduce urban auto insurance rates to focus on curbing the underlying costs, reducing the required benefits package and encouraging insurers to expand in the market.

They also suggested the state consider a “no pay/no play” system which restricts a driver’s right to sue.

The American Insurance Association was scheduled to testify today before the Maryland Auto Insurance Task Force to Study Rates in Urban Areas regarding measures to reduce costs and expand competition in the state’s auto insurance market.

The solutions for the cost and availability problems lie in attacking underlying cost drivers and encouraging insurers to enter, stay and expand in the market, the insurance group told the task force, which was foremd in February.

Currently Maryland consumers must buy a package of benefits that can be expensive in certain areas. AIA urged the state to allow consumers to tailor coverage for themselves, taking into account their assets and ability to pay.

“A reduction in mandatory coverage would allow many people, now effectively priced out of the market because of the high cost of the current mandates, to buy into the system because they could afford the new minimum coverage,” explained David Snyder, AIA vice president and associate general counsel.

AIA recommended that Maryland consider a no pay/no play system under which uninsured drivers could not sue for non-economic damages if they were not in compliance with the insurance mandates for his/her own car. Snyder maintained that this provides a “strong market-based incentive to comply with the law governing financial responsibility and is a powerful supplement to state enforcement efforts.”

Snyder reminded the task force members that insurance fraud and auto theft are not “victimless” crimes. “These crimes often victimize honest people in high risk areas and hit them the hardest economically,” said Snyder. “Accordingly, we support efforts to identify the causes of fraud and theft and to implement effective solutions.”

On the positive side, AIA noted that Maryland significantly tightened its graduated licensing law this year, which provides a phase-in program for teenagage drivers gradually increasing their responsibility behind the wheel. However, the state’s seatbelt law could be dramatically improved by requiring seatbelt use in the back seat, the insurers added.

“High costs and limited competition are problems that affect everyone,” stated Snyder. “However, a combination of safety, expense reduction, anti-crime and pro-competitive measures can address those problems and greatly improve the auto insurance system throughout Maryland. The results of these reforms will be particularly beneficial to residents of the highest cost areas of the state.”

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