04/24/1995 01:36 PM Senate JUD

          SB  95 INSURANCE AGAINST UNINSURED DRIVERS                          
                                                                              
 Number 481                                                                    
                                                                               
 DON KOCH, Division of Insurance, clarified CSSB 95(JUD), Version O,           
 addresses the Tumbleson issue, discussed at the previous meeting.             
                                                                               
 SENATOR ELLIS moved to adopt CSSB 95(JUD).  SENATOR GREEN objected.           
                                                                               
 MR. KOCH explained Version O.  It addresses the Tumbleson issue by            
 restating that uninsured and underinsured motorist coverage is                
 excess and either one can be triggered by a shortfall in the funds            
 needed to cover a particular loss.                                            
                                                                               
 Number 454                                                                    
                                                                               
 SENATOR TAYLOR discussed Mr. Lessmeier's projection that State Farm           
 Insurance would have to double the cost of premiums under this                
 interpretation, even though State Farm paid claims according to               
 this interpretation in the past.                                              
                                                                               
 SENATOR TAYLOR asked why the Division of Insurance would allow an             
 insurance carrier to double rates when the premise upon which                 
 claims are paid has not changed.  MR. KOCH replied the cost of this           
 coverage has increased over time, but that cost is borne by those             
 who voluntarily purchase the coverage, since purchase of the                  
 insurance is optional.  He was unsure of the basis State Farm uses            
 to settle claims since that information would not be made available           
 to the Division unless a complaint was filed, or unless an                    
 examination was conducted.  The Division's actuarial section is               
 taking a hard look at the basis for rate increases.                           
                                                                               
 SENATOR TAYLOR stated there was some confusion in the testimony and           
 statements made.  He reiterated he could not find any justification           
 for a projected rate increase when the interpretation for claims              
 payments used by the carrier in the past was confirmed by a court.            
 MR. KOCH commented the two don't necessarily relate, and the                  
 reasons for additional costs are independent of the court decision.           
 If the carrier was settling on the basis of excess, they may have             
 had an adverse experience with that approach that would suggest the           
 need for higher rates.                                                        
                                                                               
 Number 394                                                                    
                                                                               
 SENATOR ADAMS maintained objection to the motion.  He asked if the            
 Division supports Sections 4 and 6 (the repealer sections).  MR.              
 KOCH answered he was not specifically aware of the statute sections           
 being repealed.  SENATOR TAYLOR clarified Section 6 makes the bill            
 retroactive to 1990 so that the intent of the 1990 law is restated.           
 He added most carriers have been operating under that                         
 interpretation, therefore it should not affect them.  MR. KOCH                
 agreed.                                                                       
                                                                               
 Number 370                                                                    
                                                                               
 SENATOR GREEN asked if other lawsuits were pending or might be                
 revisited due to the retroactive clause.  SENATOR TAYLOR noted to             
 his knowledge, there have only been two cases.                                
                                                                               
 SENATOR GREEN requested the bill be held until Friday for further             
 review of Sections 4 and 6.  She expressed concern that rate                  
 increases will discourage people from buying the insurance.                   
                                                                               
 MR. KOCH noted the rates are based on the experience, and if State            
 Farm has had an experience that suggests the need for a rate                  
 increase, it will file an application for review by Division                  
 actuaries who will determine the validity.  The rate level is                 
 determined by the loss history.                                               
                                                                               
 SENATOR TAYLOR commented the bill was introduced at the request of            
 the industry to restructure the high mandatory offer of                       
 uninsured/underinsured coverage because of reinsurance                        
 difficulties.  MR. KOCH explained the bill passed in 1990 required            
 the insurance industry to offer coverage in the amount of                     
 $1,000,000/$2,000,000.  CSSB 95(JUD) changes the amount to                    
 $1,000,000/$1,000,000 to compromise with the industry.                        
                                                                               
 Number 285                                                                    
                                                                               
 SENATOR TAYLOR commented he had been receiving a lot of support for           
 this measure from insurance agents statewide until the second court           
 decision created controversy over the triggering mechanism.  The              
 legislation originated because carriers could not limit the amount            
 of the coverage, and rates had to be determined accordingly.  Those           
 rates were higher than necessary and prevented carriers from                  
 competing in the field.  He repeated the bill would be heard on               
 Friday, April 28.