02/03/1994 03:00 PM House L&C

  HB 403 - AUTOMOTIVE LIABILITY INSURANCE COVERAGE                             
                                                                               
  Number 010                                                                   
                                                                               
  HOWARD JAEGAR, with Shattuck and Grummett Insurance Agency                   
  and a spokesman for the legislative committee of the Alaska                  
  Insurance Agents and Brokers, explained that the insurance                   
  industry supports HB 403, as it will help the young and                      
  impaired drivers in the state get insurance by opening new                   
  markets and encouraging additional insurance companies to                    
  come into the state.                                                         
                                                                               
  Number 200                                                                   
                                                                               
  SEN. DAVE DONLEY stated he was opposed to HB 403 and                         
  outlined the history of uninsured liability insurance to the                 
  committee.                                                                   
                                                                               
  SEN. DONLEY stated that he assisted former Speaker Joe Hayes                 
  in producing mandatory auto insurance law in the state.  He                  
  added that this legislation was the first time that                          
  underinsured motorist coverage was ever put into statute in                  
  Alaska.  Up until then, the state had uninsured motorist                     
  coverage.                                                                    
                                                                               
  SEN. DONLEY explained that it was not mandated in law that                   
  an insurance company had to offer this underinsured                          
  coverage. Consequently, no insurance company wanted to be                    
  the first to offer this type of insurance, because to be the                 
  first in the market means you get all the excess exposure.                   
  After seeing this problem, the legislature passed a bill to                  
  require all insurance companies to offer this insurance.                     
  Because of this, every insurance company offered it and no                   
  one had a greater amount of excess exposure and all could                    
  write their rates appropriately and provide this option to                   
  the people of Alaska.                                                        
                                                                               
  SEN. DONLEY asserted that much of what occurs in the                         
  insurance industry depends on public education.  Current law                 
  gives consumers the option of learning about this type of                    
  insurance and availing themselves of this.  Sen. Donley                      
  contended that many people don't spend the time necessary to                 
  research and learn about various options out there for                       
  insurance.                                                                   
                                                                               
  SEN. DONLEY commented that when a person has not chosen this                 
  option of purchasing underinsured protection and gets                        
  injured in an accident with an underinsured driver, then                     
  they may be faced with medical bills they can't pay.  In                     
  this scenario, everyone pays, as we as a state subsidize the                 
  hospitals for those that can't pay.                                          
                                                                               
  SEN. DONLEY stated that Hawaii and North Carolina require                    
  drivers to show proof of insurance before they can get                       
  license or registration.  The problem with this system is                    
  that it involves a lot of paperwork and bureaucracy.  In                     
  acknowledgement of that, Alaska has not gone to that system.                 
  Even though we haven't, Alaska has had great success and has                 
  cut in at least half the number of uninsured drivers.                        
                                                                               
  SEN. DONLEY reminded the committee that this is a voluntary                  
  compliance system until someone is caught doing something                    
  wrong.  He believed this is all the more reason to give                      
  consumers the option of buying this additional uninsured and                 
  underinsured insurance to protect themselves from the                        
  persons driving around without auto insurance at all.                        
                                                                               
  SEN. DONLEY noted that the subsequent reminders required by                  
  law to be given to consumers by the insurance companies was                  
  written into the law as an education factor to force people                  
  into making a conscious choice in the matter.                                
                                                                               
  SEN. DONLEY stated that preferred drivers are not                            
  significantly impacted by HB 403 other than the fact that                    
  they will not have the option they did before.  The people                   
  in the minority that this will benefit are a small                           
  percentage on nonpreferred drivers.  This benefit is                         
  speculative at best, and there may be some companies that                    
  may come into this market to offer this nonpreferred                         
  insurance to this smaller group of consumers that may cause                  
  more competition.                                                            
                                                                               
  SEN. DONLEY said he would like to hear from any insurance                    
  companies that would be willing to state that if HB 403 is                   
  passed they will come to Alaska and offer this insurance.                    
  Until this happens, all the talk is just speculation.                        
                                                                               
  SEN. DONLEY explained that one way to protect yourself is to                 
  purchase an umbrella policy.  If the consumer has a good                     
  agent and utilizes this system, they could save hundreds of                  
  dollars a year.  Under HB 403 if you utilize an umbrella                     
  policy you would no longer have the option of increasing                     
  your underinsured and uninsured coverage.                                    
                                                                               
  Number 347                                                                   
                                                                               
  CHAIRMAN HUDSON stated he would postpone hearing HB 403                      
  until a future date when the committee had more time.