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.