Maryland Automobile Insurance Fund Withdraws Proposal to Gain Policy Rights

The Maryland Automobile Insurance Fund (MAIF) — the auto insurance market of last resort in Maryland — last week withdrew its proposal to gain “sole and exclusive property” rights to all MAIF policies. MAIF first announced the proposal two months ago.

The Insurance Agents & Brokers (IA&B), the partnership of agents’ associations in Delaware, Maryland and Pennsylvania, welcomed MAIF’s decision to drop the proposal, calling it “a win for the independent agency system.”

MAIF Executive Director M. Kent Krabbe told Insurance Journal, “We are withdrawing the proposed changes to the regulation. We had a lot of good feedback from the agent community.”

MAIF said that its proposal stemmed from an event in early 2013, when a major provider of MAIF insurance was closed by regulators without notice to MAIF, impacting over 2,000 MAIF policyholders. MAIF described those policies as high-maintenance policies, most of which involved regular, monthly payments to a premium finance company.

MAIF said that because the receiver initially claimed exclusive ownership, MAIF policyholders were left with no one to handle or service their policies, resulting in many of them cancelling, and adding to the growing number of uninsured drivers on Maryland roads.

MAIF said that with the receiver asserting its right to sell the book of business as an asset of the closed agency, MAIF was initially hampered in providing full service and guidance to customers.

“The regulation was an attempt to protect MAIF and our policyholders in the event of an agency failure, which we experienced,” Krabbe said, “but it was inartfully drafted and did not accommodate the legitimate interests of agents in their books of business.”

Krabbe said MAIF will try to work with the agent community in the coming weeks to come up with a better, more balanced proposal.

The Insurance Agents & Brokers’ (IA&B) CEO Rick Russell II told Insurance Journal that MAIF’s decision to withdraw the regulations is “a win for the independent agency system at large.”

IA&B has been a vocal critic of the proposal since the measure first surfaced in the Maryland Register on June 14. The proposal included several regulatory language changes for Title 14.07.02 to create a property right where none currently exists, IA&B said.

“The proposal would have gone against long-standing and established law that independent agents own the policies they write, and it would have set a dangerous precedent in the public sector,” Russell said. He noted that the vast majority of IA&B’s agency members offer MAIF auto insurance coverage.

IA&B’s Russell said the law is well-settled with respect to the ownership of insurance business by insurance agents and brokers.

He said that unless otherwise provided in agreements with the insurers whose policies they offer, agents and brokers have exclusive ownership rights in these “expirations” — consisting of policy, policyholder and information for each insurance account.

“For independent agents, such as those comprising IA&B membership, these ownership rights are the principle asset of their business,” he said.

MAIF is not an insurer; rather, it is a state agency that functions as the auto insurance market of last resort in Maryland. But there is no reason ownership of expirations should be handled any differently, Russell said.