Regulator: Maryland Auto Fund underfunded; agency ordered to phase out ZIP-code affordability cap

Maryland’s Finance Committee heard on Jan. 22 that the Maryland Auto Insurance Fund remains financially stressed and that regulators have ordered the fund to phase out its ZIP-code-based affordability cap by the end of 2027.

Executive Director Al Redmer told the committee the fund—created to insure drivers who can’t obtain coverage in the private market—saw net written premium fall from about $128 million in 2024 to $93 million in 2025 and a significant drop in policies in force. “We will not have the final budget numbers for another couple of weeks,” Redmer said, but he described a surge in liability-only policies (about 62% in 2023 to over 78% recently), high churn and cancellation rates (historically above 50%), and the use of installment billing that has grown from roughly 2% to about 20% of policyholders.

Maryland Auto’s board certified an assessment of about $19.4 million last year to shore up surplus; Redmer said another assessment is likely this year but probably smaller than last year’s. Redmer described operational and product changes the fund is pursuing—shorter, six‑month policy terms, renewed-policy treatment instead of full rewrites, and cost controls—to both protect solvency and improve affordability.

Insurance Commissioner Marie Grant told the panel that MIA’s December 2024 order requires Maryland Auto to phase out the affordability index and submit a phase‑out plan by March 1. “Our view is that Maryland Auto’s rates are not adequate,” Grant said, noting MIA found an overall indicated increase to reach adequacy of about 8.6% while Maryland Auto’s filed change was 2.8% (liability indicated 11% vs. filed 3.1%). Grant said the agency is prepared to apply risk‑based capital surveillance and, if necessary, prior approval rate standards under legislation enacted last session (House Bill 1098).

The hearing also focused on territorial rating—how insurers use ZIP codes to set premiums—and whether that practice contributes to higher costs in majority‑minority ZIP codes. Sen. Sarah Washington pressed both Maryland Auto and the Insurance Administration about the affordability work group created by HB 1098 and why it did not reach a consensus recommendation on territorial rating. Washington said independent studies suggest ZIP-code pricing results in higher premiums for Black and Brown residents in certain areas; the senator told the committee: “using these ZIP codes have been a barometer of selling black people, brown folks, when they live in a certain ZIP code, the insurance the auto insurance premium is higher.”

Redmer said insurers and regulators must balance actuarial accuracy with geographic data limitations; he explained Maryland Auto groups ZIP codes into rating areas when small policy counts make ZIP-code‑level pricing actuarially unreliable. Commissioner Grant said the work group’s report documented topics with and without consensus and that MIA will continue studying territorial rating and related equity questions in 2026 as it expands actuarial capacity.

Grant also summarized the administration’s telematics review: in 2023, roughly 13.23% of Maryland auto policies used some form of usage‑based or telematics pricing; carriers reported many different data elements, and the administration’s survey showed telematics‑related complaints accounted for about 12.4% of private‑passenger auto rate complaints between Jan. 1, 2024 and June 30, 2025.

Committee members urged clearer timelines for MIA’s work and asked whether the affordability index phase‑out would produce large premium increases for current Maryland Auto policyholders in affected ZIP codes. Grant and Redmer both said phasing will be required to limit market disruption and that Maryland Auto’s membership often transitions back to the private market as driving records improve.

The committee took no formal votes during this briefing. Members asked MIA to continue data collection and to report back with findings and timelines; the administration said it would provide updates as analysis proceeds.