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Single statewide insurance rate debated

March 09, 2001

Single statewide insurance rate debated



By LAURA ERNDE

laurae@herald-mail.com

Baltimore residents who don't think it's fair that their car insurance costs are four times higher than those in Washington County are asking the Maryland General Assembly to set one statewide rate.

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But as premiums in the city would drop, those in rural parts of the state would rise by an average of 16 percent.

That troubles many lawmakers, including Del. John P. Donoghue, D-Washington, who believes it would be unfair to rural drivers who enjoy lower premiums because they have a lower rate of claims.

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Insurance companies offer drivers a premium based on where they live because some areas have higher claim rates than other areas.

That has resulted in wide differences in premium costs throughout the state, Maryland Insurance Commissioner Steven B. Larsen told members of the House Economic Matters Committee at a hearing Thursday.

In one Baltimore neighborhood where the average income is $45,000 a year, the average auto insurance premium is $972 a year. Several miles away, in a neighborhood where the average income is $14,813 a year, the rates are $1,357 a year.

"Those that make the most pay the least. Those that make the least pay the most. Remember, this is state-mandated insurance," Larsen said.

There is a race factor as well: Those in mostly black neighborhoods pay more, he said.

Larsen said the legislature has known about the problem for at least 12 years and hasn't done anything.

"Not a single thing has changed the huge inequities and social injustice," he said.

High car insurance rates are driving young people out of Baltimore City, said Del. Cornell Dypski, D-Baltimore, the sponsor of the legislation.

Dypski has an alternative proposal to try to even out the rates without setting a flat rate statewide.

Insurance companies would create "banded" territories, where the rates could not vary between bordering territories by more than 10 percent.

Rates would still increase in rural parts of the state, but not by as much.

Donoghue said he doubts either of Dypksi's proposals will pass because it would mean rate increases for many lawmakers' constituents. In his 10 years in the legislature, he has seen similar proposals defeated three times, he said.

The flat rate would increase premiums for 54 percent of the drivers in the state. The banded rates would increase rates for 70 percent of drivers, said Marta Harting, a lobbyist for State Farm Insurance Co.

Accident rates are not much higher in Baltimore than they are in other parts of the state but the rate of costly bodily injury claims is double, Harting said.

"There is a pie here that has to be split up and it's just a matter of how we do it," she said.

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