High-risk drivers may get cheaper insurance Assembly considers two bills to help MAIF's policyholders


The Maryland House of Delegates is looking at ways of lowering automobile-insurance costs for drivers forced to obtain their coverage in the high-risk-motorists' fund.

One bill heard yesterday by a House committee would allow policyholders of the Maryland Automobile Insurance Fund to pay their premiums in installments, instead of the lump sum now required and often paid with borrowed money.

Another bill heard yesterday would require companies that finance the MAIF premiums to more accurately disclose the "add-on" services included in a customer's agreement.

Opponents say the bills would interfere with private enterprise and that the installment plan would result in higher MAIF assessments for all motorists to cover start-up costs.

Both measures have been rejected in the past, but proponents hope the large number of sponsors this year -- 10 for one, 11 for the other -- indicates growing support.

Maryland law requires all auto owners to be insured. MAIF was created in 1972 to insure motorist who cannot obtain private insurance, usually due to poor driving records. About 118,000 people have policies with MAIF, including 13,500 in Baltimore.

In a bow to private insurance companies who worried about competition from MAIF, it was not allowed to finance its premiums.

As a result, policyholders must pay their entire bill at once. In Baltimore, the average premium is $1,827 a year and the vast majority of clients finance it through private lenders. In a typical case in the city, the financing can add $180 a year to the cost.

At yesterday's hearing before the House Economic Matters Committee, Del. Gary R. Alexander, D-Prince George's, a sponsor of both bills, said, "Nobody's got enough money to put out an entire premium at one time."

Alexander's bill would allow the premium to be paid over eight installments with a 20 percent downpayment. The agency envisions a fee of up to $7 per installment during the first year of the program, and $5 thereafter to cover its costs. The result would be a savings of up to $140 a year for the typical Baltimore policyholder.

Setting up the program, however, would require MAIF to increase the assessment it charges all insured motorists in the state. Because the fund has been running surpluses, there is currently no MAIF assessment. But a one-time charge of up to $10 would probably have to be assessed, according to MAIF officials.

The other MAIF bill would require premium finance companies to bill consumers separately for any additional services provided beyond the basic auto insurance.

MAIF investigators said they contacted a number of policyholders who were unaware that their premiums sometimes included hundreds of dollars for rental car reimbursement, auto club membership, towing coverage, and other services not required by the state's minimum insurance laws.

In a 1989 survey, based on a sampling of 10 policies for each of the 10 major MAIF agents, MAIF found that G. Katz Insurance Inc. had the highest add-ons, averaging $320.75 per policy. G. Katz wrote $4.1 million worth of MAIF policies in 1990, or 2.27 percent of the total MAIF policies written.

If the bill passes, these so-called "add-ons" would have to be financed separately, and non-payment of that portion of the bill would not force the cancellation of the basic insurance coverage.

Opponents of both measures called them an "attack on private enterprise" and said private premium finance companies would be unable to compete with the state-supported MAIF.

"I don't think the proponents have said anything to show where private industry isn't doing the job well. They are just saying they can do it cheaper. I could, too, if I were handed a subsidy," said J. William Pitcher, testifying on behalf of the Commonwealth Mutual Co. of Baltimore.

He denied the add-ons were a problem, and said he could probably not recall the specifics of his own automobile coverage if asked by a MAIF investigator.

MAIF and the Montgomery County Office of Consumer Affairs testified in favor of the bill while the AAA-Maryland auto club, the state Chamber of Commerce, and various insurers and lenders registered opposition. The price of "add-ons" is also being reviewed by the state Insurance Division. The agency has recently sent out letters to the insurance companies that provide the extra coverages, asking them to give actuarial support for their rates. If the rates can not be justified, the state has the power to disapprove them.

The results of that survey are expected in the next few months.

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