Legislature(2007 - 2008)BELTZ 211

02/27/2007 01:30 PM LABOR & COMMERCE

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Heard & Held
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Heard & Held
                 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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
2:22:31 PM                                                                                                                    
SENATOR  BUNDE  asked  what  the experience  has  been  in  other                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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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