Give drivers a break

Our view: How could a MAIF rate reduction hurt? Only in the dreams of private insurers

September 8, 2008

The insurance industry is seldom at a loss for chutzpah. But even by that standard, the recent claim by some that modest rate relief for drivers insured by the Maryland Automobile Insurance Fund (MAIF) will put private carriers at risk is breathtaking in its audacity.

How do industry lobbyists say such things without blushing, laughing or otherwise tipping us off that what they're saying is nonsensical on its face? Surely, it's not easy.

A quasi-public agency, MAIF has long served as the state's insurer of last resort. Drivers with bad records behind the wheel (and many who don't pay premiums on time) generally have no choice but to go with MAIF. Private carriers drop such risky clients in less time than it takes Michael Phelps to lap his bath tub.

The agency has petitioned Maryland Insurance Commissioner Ralph S. Tyler to drop its rates by slightly less than 5 percent. That could provide a significant savings for MAIF policyholders - about $120 a year, or the equivalent of two fill-ups at the local gas station.

MAIF is sitting on a near-record $170 million surplus. Officials calculate that even under the most pessimistic of scenarios, it would take another 23 years to whittle it down to the minimum required under state law. Perhaps the private insurers need to be reminded that MAIF covers only about 3 percent of drivers in this state, hardly a threat to those who advertise with lizards and cavemen.

One of the reasons MAIF is in a position to offer a rate cut is that the frequency of claims is down. High gas prices and the downturn in the economy have everyone driving less. Most private carriers should be in line right behind MAIF asking Mr. Tyler for a rate reduction, too.

Meanwhile, lawmakers can do their part to assist MAIF policyholders by amending state law to allow them to spread out their premium payments without going through private finance companies that charge high interest rates and fees. That could, as the Pips might say in their TV ad, take MAIF drivers to Happy Town. Woo woo.