According to a legislative report in the state of Maryland, the state, thru an automobile insurance fund, recently gave employees a total of $1.4 million worth of bonuses, despite losses in 2008 amounting to $19.6 million.
From its traditional method of rewarding bonuses during the end of a year, the board of the insurance fund changed its formula to award bonuses midyear, allowing bonuses to come through. Reports say that the group was going down deep into losses from last year, raising questions as to how they were able to award such bonuses.
According to insurance insiders, the board of trustees of Maryland Automobile Insurance Fund intentionally decreased their set goals and financial targets to allow employees to receive a total of $750,000 worth of bonuses. The board of trustees also voted to waive a current policy requirement that mandates that Maryland Automobile Insurance Fund has to be profitable first before an additional $407,000 worth of bonuses would be paid to more than 30 managers. If changes did successfully take place, employees would have only been able to receive $250,000 worth of bonuses based on non-profitability of last year’s operation and nonfinancial performance results.
The Maryland Automobile Insurance Fund, founded in 1972, is a quasi-governmental company tasked to offer auto or vehicle Maryland auto insurance to citizens who are having difficulties purchasing car or automobile insurance from private companies. The fund is tasked to function without taxpayer money and procure funds to cover claims to victims of vehicle accidents caused by uninsured drivers.
Right now, reports and insurance experts question the appropriateness and timing of awarding bonus payments especially now that the state auto insurance fund is experiencing losses, and also because of the fiscal pressure felt by the state and nation as a whole.
According to Maryland Automobile Insurance Fund executive director, Kent Krabbe, the board of trustees was only protecting the organization’s employees from suffering because of circumstances that is beyond their control. He said that for the longest time, they have kept premiums to a minimum, at a rate as low as possible, just to ensure consumer insurance protection. Keeping premiums down despite spiky economic downturn made the original financial goals unattainable, making it impossible for employees to receive bonuses.
Krabbe clarified that the awarding of bonus was a considered and well debated decision, stating that the board carefully discussed this issue prior to making final decisions. According to Krabbe, bonuses rewarded to employees were small and nothing compared to the large payouts made to Wall Street employees and executives.