Legislature(2007 - 2008)BELTZ 211
02/08/2007 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB59 | |
| SB68 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 68 | TELECONFERENCED | |
| += | SB 59 | TELECONFERENCED | |
SB 68-MOTOR VEHICLE INSURANCE
CHAIR ELLIS announced SB 68 to be up for consideration.
SENATOR HOLLIS FRENCH, sponsor of SB 68, said the purpose of the
bill is to help people who have auto insurance and are affected
by those who do not.
1:55:20 PM
SENATOR FRENCH said the Insurance Research Council, a national
group, estimated that those who don't have insurance make up
about 14-15 percent of drivers on Alaska's roads; but of 18,000
accidents that happened here in 2006, 28 percent of the drivers
involved didn't carry insurance. So, a riskier and less
responsible population is causing harm far out of proportion to
what people might expect. What all of us pay each month to cover
the risk of being injured by an uninsured motorist is about 6
percent of a full coverage policy or 14 percent of just bare-
bones liability policy. That translates into $75 - $80 per year
that each Alaskan has to pay to cover the risk of being injured
by an uninsured motorist.
He said that currently, there is no real method for enforcing
the uninsured motorist laws and the genesis of SB 68 is to take
advantage of modern data-base capabilities and allow the
insurance industry database to communicate with the Division of
Motor Vehicles (DMV) about the number of uninsured motorists
each month.
SENATOR FRENCH explained that the DMV could make a list each
month of all known registered vehicles and compare that to a
list of all known insurance policies. The lack of insurance
could be communicated to the uninsured motorists with a warning
about losing their car registration if they didn't get insurance
within the next 30 days.
1:58:48 PM
DUANE BANNOCK, Director, Division of Motor Vehicles, supported
Senator French's comments and said they share the goal of
reducing uninsured vehicles. He said he would be happy to answer
questions.
2:00:00 PM
SENATOR BUNDE agreed that he wanted fewer uninsured drivers on
the road and asked what the violation rate was of people who
drive with a suspended license. He asked if that information
could somehow be interfaced with an uninsured driver's data
base.
MR. BANNOCK responded that he would attempt to get that
information for him.
2:02:27 PM
SENATOR BUNDE said that safe highways have a cost and using the
user cost/user pay philosophy, he asked Mr. Bannock if he
planned to increase drivers license fees to pay for this program
or to make a request from the general fund.
MR. BANNOCK replied that the department is not proposing to
increase the cost of a driver's license. He added that even with
the DMV's hefty fiscal note for SB 68, it still contributes
nearly five times as much to the general fund as it takes for
operating expenses.
SENATOR BUNDE responded that in the next year or so, that
contribution might become even more significant and he did not
look forward to a decrease in their contribution.
2:03:36 PM
KENTON BRINE, Property Casualty Insurers Association of American
(PCI), said that PCI's members represent about 40 percent of the
auto insurance market across the country. While he shares
drivers' and policy makers' frustration about the percentage of
drivers who drive without insurance coverage, he said that
insurers typically are not in favor of mandatory auto liability
insurance laws even though nearly every state has one. They
don't have a great deal of effectiveness in deterring people who
are determined to drive without insurance, he stated. When
states attempt to enforce laws, there is a spike in compliance
for a period of time and then members gradually drift back out
to where they were previous to that.
MR. BRINE said he had also looked at the same Insurance Research
Council's numbers as Senator French and had no quarrel with
those, but what insurers have seen is that programs,
particularly the electronic database programs, have not proven
themselves to be highly effective ways of either tracking or
changing compliance levels with uninsured motorists. The reason
varies from state to state. In some cases, it's not known if
they aren't effective because of the questionable methods used
in determining their effectiveness. Utah, as an example, changed
the reporting requirements on insurers from once a month to
twice a month. The vendor that was hired by Utah to administer
the database matching program, called Insure Write, found its
uninsured motorist rate dropped to 5 percent thanks to the
efforts of this program. But the Insurance Research Council,
which uses a comparison of uninsured motorists claim frequency
to bodily injury claim frequency numbers to determine an
estimate of uninsured motorists pegged the rate of uninsured
drivers in Utah to be about 10 percent - about double of what
Insure Write claims was their success rate.
Further he has found through studies across the board that at
best people are not sure that these programs work and at worst
they are fairly sure they don't work. And the costs for
instituting them are borne by consumers and insurers. Frequent
small mistakes are made, as well, in things like the recording
of a vehicle identification number (VIN) or something else in
the reporting to the state.
Looking at the broader issue of uninsured motorists, Mr. Brine
said it might be useful to consider what things can be done in
the insurance marketplace to make insurance more attractive for
people to buy. He admitted that the reason some people just
won't buy liability insurance coverage is because some might
feel they don't have adequate assets to protect.
MR. BRINE said that some states have considered creating a
policy with lower limits; litigation costs could be examined and
the rate quote process could be speeded up by allowing access to
a web database of driver records for insurance companies. Alaska
is currently one of four states in the country that doesn't
allow insurers to look at driver records in an online real time
web based format.
He also mentioned that in California, which has a very high rate
of uninsured drivers, the voters passed an initiative saying
that uninsured motorists involved in an accident that wasn't
their fault can't collect noneconomic damages. He concluded
saying that he would be pleased to work with the committee about
experiences across the country with these programs, but today he
was opposed to section 5 of SB 68.
2:12:15 PM
SENATOR BUNDE asked if Alaska's underinsured and uninsured
coverage would protect his assets if were in an accident with an
uninsured person.
MR. BRINE replied yes.
SENATOR BUNDE asked if uninsured people who are involved in a
disproportionate number of accidents belong in a higher risk
pool. What would it do to his rates, for instance?
MR. BRINE replied that the idea behind insurance is to pool
people with people of similar risks and not pooling higher risk
people in with the lowest risk people in order to balance out
the cost.
2:15:43 PM
SENATOR BUNDE said Utah went to twice a month reporting and
asked what impact that would have on rates.
MR. BRINE said he didn't have the chance to investigate what the
costs are because the law was passed so fast, but he has heard
that it is costly because it is computer based and a lot of
reformatting has to be done. The initiation is costly as well.
However, he agreed with Senator Bunde that "gaming the system"
is very real and no matter what, people who are determined to do
so, will be able to get some proof of insurance that isn't real
or purchase insurance, hold it long enough to have the reporting
go through and cancel it. He added that the effectiveness of
electronic database programs is also questionable and it's not
known how accurate the database would be from month to month.
2:18:13 PM
STEVE FLASHER, Anchorage Insurance Agent, said on the surface SB
68 sounds great, but he has some concerns - like would the
vendor be able to sell the information to other insurance
companies or what if a name is misspelled on the insurance
policy or the VIN number, which is 17 numbers, is wrong. He
deals with credit unions and banks on correcting those all the
time. Another issue is timeliness of reporting. Ultimately, he
said, all the costs will be passed on to the insurance companies
that will raise the rates of their current carriers. He didn't
think this program would be very successful and said he thought
the reason there is such a high number of uninsured drivers is
basically because the cost of insurance is so high and all this
does is add to that cost.
Lastly, he said SB 68 just adds another layer of bureaucracy
when it already takes his office two or three days to obtain a
customer's motor vehicle report (MVR) information. That slows
the whole process of being able to accurately quote and put
policies into force.
2:23:08 PM
SENATOR FRENCH commented that he continues to work with industry
and the division to bring costs down and make the program more
effective.
CHAIR ELLIS said the bill will be brought up again and set it
aside.
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