Legislature(2007 - 2008)BELTZ 211
02/27/2007 01:30 PM LABOR & COMMERCE
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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 another. 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 policy. 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 continue. 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 immediately. 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 instance. 2:22:31 PM SENATOR BUNDE asked what the experience has been in other states. 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 accident. 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 customers. 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 testimony. 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 all. 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 changes. 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 mix. 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.