Maryland Auto warns MIA order, possible $21M assessment could raise costs for drivers

Maryland Auto officials told the Economic Matters Committee that a recent Maryland Insurance Administration order requiring the insurer to be ‘‘rate adequate’’ by the end of 2026 will force changes to the program’s affordability index and could trigger a multi‑million‑dollar industry assessment.

Devon Brown, government relations manager for Maryland Auto, told the committee the organization exists to ‘‘reduce the number of uninsured motorists and to provide assessable insurance options for individuals who are unable to obtain coverage in the regular market.’’

The changes matter because Maryland Auto, created by the legislature decades ago as a residual market mechanism, uses an affordability index that targets minimum‑liability rates in low‑income ZIP codes. Al Radmer, director of Maryland Auto, told lawmakers that the Maryland Insurance Administration (MIA) has ordered the insurer to reach statewide rate adequacy and eliminate the affordability index by the end of 2026, a timetable Radmer said the organization has begun to address.

Radmer gave a preliminary estimate for the industry assessment that funds Maryland Auto’s surplus: when books were closed in November the board’s working estimate was about $21,000,000, though he said final certification will be based on audited financials as of Dec. 31, 2024 and that officials now hope the number will be lower. He said the board will certify the assessment in March and that invoices will be sent by the trade group (identified in testimony as the IAA), with payment due by the end of June. Radmer summarized the assessment mechanic succinctly: "It works out to be about $3 for every $1,000 of auto premiums."

Radmer and Brown described several related pressures on rates and the residual market: a roughly 52% annual cancellation rate among Maryland Auto policyholders; a high share of policyholders who buy only state minimum liability (Radmer said about 71% have liability only and that 99% have minimum limits); increasing claims frequency and severity tied to higher speeds and more expensive repairs; and a susceptibility to claimant fraud. Radmer said parts shortages and higher rental durations have pushed repair costs and claim payouts higher, and he reported ongoing coordination with the MIA fraud unit and national partners to address suspected criminal activity related to towing and storage charges.

Committee members asked about the practical effects on urban residents, noting that urban territories typically carry higher base premiums because of traffic density. One member urged attention to enforcement of the law requiring drivers to carry proof of insurance; Radmer said law‑enforcement priorities have limited enforcement in the past and that a Virginia loophole allowing out‑of‑state tags had previously undercut Maryland enforcement until Virginia closed that gap. Members also pressed for more data on the role of vehicle technology and repair costs in growing claim severity; Radmer said he would provide claims data and gave a broad industry explanation that modern sensors and cameras make even seemingly minor collisions more expensive to repair.

Radmer outlined recent and planned rate filings: he said Maryland Auto has been raising rates in recent years (including an earlier increase and an 11% request that was later revised), and that a 13% rate increase will take effect later this month as part of the insurer’s ongoing filings. He said Maryland Auto will file again to meet the MIA directive, and that the organization is looking for alternatives to the affordability index that could both satisfy statute and address the regulator’s concerns.

On the question of oversight and audits, Radmer said Maryland Auto employs an internal auditor and an annual external audit, but it is not audited by the state. He also described reporting to national organizations (testimony referenced the NCIB and a national group identified as IPSO) and said Maryland Auto participates in information‑sharing and a fraud workgroup with the MIA.

Radmer repeatedly emphasized that Maryland Auto is intended as the insurer of last resort rather than a profit‑seeking growth vehicle: while the program grew rapidly during market contractions, he said growth in the affordability‑indexed territories can be unprofitable—"we lose 20 to 40¢ on every dollar we collect" in those ZIP codes, he told the committee. He said that as private carriers tightened underwriting after pandemic losses, Maryland Auto’s policy count rose but that the company expects private carriers to re‑enter those markets during 2025, producing an anticipated 20% decline in Maryland Auto’s policy count and revenues in 2025 compared with 2024.

Next steps described to the committee: Maryland Auto will close 2024 financials, obtain actuarial and external audit signoffs, have the board certify the assessment in March, and file rates with the MIA to reach statewide rate adequacy while seeking alternatives to the affordability index.

The committee’s discussion focused on potential consumer impacts in urban communities, enforcement of existing insurance‑proof requirements, the role of fraud and repair costs in rising claim severity, and how any carrier assessment would be passed through or absorbed by private insurers. Radmer said carriers have three options to handle an assessment: absorb it, treat it as an operating expense included in future rates, or recoup it as a line‑item charge to policyholders.

Ending: Maryland Auto officials left the committee with several outstanding data requests (claims detail by territory and deeper explanation of repair‑cost drivers) and the firm timetable that the MIA’s order imposes: alternatives to the affordability index must be developed while the insurer prepares filings and the Board prepares to certify the assessment based on audited 2024 results.