Flood, Credit Rank Among Top 2004 Maryland Issues as Session Ends

April 5, 2004

As the 2004 Maryland legislative session draws to a close, a myriad of property/casualty insurance bills reportedly benefiting consumers in providing disaster relief and fair underwriting and rating practices are advancing. The legislature is scheduled to adjourn April 12.

Much attention has been drawn to flood insurance reform stemming from Hurricane Isabel last fall, according to the Property Casualty Insurers Association of America (PCI). Joint Resolution 6 asks Congress to consider changes to the federal flood program, and other bills aim to provide more continuing education for flood insurance agents and more training for producers selling insurance to better explain the value of a claim under a homeowner’s policy when the damage is the result of flooding.

“PCI is in favor of proposals that would give consumers easy-to-understand summaries of their policies, and we support continuing education for insurance agents relating to flood insurance,” said Don Cleasby, PCI assistant vice president, regional manager and counsel. “We support additional reforms that make information on coverage and consumer rights more accessible to consumers. PCI also believes Maryland’s resolution regarding Congressional action to re-examine the National Flood Insurance Program is useful. The type of coverage under the federal program is currently not as comprehensive as the coverage consumers can receive under a homeowner’s policy.”

Gov. Robert Ehrlich signed House Bill 3, the Hurricane Isabel Disaster Relief Act, into law. Similar legislation, SB 415, has passed the full Senate. HB 177 also has passed both chambers. SB 584, another bill providing for continuing education to insurance producers on flood insurance, passed the full Senate and is scheduled to be heard by a House committee.

Bills that would maintain the status quo on insurers’ ability to use credit information on a limited basis continue to move through the legislature. SB 101 and HB 504 have passed both of their respective houses. Current law prohibits private passenger automobile insurers from using credit information for underwriting, but allows such information in rating new policies within 40 percent rate collars — either a surcharge or discount of up to 40 percent. The language of the rate collars sunsets Oct. 1, but the bills would extend the rate collars indefinitely.

“We’re encouraged that the bills are moving, especially since it’s premature to make even further system adjustments that would cause more expense,” continued Cleasby. “More evidence exists, since the law was passed two years ago, regarding the strong correlation between an individual’s credit history and his or her risk of future insurance losses.

“Maryland already has ample protections on how insurers use credit, and the impact of credit on certain groups such as low income has not been determined. Insurers incurred substantial expense to come into compliance with the current law, and there is no need for additional revisions that would further burden insurers.”

HB 1222, which would have extended Maryland’s prohibition on using credit information to the rating of new personal auto insurance policies, died in committee. The bill would have created an all-out ban on insurers’ use of credit in Maryland.

Another underwriting tool has garnered attention during the session. HB 245, SB 241 and SB 581, measures that would all restrict how insurers use C.L.U.E. reports, died in committee. SB 241 would have prohibited insurers, when underwriting a policy, from using inquiries that do not result in a claim. SB 581 and HB 245 would have prohibited homeowners insurers from considering inquiries or claims of a previous property owner when underwriting and rating that current property.

PCI is also reportedly encouraged by the outcome of the following measures:

· SB 236, a personal injury protection waiver bill initiated by PCI members, has passed the full Senate.

· HB 132, prohibiting the classification of auto risk based on not-at-fault auto accidents, received an unfavorable vote in committee.

· HB 321 and SB 243, uniform arbitration provisions authorizing arbitrators to award punitive damages and attorneys fees, both failed to advance from committee.

· SB 566, forcing insurers to be liable for litigation costs, expenses and interest from date of claim submission, died in committee.

· SB 735, requiring auto insurers to file with the Maryland Insurance Administration the guidelines they use placing a value on total loss, and disclose that information to claimants, died in committee.

PCI is reportedly disappointed by the following legislative action to date:

· SB 546, creating the People’s Insurance Counsel to “protect the interests of insurance consumers,” financed by an initial $1 million from the state’s general fund and then through assessments from all insurers conducting business in the state, has passed the full Senate. The measure would do nothing to improve existing laws and may create needless and expensive conflicts between the counsel and MIA.

· HB 999, subjecting homeowners insurance policies to the premium increase and cancellation requirements that now exist for personal auto insurance policies, passed the House Economic Matters Committee.

· HB 1071, the Homeowners’ Insurance Policyholder Bill of Rights, provides very extensive, state-specific disclosure mandates on flood coverage. PCI prefers a simpler, less complicated disclosure bill.

· SB 466 and HB 1337, creating a workers’ compensation health care provider panel, received an unfavorable vote in committee. PCI supported the bill to encourage more qualified doctors to be chosen for medical services and treatment.

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