Unless state legislators act this session, many of the insurance carriers with headquarters in Maryland are likely to pick up stakes and leave. That's a job loss of 12,000 and over a half-billion dollars in lost employee income, as well as a $27 million loss in state and local tax revenue.
Yet these insurers may not have much of a choice. Maryland's oversight of the insurance industry here is so lax that it cannot obtain certification from the National Association of Insurance Commissioners. Without this accreditation, other states that are certified won't accept Maryland-based insurance carriers: they will be obstructed or prevented from selling policies in those states.
Major local insurers, such as GEICO, USF&G;, Baltimore Life, Maryland Casualty and Monumental Corp., will be under enormous pressure to move to a state with a more receptive climate. At least one of them is likely to leave the state immediately, "since it has close corporate ties to insurance firms domiciled in a state which was among the first to receive NAIC accreditation," according to a study conducted by Maryland's Department of Economic and Employment Development.
A year ago, Gov. William Donald Schaefer asked the General Assembly to beef up the Insurance Division so it could qualify for NAIC certification. Lawmakers refused. Much of that refusal had to do with internal jurisdictional struggles in the Assembly. But now Maryland has reached the point of no return: If the legislature fails to act this session, this state cannot meet the NAIC's Jan. 1, 1994, deadline for accreditation.
The House of Delegates recently gave its approval to two bills that would strengthen the state's regulation of the insurance industry. That's a positive development. It is worth noting that the insurers themselves are among the strongest backers of these bills -- even though the companies will be assessed $4.8 million in fees to pay for this increased state regulation. That's how much accreditation means to them.
Now it is up to the Senate. The issue is straightforward. Maryland consumers deserve better oversight and regulation of the insurance industry to guard against wrongdoing and to ensure that insurers are financially secure. Governor Schaefer has proposed doing just that.
Our home-based insurers are desperate for approval of these bills. The economic ramifications of rejecting the bills would be staggering. It is time for the Senate to concur with the House action and make accreditation of local insurers possible this year.