Maryland Regulator Settles Long Dispute With Erie Insurance Over Discrimination
March 14, 2025
Maryland’s insurance regulator has settled a long-running dispute with Erie Insurance Group over the insurer’s practices involving some urban agents and their insureds.
The Maryland Insurance Administration said its market conduct examination that was actually conducted four years ago uncovered unlawful practices resulting in fewer Erie policies written and renewed in urban ZIP codes, particularly in Baltimore City.
The examination of conduct from 2016 to 2020 found that Pennsylvania-based Erie encouraged insurance agents affiliated with its companies to engage in a practice they called “front line underwriting,” in which the agents were encouraged to reject otherwise qualified applicants who they deemed might be unprofitable for the company. The MIA noted that under state law, once an insurer establishes its underwriting eligibility guidelines and rates and files those rates with the state, it cannot refuse to issue a policy to anyone who meets those guidelines.
The MIA examination also found that Erie agents were penalized if their books of business resulted in a certain loss ratio, regardless of whether their customers qualified for Erie coverage. The penalties included reduced commissions and termination. The regulator found that this reliance on loss ratio primarily impacted insurance agents serving urban areas such as Baltimore.
The MIA said it is taking “corrective actions” against Erie as a result of its findings.
The investigations actually began in 2021, based on complaints from four insurance agencies about Erie’s practices. In 2023, MIA issued four public determination letters stating that Erie had violated Maryland state insurance law. Erie objected to the investigation’s findings and their release and filed due process complaints in U.S. District Court. MIA prevailed in that case, and Erie appealed to the U.S. Fourth Circuit, which found there was no reason for it to intervene in June 2024. The administration then entered into settlement discussions with Erie, resulting in a consent order that has now been released.
Federal Court Won’t Intervene in Erie Insurance Tiff With Maryland Regulator
Erie maintains that it did not violate insurance laws and disagrees with the legal and factual findings in the examination report but agreed to the directives and corrective actions in the report
In its written response to the report, Erie wrote:
“The Report states that the Administration’s “emphasis” is on “Erie’s encouragement of its appointed agents to adopt their own ‘front-line underwriting’ guidelines.” The Report finds that these guidelines led the agents to “turn down qualified business that was considered likely to be unprofitable.” Erie’s core alleged violation of Maryland law, according to the Report, was encouraging its agents to be profitable. Erie denies that encouraging its agents to be profitable violates Maryland law.”
Erie added that it is “committed to taking action to address the issues raised” and has chosen to not appeal the report. “Erie will refocus its resources on serving Erie’s Maryland policyholders and appointed agencies, rather than on expensive and distracting litigation with the Administration,” the company stated.
As part of the settlement, MIA and Erie agreed to a consent order with corrective actions. Under the order, Erie must:
- Cease and desist from all unlawful practices, including front line underwriting and direct or indirect use of adverse loss ratios, except as permitted by law.
- Submit a corrective action plan for review and approval to the Insurance Administration.
- Submit a list of all agent terminations and commission reductions, with an explanation of the actions, and prepare an efficient process for resolving any adverse findings concerning the proprietary of those actions.
- Pay an administrative penalty of $400,000, due within one year of the order. If the Insurance Administration finds that the company is in continued compliance with the order, $200,000 of the penalty will be waived.
The original dispute involved the handling of four administrative complaints filed with MIA alleging Erie engaged in discriminatory practices against low-income and minority communities in the Baltimore area. The complaints were filed by Baltimore Insurance Network, Burley Insurance & Financial Services, Ross Insurance Agency and Welsch Insurance Group.
Early in the dispute, the insurer had maintained that the MIA has not afforded it adequate opportunity to respond to the complaints by the four Baltimore independent agencies. The insurer also claimed that MIA violated state law by disclosing confidential business information from market conduct exams and its determination letters on the discrimination allegations.
The Fourth Circuit Court of Appeals found that state law afforded Erie adequate opportunity to raise its constitutional claims in the continuing administrative hearings and subsequent state court review. The court also found that Erie did not prove that past actions by MIA were motivated by bias that would affect future proceedings.
In their complaints, the agencies said that they were restricted from offering Erie’s policies to residents of primarily Black communities. They alleged that Erie threatened and penalized them for challenging what they maintain are Erie’s discriminatory redlining policies. The agencies claim the retaliatory actions hurt their business.
“A critical role of the Maryland Insurance Administration is to hold insurers accountable for actions that impact access to quality insurance products,” said Acting Maryland Insurance Commissioner Marie Grant in releasing the report and consent order. “The intent of these actions is to ensure that Erie and other licensed Maryland insurance companies follow the law going forward. It is essential that residents of Maryland’s urban areas have full and equal access to insurance.”
Topics
Maryland
Was this article valuable?
Here are more articles you may enjoy.
The most important insurance news,in your inbox every business day.
Get the insurance industry’s trusted newsletter
