Legislature(2013 - 2014)BARNES 124
04/15/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB156 | |
| SB166 | |
| SB167 | |
| SB183 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 156 | TELECONFERENCED | |
| + | SB 166 | TELECONFERENCED | |
| + | SB 167 | TELECONFERENCED | |
| + | SB 183 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 167-MULTIPLE VEHICLE INSURANCE POLICIES
4:36:29 PM
CHAIR OLSON announced that the next order of business would be
SENATE BILL NO. 167, "An Act relating to the maximum amount of
uninsured and underinsured coverage payable under multiple motor
vehicle insurance policies issued by the same insurer in the
same household."
4:36:38 PM
ASHTON COMPTON, Staff, Senator Charlie Huggins, Alaska State
Legislature, stated that SB 167 corrects a drafting oversight in
Alaska law that creates an unintended loophole harmful to
consumers of Uninsured/Underinsured Motorist (U/UIM) insurance.
In 1984, when the legislature created U/UIM insurance coverage,
it precluded restricting the combining or "stacking" of multiple
U/UIM coverage. In 1990, the legislature revised the statutes
to provide for expanded coverage in consumer choice. This made
it easier for consumers to choose predictable levels of coverage
and reaffirm that "stackable" coverage is not permitted.
Unfortunately, language adopted in 1990 created an unintended
loophole that does not consistently accomplish the stated
purpose. Under the language, if the consumer insures the
vehicles under separate policies from the same insurer, stacking
is precluded only for the "named insured" - ironically allowing
all the other coverage to be stacked for all other persons.
There is no logical reason for this discrepancy. It needlessly
forces the consumer to pay for "stackable" coverage that is not
desired and their choices are limited.
MS. COMPTON referred to a graph in members' packets that should
help illustrate situations in which "stacking" is mandated and
illustrates the additional coverage imposed. She stated that
there isn't any legislative history or rationale to treat the
named insured differently based on whether the multiple vehicles
owned by policyholders are listed in one or multiple policies.
MS. COMPTON explained that with a simple change by removing
"named insured" and clarifying that multiple auto insurance
policies are to be issued to the same policy holder in the same
household, SB 167 will help protect insurance rates, consumer
choice, and predictability. It would resolve an inconsistency
that unfairly and unnecessarily forces consumers to purchase
insurance coverage they don't desire or need and protect
insurance rates, consumer choice, and predictability under all
policy forms as original intended.
4:38:47 PM
SHELDON E. WINTERS, Attorney, Lessmeier & Winters, LLC;
Lobbyist, State Farm Insurance, stated that he is legal counsel
for State Farm Insurance Companies. He thanked the committee
and the sponsor. He offered to address three things: uninsured
motorists, the statutory language, and to offer his view on what
this bill accomplishes and does not do.
4:39:50 PM
MR. WINTERS pointed out that when mandatory liability insurance
was enacted, the legislature received some "push back" from
insurance companies. The insurance companies did not want the
misperception that with mandatory insurance that everyone would
be insured. The reality is that has never been the case. He
noted that about 13-15 percent of drivers are uninsured.
CHAIR OLSON recalled that when the bill went into effect, the
uninsured motorist rate was about 50 percent.
4:40:42 PM
MR. WINTERS related his understanding that mandatory liability
insurance came into place the same time as the uninsured
motorist coverage. He recalled the plan was to mandate
liability insurance, but the insurance companies believed it
wouldn't resolve the whole problem and suggested also enacting
uninsured motorist coverage. In 1984, the legislature mandated
uninsured/underinsured motorist insurance ("U/UIM") coverage as
a means to protect motorists against an accident caused by an
uninsured or underinsured driver. The major challenge was to
keep it affordable and that still remains the challenge. One of
the prime ways of keeping U/UIM insurance coverage affordable is
to prohibit "stacking" of insurance coverage. He offered his
belief that members understand the term. He referred to a
letter in members' packets [dated February 27, 2014 from
Lessmeier & Winters] that provides the legislative history. It
was clear in 1984 that the legislature intended to limit or
preclude "stacking." He read the statute, in part, which read:
If an insured is entitled to uninsured or underinsured
motorists coverage under more than one policy of motor
vehicle insurance, or under more than one coverage if
two or more vehicles are insured under one policy, the
maximum amount an insured may recover may not exceed
the highest limit of any one policy or coverage.
MR. WINTERS explained that consumers can purchase insurance one
of two ways depending on the way the insurance company does it.
For example, one model is that the policyholder will buy all
their cars under one single policy. The second model, the one
State Farm Insurance uses, is that the policyholder will buy a
separate policy for each vehicle. The 1984 statute allowed
either, but did not allow "stacking" under either model. In
1990, the legislature expanded uninsured motorist coverage with
the stated intent of providing consumers more choice and to make
the insurance coverage more predictable. One provision expanded
the range available, and insurers were mandated to offer $50,000
to $1 million. He recalled the options were $50,000, $100,000,
$300,000, $500,000 or $1 million. Therefore, there was even
more reason not to allow "stacking" since the consumer could
select the level of coverage. Unfortunately, the language that
was adopted didn't accomplish it entirely. In certain
situations the language actually requires "stacking."
MR. WINTERS provided legislative history, such that the bill
version that went to the Senate floor precluded "stacking" for
multi-vehicle policies, but omitted language that precluded
"stacking" for the single vehicle policies. An amendment was
offered and a letter explained it. The second important note is
that the memo explained the intent of the proposed amendment,
which was to make single vehicle policies equivalent to multi-
vehicle policies and prevent "stacking." However, that isn't
what occurred. He referred to SB 167, AS 28.20.445 (c), noting
the first sentence precludes "stacking" for the multi-vehicle
policy, but it does not address single-vehicle policies. Thus,
the 1990 language read, in part, "If a person is entitled as a
named insured ...." He interpreted the language as meaning that
"stacking" is precluded for the named insured, bit everyone else
is not precluded. He said that is the problem that currently
exists, which is explained in the letter in members' packets.
4:45:50 PM
MR. WINTERS offered his belief that SB 167 will fix this problem
and render the statute consistent with the 1984 and 1990
legislative intent. This bill isn't about whether "stacking"
should or should not be allowed since the legislature addressed
it. This bill makes the language consistent with the
legislative intent.
4:46:18 PM
REPRESENTATIVE HERRON asked whether he was aware of any people
who took advantage of this.
MR. WINTERS acknowledged that there were lots of claims that
were allowed to "stack" due to the statute, which is part of the
problem. The effect is that the claims are put right back into
the rates, and insurance companies that are selling policies
under this scenario have notably higher rates. He said that
eight states allow "stacking" in some fashion and their
uninsured motorist rates are about twice that of other states.
4:47:20 PM
REPRESENTATIVE HERRON asked whether more dollars would be kept
in Alaskans' pockets under the bill.
MR. WINTERS cautioned that so many things go into rates;
however, he knows that insurance rates in states that allow
"stacking" have rates about twice the cost. Second, in State
Farm's insurance experience, and it is the largest auto insurer
in the state, literally millions have paid out in "stackable"
claims that wouldn't be paid out under the bill and those costs
are built into the rates. Thus, he offered his belief that it
should impact rates, but he was unsure of the amount.
4:48:19 PM
CHAIR OLSON suggested it could be the lawyers and not the
insured that have "stumbled" on to this.
MR. WINTERS argued that "stacking" is not only allowed but is
required under the existing law. He suggested the lawyers are
representing their clients and the insurance companies are
paying them.
CHAIR OLSON acknowledged it was legal.
MR. WINTERS agreed.
4:48:54 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 167.
REPRESENTATIVE HERRON moved to report SB 167 out of committee
with individual recommendations and the accompanying fiscal
note. There being no objection, SB 167 was reported from the
House Labor and Commerce Standing Committee.