SB 58-CANCEL INS. ON CERTAIN ABANDONED PROPERTY  VICE-CHAIR MICCICHE reconvened the meeting and announced the consideration of SB 58. "An Act allowing an insurer to cancel an insurance policy if property becomes entirely abandoned and the abandonment increases the hazard insured against." 6:19:30 PM SENATOR DENNIS EGAN, sponsor of SB 58, introduced SB 58 speaking to the following sponsor statement: SB 58 clarifies that insurance can be cancelled when a property owner abandons the property, thereby increasing a hazard covered by the insurance. AS 21.36.210 lists allowable reasons for cancelling personal insurance, including a grossly negligent act by the insured that increases a covered hazard and physical changes in the insured property that result in the property becoming uninsurable. As this statute is currently written, it is not clear whether these reasons would include abandonment of the property by the insured. Homeowners insurance is underwritten based on the property generally being occupied. An abandoned home greatly increases the risk of damage beyond what was contemplated in the insurance contract, including damage caused by vandalism, broken water pipes and fire. Cancellation of insurance when the property is abandoned is necessary to manage insurance costs for all consumers. SB 58 clarifies that insurance on property that has been entirely abandoned can be cancelled in Alaska, as it can in all other states. However, it is important to note that SB 58 would establish the most restrictive circumstances in the country. For instance, thirty days advance written notice must be given to the insured and any lender on record. In addition, insurance cannot be cancelled where the owner demonstrates that the property is being reasonably maintained and monitored. SB 58 is responsible legislation that helps manage claims costs, the risk pool and the cost of insurance coverage for Alaska homeowners. SENATOR EGAN said representatives of the insurance and real estate industries have worked on this version of the bill, and he believes that the current language protects the interests of both groups. SENATOR OLSON asked if property owners had weighed in on the bill because it appeared to favor the insurance industry. 6:21:16 PM DANA OWEN, Staff, Senator Dennis Egan, explained that when the bill was originally introduced last year members of the community and the real estate industry voiced concern with the language. Since then the sponsor has worked with real estate agents to make sure that the interests of property owners are protected. The current language will allow insurance companies to exercise the authority to cancel an insurance contract, but not precipitously. Property owners who leave their homes for several months won't have their insurance canceled. SENATOR OLSON posed a hypothetical situation where he left his boat after it went aground. He asked if his insurance would be cancelled if the boat looked abandoned and perhaps was vandalized while he was away. MR. OWEN explained that it would have to be entirely abandoned under the new language. That means that nothing of substantial value is left behind. SENATOR OLSON questioned how he could protect himself, because he'd have nothing left if the insurance company could cancel his insurance after an involuntary circumstance like he described. MR. OWEN offered his understanding is that the property would be protected in that scenario. SENATOR OLSON asked if his insurance could be cancelled even if his payments were up to date. MR. OWEN said the intention is that as long as a person intends to maintain the property the insurance will not be cancelled. 6:25:25 PM VICE-CHAIR MICCICHE reviewed the notice provision in AS 21.36.220. 6:26:05 PM MARTIN HESTER, Deputy Director, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), introduced himself. VICE-CHAIR MICCICHE asked him to discuss what constitutes abandonment. MR. HESTER explained that AS 21.36.220 provides 30 day, 20 day, and 10 day notice requirements for cancellation depending on the circumstances. VICE-CHAIR MICCICHE opened public testimony. 6:27:37 PM SHELDON WINTERS, Lobbyist, State Farm Insurance, Juneau, Alaska, informed the committee that State Farm is the largest insurer of homes in both the state and the nation. He explained that the intent of SB 58 is to clarify that personal insurance on a property may be cancelled in those limited circumstances when a property is truly and entirely abandoned. Foreclosure is the classic example. Although the current statute has five reasons that insurance may be cancelled, the Division of Insurance has said that under a technical and strict interpretation those don't allow for abandoned property. Alaska is unique in this regard. In no other state has State Farm had problems cancelling insurance when the property is truly abandoned. MR. WINTERS said this is important because claims drive rates. When a property is left in the middle of the winter with no heat and nobody taking care of it, the exposure is significant. That increases claims and puts upward pressure on rates for everyone in the risk pool. The goal with SB 58 is to keep claim costs down, manage the risk pool, and hopefully have a better product for everyone. Referencing the hypothetical that Senator Olson described, he said the bill doesn't apply to that situation. It's not talking about the insurance company trying to cancel the policy after an accident or a claim. The bill doesn't address cancelation after there's been a claim. MR. WINTERS reviewed the proposed new provision to the statute. It says the insurer may not cancel a policy of personal insurance except for the circumstance of entire abandonment of the property that increases a hazard insured against. Entire abandonment means the property is no longer occupied by the insured as defined by the policy and it no longer has contents of substantial utility. In addition to the current notice of cancellation provisions in AS 21.36.220, the bill requires the insurer to give notice to the lender. Another safeguard to the insured is that the property is not considered entirely abandoned if the insured or their agent demonstrates that the property is being reasonably maintained and monitored. Finally, the Division of Insurance oversees the statute. With the protections provided, it's difficult to imagine a situation where property would be cancelled other than the total abandonment/foreclosure situation. He reviewed the work that has gone into this legislation, which he believes it is the best statute in the country. 6:37:36 PM VICE-CHAIR MICCICHE announced he would hold SB 58 in committee and keep public testimony open.