One winter's day in Annapolis in 1972, Gov. Marvin Mandel turned his attention from that year's race track legislation, summoned his allies to his office and launched perhaps the mightiest arm-twisting,lobby-busting statehouse campaign of his career. The subject was auto insurance, the state's then-blazing consumer issue.

Today, the arcane race-track bill-- which sent Mandel to prison --is much better remembered than the massive insurance statute the governor shoved through a reluctant legislature. But a case can be made that those 60 pages of fine print known as the Maryland Insurance Reform Act have cost the state's citizens far more than any statehouse scandal.

This reform measure made "no-fault" insurance mandatory for all drivers, granted new regulatory powers to the state insurance commissioner and created a state insurance agency for "high-risk" drivers -- all in an effort to make car insurance cheaper, more equitable, more available and better regulated.

That was the promise. In practice, it has failed in every major respect.

State insurance officials, industry executives and legislators now cite widespread failings and apparent inequities in Maryland's auto insurance market, ranging from rapidly inflating prices to an ever-expanding pool of illegal uninsured drivers to alleged redlining and a breakdown of government controls over the insurance companies. Consider:

Since 1973, average base prices for Maryland auto insurance have more than doubled -- a rate of about 13 percent a year and significantly more than the average increase nationally.

Rates for the state's special agency for drivers whom the insurance companies refuse to serve --including a disproportionate number of low-income persons in Baltimore and elsewhere -- have more than tripled in Baltimore City, denying the right to drive to thousands and creating a pool of uninsured drivers estimated at 120,000 or more.

For many Baltimore drivers, the lack of affordable insurance has been particularly unjust. State insurance officials say that both the old and new state laws have failed to stop the practice by companies of redlining in Baltimore -- or avoiding all business in low-income areas.

Meanwhile, the power of the state insurance commission to regulate the activities of companies worth $174 billion and selling $700 million of auto insurance annually in Maryland has been steadily eroded by tight budgets and inefficiency. And this state office represents the only watchdog consumers have over the national industry, for insurance companies are the largest American business regulated by the states, exempted since 1945 from federal antitrust laws and almost all other national controls.

While a few states have adopted new methods of regulating insurance prices and availability that advocates say work more efficiently and equitably than Mandel's plan, Maryland's auto insurance system -- and its problems -- are typical of states across the country.

This series will describe how the regulatory system enacted in 1972 went awry, largely to the benefit of trial lawyers and insurance companies. It will also compare Maryland's regulation of insurance with other states', and describe how this unusual regulation of a national industry has led, in many cases, to a Balkanized system whose controls over one of the nation's largest industries have often broken down.

The story begins with what was perceived as an auto insurance crisis 10 years ago in Maryland -- a crisis whose conditions, ironically, have hardly changed today, although the wave of official concern has nearly died out.

Auto insurance was the most complained-about issue in the first years after Mandel took office in 1969, his aides recall now. The complaints covered a wide range of areas: not just rising prices, but broad practices by the insurance companies in determining who could buy insurance, how they were surcharged for their risk of future accidents and what happened when they ended up in the industry-controlled "assigned-risk" plan for drivers the private market turned away.

At the same time, a new approach to settling insurance claims for accidents was being loudly proclaimed in Congress and in statehouses around the nation as a solution to high costs and inadequate and delayed payments for accidents. This was "no-fault" insurance, the system under which drivers collected benefits for accidents from their own insurance companies, rather than from the company of the person at fault.

First proposed in the mid-1960s and strongly endorsed in a massive report by the U.S. Department of Transportation in 1970, no-fault insurance was at its peak as a national issue in 1971. In Maryland, a no-fault bill had provoked a heated debate on the state Senate floor that year, but was defeated.

"For the first time, the notion took hold around the state that insurance rates were out of hand," said then-state Sen. Newton Steers, who was state insurance commissioner in the late 1960s and a leader of the no-fault drive. "And Marvin Mandel was nothing if not a good politician. He knew when to act."

Indeed, Mandel acted decisively. As the no-fault system was debated in the legislature in January 1971, he appointed a task force headed by the state secretary of licensing and regulation, John Jewell, to study Maryland's auto insurance and decide what should be done to change it.

Jewell was so impressed with the complaints about the insurance companies and the practices of settling auto-accident claims that he delivered a strident report in January 1972 recommending that Maryland take the most drastic possible step-- pass by no-fault systems and other standard solutions and take over the auto insurance business entirely.

Mandel knew that such a proposal -- even if it were workable -- would never be passed by the state legislature. And so, still determined to come up with an auto-insurance bill, he assigned his staff to come up with something more practical. Less than a month later, the Maryland Auto Insurance Reform Act was unveiled, a book-thick bill that, while mild compared to Jewell's suggestions, sought to reorganize or improve almost every aspect of auto insurance and its regulation.

The bill began by making auto insurance mandatory for all drivers in the state, and contained whole new areas of authority for the state's insurance commissioner.

But most important, Mandel's comprehensive package had two major provisions designed to solve the problems of high insurance prices and low availability to drivers in the inner city. The first, taken from Jewell's radical proposal, was a new state agency, the Maryland Automobile Insurance Fund, which would replace the industry-controlled assigned-risk plan as the harbor for drivers who could not buy insurance from private companies.

Second, the bill embraced the national enthusiasm for no-fault insurance by proposing a modified version promoted by national lawyers' organizations. It established no-fault insurance coverage while preserving the traditional court-suit system.

Almost every provision of this ambitious package was an offense to insurance companies, but it was these last two provisions --particularly the dreaded entry of the state into the insurance business --that caused the biggest uproar. Desperate to stop the bill, the insurance industry launched the biggest lobbying campaign ever in Maryland, flying in executives and specialists from all over the country to cajole somewhat bewildered state legislators.

At first, the insurance companies succeeded, defeating the bill in its first Senate vote. Mandel began negotiating with top national insurance executives, seeking a compromise. But the industry, feeling it had the upper hand with time running out in the session, refused to budge.

"That was their big mistake," says current state insurance chief Edward Birrane, then working for the bill as a staffer in the state Motor Vehicle Administration. "After that happened, all of a sudden people started getting called up to the governor's office, and roads got built and places got paved and the House version of the bill came rolling out of committee like a bowling ball, knocking lobbyists off right and left."

On the last weekend of the legislative session, Mandel's insurance bill passed, nearly intact in its introduced draft. "It was," Birrane says now, "Maryland's day in the sun for insurance."

Now, nine years later, almost everyone in the insurance industry acknowledges that the state's no-fault provision is gravely flawed. The state agency, while perhaps more effective than the old assigned-risk plan, has been unable to solve the problems that prompted its creation. The same inequities of price, availability of insurance and payments for accidents exist now as in 1969, when they were deemed an insurance crisis.

And yet, Maryland's elected officials show little or no interest in insurance. Each year, bills are introduced during the three-month legislature to reform the system. For the most part, they have been ignored. Even the insurance industry has made little effort to work for or against them.

In part, the inaction results from the changing times; like other consumer-oriented issues, insurance has vanished from the highlighted agenda of the legislature in recent years. While Mandel used the full force of his considerable political power to ram the original no-fault bill through the legislature nine years ago, no such regulator or politician is willing to undertake the task now.

Even if there were a reform effort, it would face enormous hurdles in Maryland, for on insurance matters, all legislation comes under the sway of several competing special interests -- most prominently, the insurance industry and the trial lawyers.

The industry's resources are perhaps the main reason for its sway over state regulators. Maryland's insurance department is hard-pressed to complete the work it is charged by law to do, and its staff can rarely devote time or money to studying or writing regulatory reforms. At the same time, no state-based consumer organizations take an active interest in insurance matters.

The insurance companies, in contrast, set aside millions of dollars a year for lobbying regulators and legislators. The companies that sell auto, property and commercial insurance alone have three national trade associations, each of which has an annual budget in the millions of dollars. These trade associations --the American Insurance Association, the National Association of Independent Insurers and the Alliance of American Insurers -- have established regional offices around the country with staffs specializing in the laws and politics of a few states. Two have offices in Washington that oversee work in Maryland.

Trade association committees draw up strategy and position papers for winning over state legislators, and trade association lawyers spend time drafting "model" bills to be introduced in legislatures across the country under the name of a friendly state senator or delegate.

In Maryland, these bills most frequently come in under the names of Sen. Harry McGuirk (D-Baltimore), the chairman of the insurance-supervising Senate Economic Affairs Committee, and Del. Frank Komenda (D-Prince George's), a prominent member of the parallel House Economic Matters Committee and the former chairman of its insurance subcommittee. Both men say they introduce the bills as a "courtesy" to the insurance companies.

In promoting the bills -- and working to kill dozens of proposed reforms -- the three trade associations spend about $80,000 on lobbying activities during the three-month legislative session in Annapolis --and this figure does not include the time and money spent by the three regional offices that supervise work in the state.

Meanwhile, often opposing both the industry and consumer interests in Annapolis is the state's trial lawyers' lobby, whose members make their living litigating insurance claims under a system most of them are loathe to change. The power of the trial lawyers comes not so much from their lobbying resources --although the trial lawyers, too, have national lobbying organizations --but from their friends in the legislature.

Many legislators in Annapolis are not only practicing lawyers, but specialists in cases such as the lucrative insurance damage suits that reformers would like to curtail. They comprise almost half the membership of some key committees, and some, like Baltimore City delegation chairman Dennis McCoy, an attorney who handles claims for the state insurance agency as well as plaintiff's actions, are important leadership members.

"These guys make out like crazy as plaintiff's lawyers," says former Del. David Scull, a plaintiff's lawyer who introduced a no-fault reform bill last session only to see it smothered. "And when you try to change the system, you're directly threatening their livelihood. They'll go to incredible lengths to stop it."

The competing and powerful interests have frustrated even Birrane, a relative conservative in insurance matters, who has seen several of his reforms defeated year after year despite intensive lobbying by his staff.

"The legislature is less consumer-oriented than when I first arrived," Birrane said. "When I was a reporter for the Baltimore News-American in the 1960s , the legislature was completely controlled by the insurance industry. In the late '60s and early '70s there was a surge of consumer legislation. Everything labeled as consumer-oriented passed -- and that's what helped us pass the Mandel bill. Now, you see things coming back to what they were."