The Baltimore Sun reports that car insurance companies in Maryland are resisting the Maryland Automobile Insurance Fund’s (MAIF’s) car insurance rate-lowering proposal because MAIF’s plan to lower rates puts the private sector at risk. After a hearing in Baltimore, Maryland Insurance Commissioner Ralph S. Tyler delayed ruling on some insurance companies’ objections to MAIF lowering their rates.
Let me get this straight. Car insurance companies cannot compete with a non-subsidized state-run agency. Was Marx on to something? No, we all saw the Beijing Olympics; capitalism seems to be working just fine.
Is this really where we are? Private car insurance companies need protection from competition by this awful company? I’m not sure what the private insurance companies’ arguments are on this issue. The only argument offered by the Baltimore Sun was provided by Hal S. Katz, president of Baltimore-based Interstate Auto Insurance (IAICO). Also specializing in writing Maryland car insurance policies for drivers that have a history of trouble, IAICO complained that MAIF does not enforce its requirement that it provide car insurance only to drivers who have been rejected by two private companies.
The Absurd Notion that MAIF Is Too Cheap
My response to IAICO is, so what? Why can’t IAICO compete with this state-owned company on a level playing field without having to run to Ralph Tyler to complain that MAIF’s prices are too low? The average MAIF policy now costs $2,400. It is not like they are giving insurance away. Either IAICO is not running their business very well, or – and this is the more likely explanation – it does not want any competition to interfere with its gouging of Maryland drivers with shady driving records or credit scores, often the people that most need the lower rates that come with competition.
Also, if MAIF has a $170 million surplus, as the Baltimore Sun reports, would it be a bad idea for it to stop writing 99% of its policies at 20/40/15? This is a quasi-state-owned company. Couldn’t it be in the best interest of its policyholders and Maryland accident victims for MAIF to raise its policy limits to 30/60/15, at least protect its policyholders from district court (non-jury trials) where the jurisdictional maximum is now $30,000? (2019 Update: This is the new state minimum insurance coverage now.)
While I’m spending this $170 million surplus, here’s a quick plug for the enemy. One of the big problems we have with this company is that they offer their small insurance policies too late in many cases to protect their insureds under Maryland’s pay-to-play statute.
Maybe if these lawyers were paid a little more, they might have the time to figure out from the beginning whether it is an excess case where the policy should be tendered. It couldn’t hurt. Even more importantly, it could spend the resources to figure out which cases are policy cases from the beginning. This is an investment that would actually save a ton in lawyers’ fees.
The big update in 2019 is that MAIF changed its name to Maryland Auto Insurance. Yes, some creative genius came up with that fancy name. They said this was a simpler name. My theory is that the name MAIF was so besmirched they wanted to get rid of it. This makes sense. But I think the true brilliance is actually the new name. It is hard to taint “Maryland Auto Insurance” because it means it evokes that plain meaning of those words. Cynical but smart marketing, I guess.