Legislature(2021 - 2022)BELTZ 105 (TSBldg)
04/15/2021 01:30 PM Senate TRANSPORTATION
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB36 | |
| SB103 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 36 | TELECONFERENCED | |
| += | SB 103 | TELECONFERENCED | |
HB 36-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE
1:39:05 PM
CHAIR MYERS announced the consideration of HOUSE BILL NO. 36
"An Act relating to an application for a license to operate as
a dealer in motor vehicles; and requiring a dealer in motor
vehicles to maintain liability and property insurance."
1:39:38 PM
CHAIR MYERS moved to adopt Amendment 1, work order 32-
LS0271\A.2:
32-LS0271\A.2
Fisher
4/14/21
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR MYERS
TO: HB 36
Page 2, line 29, through page 3, line 2:
Delete all material and insert:
"Sec. 08.66.085. Insurance requirements. A
dealer in motor vehicles shall maintain liability
insurance for bodily injury and property damage on
an auto dealer's form."
SENATOR SHOWER objected for discussion purposes.
1:39:55 PM
CHAIR MYERS explained that Amendment 1 was language requested
by the sponsor and the Director of the Division of Insurance,
Lori Wing-Heier. He asked the sponsor to explain HB 36.
1:40:09 PM
REPRESENTATIVE MATT CLAMAN, Alaska State Legislature, Juneau,
Alaska, as sponsor of HB 36, explained that Amendment 1 was
language recommended by Lori Wing-Heier, Division of Insurance
director as appropriate insurance for auto dealers. She also
advised that minimum levels of insurance were not necessary
because the insurance brokers would determine the right amount
of insurance the specific dealer needed based on the volume of
sales they had within the market. The key goal was to ensure
dealers had insurance but not to mandate any specific level of
insurance, he said.
1:41:34 PM
LORI WING-HEIER, Director, Division of Insurance, Department
of Commerce, Community and Economic Development (DCCED, stated
that she met with the sponsor to discuss the insurance
requirement in HB 36. Amendment 1 will provide the insurance
requirement for automobile dealers that the sponsor intended,
she said.
1:41:56 PM
SENATOR KIEHL asked about price points for policies because
the committee was interested in any increased costs for
dealers.
MS. WING-HEIER responded that the division researched premiums
for the policies. She stated that premiums for auto dealers
are rated on the number of fulltime employees. The annual rate
per employee cost would be approximately $600 in Anchorage,
$350 in Fairbanks and $300 for all other areas of the state.
In addition, there would be loss cost multipliers (LCMs) to
add and other factors, such as whether the employer had
previous claims. She stated that the sponsor wanted liability
insurance at $100,000 per accident with a $200,000 policy
limit and a separate limit for property damage. She noted that
she could not find an insurer that would write less than $1
million. She offered her belief that the rates would probably
double the current dealer insurance rates. In addition, some
insurance companies have a minimum insurance premium. It would
be possible to have one fulltime employee and still pay
$2,500.
1:43:55 PM
CHAIR MYERS asked if that is per month.
MS. WING-HEIER answered the rates were for annual policy
amounts. Premiums would be based on what the company
underwrites. For example, the insurance premium for a dealer
with four employees at $600 each would total $2,400. In this
instance, the rates were based on fulltime employees.
1:44:35 PM
SENATOR SHOWER offered his view that the rates did not seem
onerous. She asked what kind of impacts or barriers she
foresaw for small businesses. He wondered if she had done any
analysis.
MS. WING-HEIER answered that she had not done so. She offered
her belief that established businesses would receive better
rates than a new dealer because the insurance company could
review their claims.
SENATOR SHOWER expressed concern that the capital outlay could
be burdensome and create a barrier for a person who is just
starting a business.
1:46:10 PM
SENATOR MICCICHE joined the meeting.
1:46:24 PM
REPRESENTATIVE CLAMAN outlined that the economic cost to
become an auto dealer falls into two categories: the bond cost
and the insurance cost. Currently, the cost of obtaining a
bond of $50,000 is $500 to $1,000, depending on
creditworthiness. An estimated increased cost of going from a
$50,000 to $100,000 bond was $1,000 to $2,500. He clarified
that he did not ask about the charge. He explained that
typically the bond is sold by the same broker, so the minimum
coverage might be less because the dealer would be buying the
bond and insurance from the same broker. He estimated the
total cost would range from $2,500 to $4,000 for someone
initially starting a dealership. He said it strikes him as
reasonable consumer protection considering that people would
be spending from $15,000 to $30,000 for a used car.
1:48:14 PM
CHAIR MYERS asked whether the costs would be too high for
entry-level auto dealers.
1:48:48 PM
MARTEN MARTENSEN, Owner, Continental Automobile Group,
Anchorage, Alaska, related a scenario in which a wheel fell
off while a driver was test driving a vehicle advertised on
craigslist. MS. WING-HEIER answered the rates were for annual
policy amounts. Premiums would be based on what the company
underwrites. For example, the insurance premium for a dealer
with four employees at $600 each would total $2,400. In this
instance, the rates were based on fulltime employees. He
related his understanding that every legitimate dealer has
liability insurance and garage policies to protect themselves
in the event of an accident. When Continental Auto takes a
vehicle in trade, the dealer performs any reconditioning
needed. If something goes wrong, the dealer needs that
insurance coverage as protection. At a minimum, state law
requires all vehicle owners to have liability insurance. He
offered his belief that requiring liability insurance would
not pose a barrier for anyone entering the car business;
that's just something dealers must provide.
1:50:17 PM
CHAIR MYERS related his understanding that HB 36 would
effectively put what is already happening into statute.
MR. MARTENSEN answered that legitimate auto dealers carry
liability insurance.
1:50:45 PM
SENATOR KIEHL pointed to a reputable dealer with a different
business model. This dealer is not exclusively a car dealer
but operates a boutique business on a very small scale geared
toward a higher quality product. He stated that Amendment 1
would impose an increased obligation and cost for this dealer.
He asked members to contemplate this. He said he would not
object to Amendment 1, but he hoped to work with the Division
of Insurance and the sponsor to explore lower-cost options to
provide the minimum coverage. He stated that this remains a
concern as the bill moves forward.
1:51:45 PM
REPRESENTATIVE CLAMAN pointed out that Mr. Martensen brought
up a good point. He highlighted the situation of an uninsured
driver test driving a vehicle. He stated there should be
protection for someone hit by an uninsured driver. That car
should be insured just as his car is insured. If a driver test
drives a car from the boutique dealer Senator Kiehl mentioned
and the wheel falls off, it is due to a problem with the
vehicle. If the driver is severely injured in that instance,
the notion that the boutique dealer could operate without
insurance would be troubling to the average consumer. The
average consumer would expect a dealer to stand behind the
defective vehicle, which is why liability insurance should be
required.
1:53:10 PM
SENATOR KIEHL agreed that uninsured motorists are problematic.
He offered to continue to work on the issue going forward due
to his concerns. He acknowledged that the potential insurance
costs would more than double, so he would continue to
contemplate it.
1:53:45 PM
SENATOR MICCICHE offered his belief that the proposed
insurance required by Amendment 1 appeared to be basic
insurance coverage. He stated that he has insurance on every
vehicle he owns. He said he wanted to be certain he understood
Amendment 1. He asked what the difference was between the very
basic level of insurance and Amendment 1.
1:54:47 PM
CHAIR MYERS explained that Amendment 1 was recommended by the
division. Currently, the bill takes the language aimed at an
individual and applies it to a business. Amendment 1 would
change the liability insurance requirements to better apply to
businesses. The insurance company set the minimum
requirements, not by statute.
1:55:24 PM
SENATOR MICCICHE asked why the language "death" was being
removed from AS 08.66.085. It previously read, "for injury,
including death for any one person?." He asked whether the
assumption was that the insurance for an auto dealer would
include that level of protection.
REPRESENTATIVE CLAMAN deferred to Ms. Wing-Heier.
MS. WING-HEIER responded that the insurance policies currently
have a single limit of $1 million, whereas personal auto
coverage is $50,000 per person, $100,000 per accident and
$25,000 for property damage. Amendment 1 would require the $1
million limit, which includes bodily injury, including death.
1:56:48 PM
SENATOR MICCICHE asked what the cost increase will be to auto
dealers.
MS. WING-HEIER replied that it was impossible to find an
insurance company to write a policy for less than $ 1 million.
She suggested that the minimum premiums would likely run about
$2,500, whether the dealer has one employee or four employees.
She said insurance companies or brokers could not afford to
write policies for less. She indicated that the base rate
could be $600 for an auto dealer with one employee in
Anchorage.
SENATOR MICCICHE asked whether these fees were for annual
premiums.
MS. WING-HEIER answered yes.
1:58:07 PM
SENATOR SHOWER removed his objection.
There being no further objection, Amendment 1 was adopted.
1:58:37 PM
SENATOR MICCICHE commented that he heard from several auto
dealers in his region. He offered that HB 36 was not a
burdensome bill. For example, if one of his daughters were to
test drive a vehicle, he would want the dealer to be
reputable, one who could be located if something went wrong,
and one who has insurance coverage for test drives. He said he
was worried about the cost of entry for smaller dealers.
However, it seemed as though most held this level of insurance
anyway. He offered his view that the provisions in HB 36 were
not burdensome and seemed fair.
CHAIR MYERS asked the will of the committee.
1:59:57 PM
SENATOR SHOWER moved to report HB 36, work order 32-LS0271/ as
amended, from committee with individual recommendations and
attached fiscal note(s).
CHAIR MYERS found no objection and SCS HB 36(TRA) was reported
from the Senate Transportation Standing Committee. He stated
that Legislative Legal is directed to make any changes to the
language, including technical, conforming, or bill title
changes to accomplish the intent of any conceptual changes to
the bill.
| Document Name | Date/Time | Subjects |
|---|