If there are two groups of people held in disregard these days, it's anyone who works for an insurance company or the government. That makes those employed by the Maryland Automobile Insurance Fund, the state's quasi-public auto insurer of last resort, something of a twofer in the public's eye.

One can only imagine the reaction of people when the term "bonus" is tossed in there, too. But that's what happened recently when state legislative auditors chided MAIF for rewriting bonus plan rules in the middle of 2008 so its workers could remain eligible for $1.4 million in end-of-year payouts.

What happened, exactly? For years, MAIF has operated an employee incentive plan, something made possible because the organization is not truly a state agency but is funded entirely by insurance premiums. Drivers come to MAIF when they've been turned down by private companies either because they have a bad driving record or a poor financial one.

The theory is that MAIF can operate more like a private company. When it does well, the employees get a modest boost -- the average MAIF salary last year was $57,500 and the average bonus $3,400.

But how to measure performance to justify the incentive payments? That's the rub. MAIF doesn't turn a profit, so it's used two major criteria in recently years -- surveys that monitor customer satisfaction and the organization's financial posture as measured by its expenses compared to earnings. If employees find ways to reduce expenses and improve efficiency, the theory went, that ratio usually improves.

That's fine in a normal year, but 2008 proved far from average. MAIF's financial situation worsened as the economy slid into recession. That obviously had little, if anything, to do with employee performance and much more to do with fewer people buying MAIF policies and the rising cost of claims.

By midyear, MAIF's board saw that the bonus criteria were unrealistic and decided to change them. In doing so, the board clearly ignored the plight of the state budget, which was simultaneously in the process of substantial reductions and employee furloughs.

But so what? If MAIF is truly independent, that shouldn't matter. Yet at the request of the O'Malley administration, MAIF made furloughs, too. And that was kind of silly, since salary reductions at MAIF don't provide one thin dime to the state treasury --only less in state taxes collected from MAIF employees who had their salaries cut.

While it may not have been MAIF's intent, preserving the bonuses offset the workers counterproductive participation in furloughs. But that's not a point of view that will make Gov. Martin O'Malley or legislative leaders particularly popular with state employees or their unions.

This year, the matter is moot, as the legislature instructed MAIF not to offer bonuses of any kind. So much for independence.

Admittedly, bonuses may not be the best way to compensate employees, particularly at a nonprofit. When MAIF has to tap its reserve funds (as last year's $20 million shortfall required), it may reflect more on the cyclical nature of the business than employee performance, but it's not exactly a positive indicator either.

The most expensive bonus paid out last year was the $13,000 given to MAIF's executive director. That's a lot less than the private industry standard, regardless of the earnings situation. If the General Assembly wants MAIF to be run like a private company, lawmakers can't be terribly shocked when it acts like one.

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