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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