Legislature(2007 - 2008)BELTZ 211

02/08/2007 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Bills Previously Heard/Scheduled
Moved SB 59 Out of Committee
                 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                                                               
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                                                               
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                                                               
CHAIR ELLIS said the bill will be brought up again and set it                                                                   

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