MARYLAND – Anne Arundel Democrat Sen. John C. Astle intends to file a bill to curb the spending practices of the Maryland Automobile Insurance Fund (MAIF).
The Maryland lawmaker will take initiative to end the firm’s practice of giving out bonuses to managers and workers, as well as hiring lobbyists on their behalf.
At the Joint Appropriations Committee hearing earlier this month, the MAIF justified using $74,000 to spend on outside lobbyists from 2008 to 2009.
Moreover, MAIF also justified internal changes allowed by their board of directors to lessen restrictions to give out employee bonuses. About $1.4 million in bonuses were offered to about 425 fund employees: $1 million went to 395 non-managerial staff, while $470,000 was given to 30 managers. This happened during the fiscal year when the insurance fund reported a loss of about $19.6 million.
Formerly, this fund had a rule which said that managers of the agency would be allowed to benefit from the ‘bonus pool’ if the fund yielded a profit. If the new changes were not in place, a Maryland state audit revealed that only about $250,000 in bonuses would have been given out.
MAIF executive director M. Kent Krabbe, during the hearing, said that expenses for lobbying were essential. This was because the fund needed to react to private insurance companies which targeted the MAIF initiative to implement laws that would enable clients to comply with auto premium obligations in payment installments.
At present, the fund’s clients are required to fulfill payments in lump sums which tend to cause more financial burdens for customers. Some clients resort to borrowing from finance companies and lending institutions; for-profit insurers typically allow payments in installments on a per-month basis.
Moreover, Krabbe said that the bonuses are also essential so that they could keep their salaries competitive in comparison with what for-profit insurers offer. In 2008, the fund’s board approved some changes to this formula to award bonuses so that the company decision to maintain premiums at minimal cost would not affect staff salaries.
However, Astle did not accept Krabbe’s explanations. He said that the MAIF has no reason to pay lobbyists as if they were a “private company” to “in influence state lawmakers on policy issues,” but instead focus on its core purpose of serving the best interest of drivers who are turned down by for-profit insurers.
Astle also does not approve of the MAIF practice of giving away bonuses though his bill does not explicitly contain an overt ban of such a practice.
Baltimore County Republican Delegate Susan L.M. Aumann is considering co-sponsoring the Maryland legislator’s bill.
