SENATE JUDICIARY COMMITTEE March 2, 1998 1:35 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Mike Miller Senator Sean Parnell MEMBERS ABSENT Senator Drue Pearce, Vice-Chairman Senator Johnny Ellis COMMITTEE CALENDAR SENATE BILL NO. 307 "An Act relating to conditions for filling vacancies in the office of United States senator; and providing for an effective date." - MOVED SB 307 OUT OF COMMITTEE CS FOR SENATE BILL NO. 158(L&C) "An Act relating to motor vehicle liability insurance covering a person who has had the person's driver's license revoked for possession or consumption of alcohol while under 21 years of age." - MOVED CSSB 158(L&C) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 307 - No previous action to report. CSSB 158 - See Labor and Commerce minutes dated 2/5/98. WITNESS REGISTER Mr. Bill Stoltze Staff to Senator Rick Halford State Capitol Juneau, Ak 99801-1182 POSITION STATEMENT: Presented SB 307 Mr. Ralph Bennett Staff to Senator Robin Taylor State Capitol Juneau, Ak 99801-1182 POSITION STATEMENT: Presented CSSB 158(L&C) Ms. Marianne Burke Division of Insurance State Office Building 9th Floor Juneau, Ak 99801 POSITION STATEMENT: Supported SB 158 Mr. John George National Association of Independent Insurers 3228 Fritz Cove Rd. Juneau, Ak 99801 POSITION STATEMENT: Commented on SB 158 Mr. Michael Lessmeier State Farm Insurance 1 Sealaska Plaza Suite 303 Juneau, Ak 99801 POSITION STATEMENT: Commented on SB 158 Ms. Juanita Hensley Division of Motor Vehicles PO Box 110200 Juneau, Ak 99811 POSITION STATEMENT: Supported SB 158 ACTION NARRATIVE TAPE 98-12, SIDE A Number 001 CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 1:33 and brought up SB 307 as the first order of business. SB 307 - U.S. SENATE VACANCIES MR. BILL STOLTZE, staff to Senator Rick Halford, said SB 307 changes the conditions of an appointment to the State Senate and requires that any appointee be of the same political party as the his or her predecessor. SENATOR PARNELL asked why this bill is limited to the Senate and MR. STOLTZE said House holds elections to determine who will fill a seat and federal law prohibits appointments to the House. CHAIRMAN TAYLOR asked for further testimony, hearing none, SENATOR PARNELL moved SB 307 out of committee with individual recommendations. Without objection, it was so ordered. SB 158 - INSURANCE CHANGES FOR DR. LIC REVOC. MR. RALPH BENNETT, staff to Senator Robin Taylor, presented SB 158. MR. BENNETT said the bill is aimed at removing an abuse that has been found to the "use it - lose it provision" in state law. He said this an unintended consequence has resulted in minors, who lose their licence due to a minor consuming charge totally unrelated to driving, finding themselves and their families with increased insurance premiums or even canceled policies. SB 158 would correct this situation by prohibiting an insurance company from raising rates or canceling policies soley for the suspension of a minor's driving licence due to minor consumption where driving was not involved. Mr. BENNET said this is a narrowly focused bill and does not address other offenses like DWI, use of false identification or possession of controlled substances. MS. MARIANNE BURKE, Director of the Division of Insurance, testified that this is a real problem and her division has received numerous phone calls regarding it. She said this bill will clarify the intent of the original bill. She agreed with the sponsor that as the statute exists, there is nothing to prohibit premium increases or cancellations in cases where minors lose their licences for drinking unrelated to driving. CHAIRMAN TAYLOR asked MS. BURKE if the department supports the legislation and she said that was correct. MR. JOHN GEORGE, representing the National Association of Independent Insurers, commented that SB 158 as amended was much more palatable than the bill in it's original form. He said the association would reserve the right to underwrite based on things that may not be perceived as relating directly to driving an automobile. Qualities like responsibility, maturity and tendency to drink may be useful factors for an insurance company to consider. MR. GEORGE said also that there exists another provision that allows parents to exclude a problematic driver, He advises this is not a good idea and may expose the person to a high degree of risk if that driver drives anyway under any circumstances. He said it is, however, an out for people who do not want to pay higher premiums. MR. MIKE LESSMEIER, representing State Farm, echoed the comments of MR. GEORGE and said also that insurance companies want to be able to consider this information, since sometimes, tendencies in a person's behavior may transmit into an assessment factor for driving. He agrees the bill has been narrowed and allows his company to essentially do what they have been doing. He believed that people should be underwritten based on the available information in order to prevent one sector of the driving public from subsidizing another. MS. JUANITA HENSLEY, Director of the Division of Motor Vehicles, supported the legislation. She recalled the debate in 1994 when the "use it - lose it" law was passed about the high risk insurance requirements and indicated that is why the bill included a provision saying this high risk insurance could not be a condition of reinstatement of a driver's licence. She has had numerous complaints over the last few years regarding this. Knowing the legislative background on this issue, MS. HENSLEY approached several insurance companies who advised her they could charge the high risk rates because they were not prohibited in Title 22. SENATOR PARNELL disclosed that, in his law practice, he represents a national insurance company in some collection matters and asked to be allowed to abstain from voting. There was objection from SENATOR MILLER. SENATOR PARNELL commented that underwriting is all about risk assessment and is commonly used by different types of insurance companies. He believes that minor consumption does say something about the risk that individual might pose. For that reason, he is less willing to say that a company can not increase a premium for a person that they have determined to be a higher risk. SENATOR PARNELL added he wants the company to be free to assess risk. CHAIRMAN TAYLOR noted he was the first one to introduce a "use it - lose it" law but, being a minority member, was unable to make progress with it. Later, another legislator advocated for the bill. He said at the time, the reason behind going after a driver's licence was that driving is a privilege kids look forward to and it may have a significant impact on their drinking habits. CHAIRMAN TAYLOR said none of the legislators who worked on the bill thought it would provide an excuse for insurance companies to increase family insurance rates. He mentioned that it took a few years after the passage of that bill before the insurance companies caught on that they could increase premiums in this back door manner. CHAIRMAN TAYLOR asked what type of increases have been seen. MARIANNE BURKE said she is unable to define them but can say they are industry-wide and she has seen this used as a reason for cancellation of policies. SENATOR PARNELL asked if the discussion was about raising premiums on families where kids are still driving and CHAIRMAN TAYLOR clarified they were talking about raising premiums on families where kids are not supposed to drive and may not even have the right to apply for a licence. He said the bill has really been narrowed down. CHAIRMAN TAYLOR expressed concern that the bill might have been narrowed too much. He said he was told by insurance brokers that anyone in his household is covered under his insurance policy as long as he grants them permission to drive his car. He wondered why he needed to purchase additional insurance for his kids or put them under his homeowner policy. CHAIRMAN TAYLOR said he was told they would be covered under his liability provision but not if they had stolen the car. CHAIRMAN TAYLOR said these kids can't get a licence, and could never get insurance, yet their family still has to pay the penalty. CHAIRMAN TAYLOR agreed with MR. LESSMEIER that certain tendencies may reflect in a person's conduct and stated he does not have a problem with that individual paying a higher premium, but does not feel the family should be punished. SENATOR MILLER moved CSSB 158(L&C) out of committee. Without objection, it was so ordered and with no further business, the committee was adjourned.