Legislature(1999 - 2000)
04/12/1999 03:23 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CSSB 87(L&C) - RENTAL CAR INSURANCE Number 0001 CHAIRMAN ROKEBERG announced the committee's next order of business is CSSB 87(L&C), "An Act requiring a license to sell rental car insurance." REPRESENTATIVE HALCRO declared a potential conflict of interest. He stated his company does not have a position on this legislation, nor did it have anything to do with the bill's introduction. He had not even known of the legislation's existence until Mr. Miller informed him it would be introduced. CHAIRMAN ROKEBERG questioned whether Representative Halcro wished to be excused. REPRESENTATIVE HALCRO answered he would allow the committee to decide. CHAIRMAN ROKEBERG indicated the committee would not excuse Representative Halcro but appreciated the conflicts being stated for the record. Number 0044 CHARLIE MILLER, Lobbyist for AutoNation, Incorporated, came forward to testify in support of the legislation. The company he represents, along with The Hertz Corporation, has been negotiating with the Division of Insurance on this language and requested the legislation's introduction by the Senate Labor and Commerce Standing Committee. Senate Bill 87 provides for a limited licensure for rental car insurance transactions. The transactions are incidental to the auto rental, the product is not sold on the open market; it is not normal insurance in that sense and fits very well into the limited licensure statute. The industry was prompted by regulatory action and litigation in other markets to approach Alaska's Division of Insurance to discuss a solution for a potential problem. This was done over the past interim, and this language is the result of those discussions. The Division of Insurance opted for this type of fix; some states exempt from licensure, and Mr. Miller believes there are other options as well. He indicated CSSB 87(L&C) adds a new subsection, subsection (7), to AS 21.27.150, limited licenses; subsection (7) provides the restrictions regarding the sale of these rental car insurance products. Mr. Miller understands the Division of Insurance is in favor of the legislation, and he is unaware of anyone in opposition. Number 0149 HOWARD CONCKLIN, Director of Government Relations, AutoNation, Incorporated, testified next off-network via teleconference from Florida. He noted AutoNation, Incorporated owns Alamo Rent A Car [Alamo Rent-A-Car, Incorporated] and National Car Rental [National Car Rental System, Incorporated], and that the company name had recently changed from Republic Industries, Incorporated. Mr. Concklin commented this legislation is typical of their efforts around the country to clarify general insurance laws to either provide an exemption or limited license. Agreeing with Mr. Miller's summarization, Mr. Concklin related that one of these products has been sold for 10 years, the others up to 20 years, throughout the country. CHAIRMAN ROKEBERG questioned that AutoNation is involved in the national marketing of used automobiles. MR. CONCKLIN answered in the affirmative. They have AutoNation USA used car megastores and they are the largest operator of new car dealers in the world with approximately 300 dealers nationwide. CHAIRMAN ROKEBERG questioned if this is insurance offered to a consumer at a rental car counter. MR. CONCKLIN agreed; it is only offered incidental to a car rental, it could not be purchased as a stand-alone product. The insurance is typically bought for the period of the car rental. Mr. Concklin indicated the products are purely optional and some, especially the liability insurance, may be sought by consumers who aren't covered by their own personal policies. Mr. Concklin noted foreign visitors are normally the higher incidence takers of these products. Number 0248 CHAIRMAN ROKEBERG questioned that there was nothing inconsistent in the legislation with a person having his/her own coverage, particularly coverage for uninsured or underinsured motorists. MR. CONCKLIN agreed; there is nothing to prevent it, and nothing requiring a person to take the rental car coverage. He possibly indicated a person's own policy might not cover a rental situation. CHAIRMAN ROKEBERG asked, "There's a number of credit card companies, particularly the premium cards, that indicate that they will cover the differential, and that [it is] therefore not necessary to purchase any insurance coverage from a rental car agency. Is there anything..." MR. CONCKLIN answered that might be related to what the industry terms collision damage waiver or loss damage waiver, which is for property damage to the vehicle alone. Basically, courts around the country have declared that product is not insurance. This legislation would not cover collision or loss damage waiver - damage to the car. Mr. Concklin confirmed credit card companies do offer this coverage. CHAIRMAN ROKEBERG commented he is somewhat curious about that because he always refuses it. MR. CONCKLIN stated he knows of no credit card that offers liability insurance to third parties in a rental situation. Number 0333 RICHARD McEVILY, Deputy General Counsel, The Hertz Corporation, testified next off-network via teleconference from New York in support of the legislation. They believe the bill will clarify some situations that have occurred in other states. CHAIRMAN ROKEBERG questioned the necessity of this legislation in Alaska. MR. McEVILY indicated each state's insurance department has been asked whether a license is believed to be necessary, and if so, the question of limited licensure or exemption law has been posed. This occurred after a situation arose in Texas. Mr. McEvily understands Alaska's Division of Insurance has opted for the limited license language as opposed to exemption. CHAIRMAN ROKEBERG asked about the fee the companies might pay. MR. McEVILY confirmed they are assuming it would be a modest fee. CHAIRMAN ROKEBERG asked Mr. McEvily to comment on what the credit card companies advise their clients, and, as a result, what Hertz advises its clients. MR. McEVILY echoed Mr. Concklin's comments: he is not aware of credit card companies providing third party liability insurance. What most of the credit card companies do is, as he understands, provide secondary coverage for loss damage waiver, although it might be primary in some situations. In essence, if a person does not have his/her own insurance that applies to physical damage to a rental car, the credit card company will step in. The legislation does not address that; it addresses liability and some other products. CHAIRMAN ROKEBERG confirmed from Mr. McEvily there is nothing in the legislation affecting that particular claim. MR. McEVILY agreed, reiterating that courts around the country have determined loss damage waiver is not insurance. Number 0474 JOHN FERENCE, Deputy Director, Division of Insurance, Department of Commerce and Economic Development, came forward to testify in support of the legislation. The Division of Insurance feels this measure represents a reasonable compromise between the need to protect the public from unqualified or deceptive insurance sales and the operational realities of rental car companies. REPRESENTATIVE BRICE referred to subsection (7)(C)(vi), "(vi) other insurance as may be authorized by regulation by the director;". He questioned the broadness of the language on this limited licensure legislation, although noting he doubted dental coverage would be offered with the collision and liability. MR. FERENCE referred to the types of insurance sales allowed by the bill [(7)(C)(i)-(v)], commenting that comprehensive and collision insurance was not included at the request of Mr. Miller's clients. The Division of Insurance felt it was important to provide a facility for doing so in the future without the need to seek new legislation. In addition, it allows the facility if the state moves toward a no-fault option or similar in the near future. Mr. Ference stated, "It allows us to amend the scope of what the license authorizes without having to seek new legislation." REPRESENTATIVE BRICE surmised rental car agents have been renting vehicles and selling this insurance for a number of years; he questioned the current concern about the inappropriate selling or offering of that insurance. MR. FERENCE answered it is the division's opinion that rental car agents and personnel who have been selling insurance associated with rental cars have always been required to be licensed. However, Mr. Ference indicated it has come to the division's attention its existing standard license process, based on an insurance agent or broker selling a broad range of coverages with a high degree of occupational stability, does not fit the rental car environment. Number 0630 REPRESENTATIVE HALCRO commented on the marketing possibilities of Representative Brice's idea. Representative Halcro asked Mr. Ference about subsection (D), "(D) notifies the director in writing, within 30 days of employment, of the name, date of birth, social security number, location of employment, and home address of an employee authorized by the licensee to transact insurance on the licensee's behalf; and". He assumes this applies to rental agents and managers who are selling the coverage at the counter. MR. FERENCE answered the reporting is intended to respond to employees, and, as the rental car companies put new counter people on staff, the division's standard agency licensing requires that these employees be licensed before engaging in any sales activity. This change would allow the employees to begin selling the products before the reporting is made to the division. REPRESENTATIVE HALCRO questioned that a licensing fee would not be required as the reporting occurred, or that individual licenses would not be necessary. MR. FERENCE confirmed individual licenses would not be required; however, the legislation contains provisions that would allow the division to stop them from continuing if it turns out there is something wrong. REPRESENTATIVE HALCRO questioned the division's plans to notify the several small operators if this legislation becomes law. MR. FERENCE indicated the division has anticipated this would be necessary. The division would accomplish this through a mailer. Number 0717 CHAIRMAN ROKEBERG asked about notification in subsection (D) if an employee leaves employment. The chairman questioned if the division would have a never-ending list. MR. FERENCE answered the division would have an ever-growing list, but, given that the employee "has not failed" when he/she was hired, there is no downside to non-removal. Mr. Ference commented the person would "just fade from the system." CHAIRMAN ROKEBERG indicated, then, there would be no electronic file storage problem and this avoids the need for two notifications. MR. FERENCE answered in the affirmative. REPRESENTATIVE BRICE asked what the division's role is under this legislation if an employee is selling car rental insurance inappropriately. MR. FERENCE indicated the division would be able to revoke the employee's authority to sell the products. The division would also be able to take sanctions against the license holder. CHAIRMAN ROKEBERG asked about the fee schedule and questioned whether the division has the authority in this legislation or this section to write the necessary regulations. Number 0802 MR. FERENCE replied the division's existing regulatory authority allows it to establish a fee schedule for licenses. The division currently anticipates a fee schedule where the fees would be generically similar to those for existing licenses. Mr. Ference indicated this is in the context of one license issued per rental car agency. In response to the chairman's question about the fee amount, Mr. Ference responded he believes the standard new license fee is $125. He confirmed that would be for an ordinary agent's license. CHAIRMAN ROKEBERG commented the division would be checking with other states before it sets the fee schedule. MR. FERENCE noted the division has existing fee schedules for agents and it was not contemplating creating a special fee schedule for rental car agencies. CHAIRMAN ROKEBERG questioned that there had been testimony collision insurance would not be available. MR. FERENCE replied the industry testified it views the collision damage waiver as something other than insurance. The industry requested that, in granting the scope of this license, their employees not be permitted to sell collision insurance. Mr. Ference noted the reason is because they are already selling, or intend to sell, collision damage waiver. CHAIRMAN ROKEBERG sought clarification. Number 0933 REPRESENTATIVE HALCRO commented the industry is currently selling collision damage waiver or, as it is called now, liability damage waiver. It is not classified as insurance; it is a waiver. For a fee per day, a person is waiving responsibility for any and all damages in the event of a collision or upset. If a person declines the waiver, he/she is responsible for the damages. Representative Halcro emphasized it is just a waiver and has nothing to do with liability. CHAIRMAN ROKEBERG questioned, then, if he buys the waiver from Representative Halcro's company and damages the vehicle, he does not have to pay for it. REPRESENTATIVE HALCRO confirmed that is correct. He used his company as an example, noting it does not have comprehensive coverage. If the chairman rents a car, accepts the liability damage waiver for $9.95 per day, and totals the vehicle, the company's coverage would pay for the person or object the chairman hit, but not for the vehicle. Representative Halcro said, "If you decline that, then you're liable, not only for mine, but yours." CHAIRMAN ROKEBERG noted, "And I would look to my own auto insurance (indisc.) recover that ...." The chairman indicated, then, his credit card coverage would not extend that far. REPRESENTATIVE HALCRO commented many people are under the assumption, when using their credit card for coverage, that their card will pick up the bill if they are in an accident. In fact, the person's insurance would be primary and the credit card's would be secondary. Number 0994 CHAIRMAN ROKEBERG closed the public hearing on SB 87 after confirming there were no other witnesses. Number 1028 REPRESENTATIVE BRICE made a motion to move SB 87 to the next committee of referral with attached fiscal notes and individual recommendations. There being no objection, CSSB 87(L&C) moved out of the House Labor and Commerce Standing Committee.
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