February 25, 2004

LETTER TO THE EDITOR

THE HOUSEHOLD FAMILY EXCLUSION – ANOTHER AUTO INSURANCE RIP-OFF

The auto insurance industry should be given an award for sheer creativity in thinking up ways to rip off their policyholders. The household family exclusion is one of those rip offs.

This exclusion means that if a family member living in the same household as the insured driver is injured due to the driver’s negligence that family member can collect only up to $20,000 in damages. Here’s how it works. Let’s say that the face value of your auto policy is $100,000/$300,000. You have an accident and your mother, who lives with you, is in the car and sustains injuries. She can collect only up to $20,000 in damages. However, if your mother does not live with you, she can collect up to the face amount of your policy - $100,000.

The only reason a family member living under the same roof with the insured can collect up to $20,000 is because of a 1986 Maryland Court of Appeals decision. The Court ruled that since the $20,000 is the legally mandated minimum auto coverage a Maryland driver must carry, household members could not be excluded.

Maryland is one of only 12 states that imposes the household family exclusion rule.

For several years, legislation has been introduced and rejected to require that Maryland drivers be offered the opportunity by their insurer to buy coverage for household members. This year, HB 486, which I strongly support, will give auto insurance policyholders the opportunity to purchase coverage for family members. The measure further provides that an insurer may not refuse to underwrite a policy if the named insured requests such coverage for family members.

It is absolutely ridiculous to deny family members who live with the insured the same coverage that family members who do not live with the insured receive. It is an auto insurance injury ploy to save money on accident claims. I guess the insurers figured out that the passengers in the insured’s car are most likely going to be the people who live with the insured.

The insurance industry has infinite ways and means it uses as an excuse to hike premiums and save money on claims. The household family exclusion is merely one of the tricks in the industry’s bag of tricks to increase profits.

I have introduced legislation – HB 132 - to prohibit auto insurers from raising premiums on drivers who are not at fault for accidents. Yes, that’s right insurers actually do that. If you are stopped at a red-light and another vehicle plows into your car, that can be grounds for the insurer to raise your premium.

In 2002, the General Assembly enacted HB 521 to prohibit home owner insurers and auto insurers from hiking premiums, based on the insured’s credit rating. People’s driving record, not their credit rating, should be used to determine premiums. Homeowners’ damage claims, not their credit rating, should be used to determine premiums.

These so-called tricks of the trade should be struck down one by one. Whether it is the household family exclusion or penalizing the clearly not at fault driver or using one’s credit rating to assess auto and homeowners’ insurance premiums, all of these industry ploys have several things in common. Each is grossly unfair and unreasonable, and each has nothing to do with fault or risk. To my way of thinking, insurance policies should be based on reason and fairness and concerned primarily with fault and risk.

Sincerely,

Eric Bromwell

EB:jn