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The Maryland Insurance Administration has taken enforcement measures against Erie Insurance Group following an investigation into the company’s business practices. A market conduct examination found that Erie engaged in unlawful practices that disproportionately limited policy availability in urban areas, particularly Baltimore City. The investigation determined that Erie’s agents were encouraged to reject qualified applicants and faced penalties based on loss ratios, practices that violated Maryland insurance laws.
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The findings were detailed in a Market Conduct Examination Report released today. The report states that Erie encouraged a practice known as “front line underwriting,” where agents were instructed to reject applicants they believed might be unprofitable, even if they met underwriting guidelines. Maryland law prohibits insurers from denying policies to individuals who meet established eligibility criteria. Additionally, the Insurance Administration found that Erie penalized agents if their loss ratios exceeded certain thresholds, which disproportionately affected agents serving urban areas such as Baltimore.
Under a consent order between Erie and the Insurance Administration, Erie must cease all unlawful practices, submit a corrective action plan, provide documentation on agent terminations and commission reductions, and establish a resolution process for any wrongful actions. The insurer must also pay a $400,000 administrative penalty, though half may be waived if Erie complies with the order for one year.
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The investigation into Erie’s practices began in 2021 after complaints from four insurance agencies. By 2023, the Insurance Administration had issued public determination letters finding Erie in violation of Maryland state law. Erie challenged these findings in U.S. District Court but lost the case and an appeal to the U.S. Fourth Circuit in June 2024. Following the court ruling, Erie entered settlement discussions with the Insurance Administration, ultimately agreeing to the corrective actions outlined in the report. While Erie denies violating Maryland’s insurance laws, it has consented to comply with the new directives.
Article by multiple RFHC contributors, based upon information from the Maryland Insurance Administration.
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