Schaefer backs bill for independent insurance agency Surtax on Md.-based insurers would finance new unit


ANNAPOLIS -- A plan to make the state Insurance Division an independent agency, with the needed financing provided by a surtax on all Maryland insurers, will be introduced in the General Assembly this week with the governor's support.

The bill will include an annual surtax on all insurers based in Maryland and "most likely" will remove the Insurance Division from the Department of Licensing and Regulation, David Iannucci, Gov. William Donald Schaefer's chief legislative officer, said yesterday.

Proponents think an insurance agency removed from the politics and budget decisions of a full department would be better able to focus on its mission.

The surtax idea actually came from insurance executives, who floated the proposal in a meeting with the governor last month. They agreed to provide whatever money the insurance regulator needs and that the state is unable to provide, they said.

The division receives about $8 million each year, but Commissioner John A. Donaho has asked repeatedly for an additional $1 million to $2 million a year.

Jack Andryszak, a vice president of USF&G; Corp., said the surtax would be based on the amount of insurance a company sold in Maryland and probably would raise $2 million to $4 million a year.

In Annapolis, the move to make the agency independent has derived much of its force from Del. Casper R. Taylor Jr., D-Allegany, chairman of the House Economic Matters Committee. That panel voted last week in support of the proposal, which also calls for the creation of an anti-fraud unit within the insurance agency.

Even with the governor's imprimatur, the proposal faces a rocky road in the Senate, which long has opposed the idea of an independent insurance regulator. Licensing and Regulation Secretary William A. Fogle Jr. also has opposed the idea in the past.

The insurance agency is seeking accreditation from the National Association of Insurance Commissioners, an organization formed by the top insurance regulators, and Mr. Taylor has said independence would help.

"I believe that Chairman Taylor believes it's an integral part to making the Insurance Division accredited," Mr. Iannucci said.

"You essentially have the insurance industry asking to be taxed to fully fund the Insurance Division," Mr. Iannucci noted. "They thought this was a good investment."

That's because the division's failure to win accreditation could threaten the ability of Maryland companies to do business in other states. The National Association of Insurance Commissioners has warned that after Jan. 1, 1994, commissioners might not authorize companies that are based in non-accredited states.

Some insurers in Maryland don't find that a compelling reason to pay an extra tax. The Maryland Automobile Insurance Fund, the state-chartered insurer of last resort, does business only in Maryland, and its director, Martha Roach, said, "I don't care if we're accredited or not. When [Mr. Andryszak] said that all insurers had signed off [on the plan], he misspoke."

But she added, "I have to report to the governor, and I don't normally oppose the governor's bills."

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