Debate Over Forced Insurance Bundling Continues in Maryland

Legislation barring insurers from refusing to provide homeowner’s or renter’s coverage to customers only because they haven’t also purchased auto coverage from that insurer, or vice versa, was debated as part of a Senate committee hearing in Maryland on Thursday.

Industry representatives said the bill, HB 1105, was premature, while the state delegate sponsoring it said it’s meant to “head off the threat” of the practice, called “forced bundling.”

“Consumers should be allowed to bundle at their choice,” Delegate Tom Hucker (D-Montgomery County) said during the hearing. “But an insurance carrier shouldn’t force you to buy another line of insurance by threatening to cut you off from another one.”

Hucker also said his proposed bill would have no impact on consumers who voluntarily hold different policy types with the same insurer, which usually happens when companies offer discounts to encourage multi-line purchases.

The bill already passed the House earlier this month on a 137-0 vote.

An ‘Illegal and Discriminatory’ Practice

Others offering testimony during the hearing included Peter Killough, a consumer advocate for the Maryland attorney general’s office, who called forced bundling “illegal and discriminatory.”

Consumers looking to save money by buying the cheapest insurance in either the home or car coverage industries, Killough said, would not be able to because of forced bundling. Killough added that it could create other unfortunate situations, calling the auto and homeowner’s markets “two separate industries that are both highly regulated.”

“What if you’re ineligible for auto insurance but you have homeowner’s? Does that mean you have to drop your home insurance?” Killough said during the hearing. “What if you have both and you get two moving violations [and your auto coverage is dropped]? So they drop you from home insurance?”

Arguments Cite North Carolina, Arkansas Bundling

Hucker cited the nonrenewal of tens of thousands of residential policies by Allstate in North Carolina and Arkansas because those policies were not paired with auto policies as evidence that insurers are increasingly employing such practices to boost profits.

But Lawrence Richardson Jr., a State Farm representative, told lawmakers that they would be rash to make conclusions about the issues reported in North Carolina late last year.

“The companies that engaged in that activity were doing it relative to a rating process that is currently under review,” Richardson said.

Richardson added that “we’re not aware of extensive abuse of this process,” but North Carolina’s state Legislature expects to conduct a study on the issue in late 2012 or early 2013. He recommended that Maryland legislators “defer this issue until we see what, if anything, is determined by the commissioner and what North Carolina [legislators] determine from their review and study.”

Another State Farm representative said insurers are concerned that legislators “start passing laws in anticipation of what’s happening elsewhere when it’s not a real situation in Maryland now.”

Bundling Supporters, Opponents Differ on Availability of Options

Jack Andryszak, an industry advocate with the American Insurance Association, said the market is robust enough that consumers still have options if bundling forces them from an agency.

“The market is good,” he said at the hearing. “We don’t have any evidence of a problem here.”

But the market’s health looked different to Tinna Quigley, spokeswoman for the Maryland Insurance Administration (MIA). When asked by a senator about how destructive forced bundling is to consumers since “there’s enough companies in the standard market that someone else would pick up the business,” Quigley replied that some Maryland homeowners could lose out because of the practice.

“The homeowner’s market is vibrant but there are places along the coastal areas where some homeowners wouldn’t agree,” she said.

Quigley said the MIA is “being more vigilant” about being aware of filings that require bundling but is wary because administrators lack an avenue of enforcement.

“Absent a law, we don’t have a hammer to use to make sure insurers don’t require bundling of policies,” she said.

Hucker also differed from industry representatives on bundling’s effect on its respective markets.

“It’s in the public interest to protect our homeowners,” he said. “We have a foreclosure crisis. We don’t want people to start losing their homes because they don’t have auto insurance.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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