Legislature(2007 - 2008)BELTZ 211
02/27/2007 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB84 | |
| SB68 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 84 | TELECONFERENCED | |
| += | SB 68 | TELECONFERENCED | |
SB 68-MOTOR VEHICLE INSURANCE
CHAIR ELLIS announced SB 68 to be up for consideration and that
there was a new CS, version L.
SENATOR FRENCH, sponsor of SB 68, said he wanted to streamline
the bill and make it more cost effective, but the fundamental
goal of trying to reduce uninsured drivers remains. It allows
for the Department of Motor Vehicles (DMV) to check at the time
of registration to see if a vehicle is insured - a missing link
right now. Another goal is to take uninsured cars off the road
until insurance is purchased. It also seeks to increase the
penalty for driving uninsured.
2:10:50 PM
ALLISON BIASTOCK, staff to Senator French, explained that the
original bill had reporting deadlines for insurance companies
directly to the DMV. The CS leaves the implementation of that
program to the executive branch. "We believe the department will
work with all the parties involved and the industry to come up
with a method that works for everybody." Additionally the CS
requires proof of insurance at the time of registration and
renewal. The CS keeps the provision on impoundment of the
vehicle if it's not insured.
2:12:36 PM
MS. BIASTOCK went through the bill section by section. The first
section requires the motor vehicle liability insurers to provide
information to the commissioner of the DMV. Section 2 allows
municipalities to impound vehicles for failure to have mandatory
insurance. Section 3 requires proof of mandatory insurance when
a person applies for vehicle registration [a new section].
Section 4 requires proof of insurance when renewing a vehicle
registration every two years.
She said the difference between this CS and the last version is
that in the prior bill, the DMV would get information from the
created database. It would compare that list to the list of
insured vehicles to discover who wasn't insured. The department
would then send out letters to the uninsured vehicle owners
requiring them to comply with the insurance laws within 30 days.
However, the DMV pointed out that would be a very difficult
task. So that portion has been removed. Now the verification of
insurance is going to happen at points of contact -
registration, renewal of registration and if you were going to
be pulled over and have your plates run for one reason or
another.
SENATOR BUNDE noted that renewal can be done by mail.
MS. BIASTOCK agreed and added that it can be done over the
Internet or at an organization like Jiffy Lube, as well. That's
where the electronic verification comes in to play.
SENATOR BUNDE asked if the DMV would need access to the
insurance companies' database to verify that a person has
vehicle insurance.
MS. BIASTOCK replied that was the major change.
2:15:57 PM
CHAIR ELLIS began taking public testimony.
DUANE BANNOCK, Director, Division of Motor Vehicles (DMV),
Department of Administration (DOA), informed them that the
department had reviewed the CS. He explained the way the
division verifies insurance today is by someone certifying that
he has insurance when he signs the application for registration
or its renewal. Often the division is lead to believe people
have insurance when in fact they don't. This proposal will allow
them to have electronic access to every insurance company that
is authorized to do business in Alaska for online verification
that a policy is in place. He didn't use the word "database"
because he is not considering warehousing all the insurance
policies, but rather just creating a conduit to access that
information from the insurance companies.
He said that two things will happen as a result of this bill.
One is that staff will get a better grip of when a vehicle does
not have insurance and they will be able to say no to the
registration. Second, they will spend less time with the current
labor-intensive process of attempting to verify an insurance
policy.
Regarding Senator Bunde's question about registering by mail, he
stated when the information is entered into the computer is when
the electronic signal will be sent to the insurance company for
verification. With a positive match, the transaction will
continue to be processed and the registration will be received
in the mail three to four days later. If they are unable to
electronically verify an insurance policy, then the process
would come to a "screeching halt."
2:20:03 PM
SENATOR BUNDE asked if it would be correct to assume if he
bought a used car today, got insurance and registered it, that
he could cancel the insurance tomorrow - the same as with the
mail-in renewal.
MR. BANNOCK replied, "That is an accurate assessment." It is his
professional opinion that the majority of those scofflaws
probably did not have insurance, but rather told the division
they did.
2:21:01 PM
SENATOR BUNDE commented that this law would result in scofflaws
having insurance for two weeks longer than they do now. He asked
if he bought a new car and the insurance company provided a
binder so he could drive off the lot, would that get put into
the insurance database so the registration process could
continue.
2:21:36 PM
MR. BANNOCK replied that in his opinion, when car dealership
processes the transaction, it's not done for several days until
the actual transaction is recorded into his name. But he also
thought the insurance company would update its records
immediately.
He related that the Alaska DMV intends to model its business
practices after a couple of states that have created a work-
around for that scenario - even if he hadn't yet contacted his
insurance company to add the new vehicle. If he had a verifiable
policy in force, the DMV would continue to honor it in that
instance.
2:22:31 PM
SENATOR BUNDE asked what the experience has been in other
states.
MS. BIASTOCK added that this process is relatively new.
California started contacting drivers without insurance within
the year. Texas and Florida have an on-line verification system.
Other states have programs in place that take a sampling of
vehicles and run a check on those and notify the driver if he
isn't insured.
2:23:27 PM
SENATOR STEVENS commented that this sounds like it has the
potential to be more user-friendly to the general public and
asked if consumers would need to carry proof of insurance cards
in their automobiles if the department has immediate access to
insurance information.
MR. BANNOCK opined that he didn't think the coupons should be
done away with. They facilitate getting information at an
accident.
SENATOR STEVENS didn't agree. He thought this was an opportunity
to be more user-friendly to the public and allow them to not
have to carry a coupon.
KENTON BRINE, Northwest Regional Manager, Property Casualty
Insurers Association of America, said his company represents
roughly 40 percent of the auto insurance market place across the
United States. He had a number of concerns with the original
bill, mostly with the effectiveness and cost of using database
programs to identify uninsured motorists and he still held that
opinion about the CS.
He repeated that these programs are in place in various shapes
in some other states, but their effectiveness shows mixed
results. A study from the Motor Vehicle Administrators of
America on statistics from 1989 to 1999 gathered by the
Insurance Research Council showed that of the 18 states with
reporting programs in place for five years or more, 12 showed an
increase in uninsured motorists, while only 6 experienced
improvement. He supposed that some of that has to do with how
successes or failures are reported, the accuracy of the reported
data and difficulty in tracking VIN numbers.
With regards to the CS, he said that while the amendment was
well-intended that a program could be worked out, he was not
aware of a state using a live link to verify insurance coverage.
He said insurers have been interested in the reverse situation
where they have on-line access in real time to motor vehicle
driver abstracts for rating purposes. So he thought that could
be provided in reverse, but he didn't want to say for sure it
could be done. He was a little troubled with language that says
trust us and we'll work the details out later. He was opposed to
this bill, but offered to work with the department to structure
language to clarify what kind of program it intends to develop.
2:30:34 PM
SENATOR BUNDE asked if he said other states had not had enough
experience with these kinds of programs to get an actuarial
feeling for how this might impact insurance rates.
MR. BRINE replied that start up costs for these programs have
run from $1 million to $5 million. The programs from state to
state aren't consistent with each other and neither is their
reporting system to their legislature. "The improvement is
always temporary at best as people figure out a way around it."
SENATOR BUNDE asked if the fiscal note would be passed on to the
customers.
MR. BRINE answered that he thought companies would pass the cost
on to the customer.
2:34:14 PM
CHAIR ELLIS asked if others had comments or rebuttal to his
testimony.
MR. BANNOCK commented that he was very familiar with Mr. Brine's
comments, including the department's ability to get good quality
real time information back to insurance companies, an issue that
is on its short-range project list. As to the concept of
mandatory insurance, that is the law in Alaska and this bill
doesn't address whether that is good or bad public policy.
Finally, he said this law replaces a paper-driven certify-driven
process policy with an electronic process. Clearly, however,
some people will continue to manipulate the system.
MS. BIASTOCK concluded saying this bill tried to update with the
use of technology.
2:37:54 PM
LINDA HALL, Director, Division of Insurance, had Sarah McNair-
Grove, Division Actuary, with her. She said she had not taken a
position on this bill because it did not affect her division.
She worked with Senator French regarding not duplicating things
insurance companies have to do.
MS. GROVE declined to comment.
SENATOR BUNDE noted that she has always said that Alaska has a
small pool of insurers and he was concerned that putting an
added burden on them might help them decide to not write here at
all.
MS. HALL said that is her concern. One of her goals has always
been to walk the fine line between insurance protection for
consumers and having choices for insurance.
CHAIR ELLIS recapped that he didn't want to adopt the CS right
now. He might want another one drafted that would include more
changes.
2:42:39 PM
SENATOR BUNDE asked if the committee could get input from
automobile dealerships as to how they would fit in with this
mix.
CHAIR ELLIS agreed and announced that SB 68 would be held. There
being no further business to come before the committee, he
adjourned the meeting at 2:43:45 PM.
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