A new coalition of businesses and community groups believe Maryland consumers should get a chance to drop out of the traditional automobile insurance system.
At a press conference yesterday, Citizen Choice Coalition formally launched its campaign to bring a modified no-fault system to Maryland. This new system would offer consumers lower rates and faster claims service, according to its supporters.
"We are convinced that the coalition proposal offers real and substantial savings for Maryland consumers," said Peter J. Lombardi, president of the Maryland Chamber of Commerce.
The coalition, which consists of 40 business and community groups, is now working on a proposal that lawmakers are expected to introduce in the Maryland General Assembly next year.
Insurance companies and other groups are advocating no-fault systems as a way to cut insurance rates. But many trial lawyers, doctors and consumer groups are opposed to no-fault because policyholders would lose their right to sue.
Under the Choice Coalition proposal, policyholders would have the option of either remaining in the traditional liability insurance system or enrolling in a no-fault program.
Under the traditional system, a person involved in an accident may sue the other person involved in the accident for monetary damages as well as pain and suffering. In turn, insurance liability policies pay these claims.
With a no-fault system, the policyholder may not sue or be sued. Instead, the person's claims are paid by his or her own insurance company. Claims for pain and suffering would not be allowed.
A traditional insurance policyholder could not sue a no-fault customer. However, the traditional customer has the option of suing his or her own insurance company for damages and pain and suffering, Lombardi said.
If a no-fault customer is convicted of drunken driving, the person would lose immunity from being sued.
Because no-fault is less expensive for the insurance companies, the Choice Coalition proposal would require that no-fault policies be at least 20 percent cheaper than basic policies. Basic policies provide the minimum coverage required by law.
Claims would also be paid in 30 days, or insurance companies would pay a 15 percent penalty, Lombardi said.
"You should have the right to pick the system," said August P. Alegi, group vice president of of the Government Employees Insurance Co., one of the largest automobile insurers in Maryland.
For those people who "believe suing is America's greatest indoor sport," they still have the option of staying in the traditional system, Alegi told the press conference.
Besides the Chamber of Commerce and the state's major
insurance companies, the coalition includes such groups as the Cherry Hill Coordinating Committee, the Upper Fells Point Community Association, the Rosemont Improvement Association and the Gray Panthers of Prince George's County.
"We feel it is critically important to make automobile insurance more affordable to low- and middle-class consumers," said Janet Parker, who will head the Gray Panthers of Prince George's County next year.
When the no-fault measure is introduced next year, it will be met with stiff opposition.
"It's an orchestrated effort by the insurance industry to increase their profits at the expense of policyholders," said Jonathan Schochor, president of the Maryland Trial Lawyer's Association.
Schochor, who is a member of the Task Force on Automobile Insurance and Medical/Legal Rights, said that no-fault has not -- saved consumers any money in the states where it has been tried. He also said the 20 percent discount is a way to entice consumers into the system and then rates will be increased.
The private task force is expected to issue a report on no-fault in December or January, Schochor said.
As the insurance issue has heated up, the number of groups promoting different positions has grown. Besides the Choice Coalition and the Task Force, there is the Maryland Citizen Action Coalition, Baltimore Fair Automobile Insurance Rates, and the City Wide Insurance Coalition.
The Maryland Citizen Action Coalition is opposed to no-fault and has lobbied to eliminate the anti-trust exemption for insurance companies. Baltimore FAIR is working to prohibit territorial rating, which allows insurance companies to charge different rates in urban, suburban and rural areas.
Unlike the other groups, which are trying to change the insurance system through the legislature or the regulatory system, the City Wide Insurance Coalition is trying to establish an alternative quasi-government insurance organization to provide low-cost insurance.
Robert Kaufman, president of City Wide, said his group does not have a position on no-fault, but believes it is an effort by insurance companies to draw attention away from his group's proposal.