STAND. COM. REP. 1005

Honolulu, Hawaii

, 2003

RE: S.B. No. 1055

S.D. 1

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 1055, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO MOTOR VEHICLE INSURANCE,"

begs leave to report as follows:

The purpose of this bill is to encourage drivers to participate in the State's no-fault system and to reduce the cost of uninsured motorist coverage, by establishing a motor vehicle insurance database to be used to identify uninsured motorists and better enforce the motor vehicle insurance laws.

Testimony in support of this bill was provided by the Insurance Commissioner and the Honolulu Police Department. A concerned individual supported the bill and suggested an amendment. Testimony in support of the intent of the bill and recommending amendments was submitted by The City and County of Honolulu Department of Customer Services. State Farm, Hawaii Insurers Council, and a concerned individual opposed the bill.

Your Committee finds that the police departments of the counties have had ongoing problems with enforcement of the State's motor vehicle insurance law, which uses insurance cards to identify insured motorists. Insurance cards are subject to fraudulent use and counterfeiting. A motorist may retain possession of these cards although the underlying insurance policy has been cancelled or revoked, present the card to law enforcement officers, and thereby avoid being cited at a traffic stop or at the scene of an accident.

The motor vehicle insurance database established by this bill was one of the proposals of the 2000 Motor Vehicle Insurance Benefits Task Force, which was formed to address the problem of uninsured motorists in Hawaii. This secure database would reside in the Honolulu City and County's Motor Vehicle and Licensing Division and contain information on insured vehicles that is sent directly to the database by the State's insurers. Law enforcement officers, the Judiciary, and county departments with motor vehicle insurance enforcement authority would be given access to this information, which will allow a police officer to immediately determine whether a vehicle involved in a routine traffic stop or motor vehicle accident was insured.

Your Committee finds that the Legislature has been striving to address the problem of uninsured motorists for some time, and that similar measures have been unsuccessfully introduced in past legislatures largely because of cost concerns.

However, your Committee heard testimony that the proposed database has become economically feasible with the recent expansion of insurer marketing efforts into the Internet. There was testimony that all of Hawaii's major insurers, representing 95 percent of insured motorists in this State, already maintain websites with capabilities that far exceed those necessary to provide the information required under this bill.

Your Committee heard estimates that start-up costs to the few insurance carriers that do not maintain a computer system that transfers data to an off-site location would be $1.85 per policy per year over a period of five years, and that these costs would be less for the majority of Hawaii's insurers who do maintain these systems.

Thirteen other states currently require insurers to report account information electronically, and over 600 insurance companies nationwide already report to one or more state-mandated databases. Your Committee heard testimony that Nevada, Utah, and Colorado experienced a reduction in the number of uninsured motorists after implementing a central database system, and that Nevada received increased revenues through its insurance reinstatement fee of $8,400,000 -- more than double its projection of $3,800,000.

However, your Committee is also aware of continuing insurer concerns that the system will be costly to maintain and less accurate than the current card system, that the possibility of errors in reporting could result in additional costs due to insurer liability, and that these costs would outweigh the current cost of uninsured motorist coverage, which is currently about $48 for unstacked basic 20/40 coverage, or about $4 per month.

There were also concerns that insurers could not reasonably provide the required information within 24 hours of the effective date of any change in the status of a policy, and that vehicle identification numbers are not recorded for insured commercial fleets.

Finally, your Committee heard concerns that better enforcement of the insurance laws would hurt persons who are unable to bear the cost of insurance, by removing their ability to drive to work.

Upon consideration, your Committee has amended this bill by:

(1) Extending the deadline for insurer transmission of insurance information to the City and County of Honolulu motor vehicle insurance database, from 24 hours to ten working days;

(2) Providing clarification of the scope of information that must be transmitted by insurers;

(3) Providing that insurers are not required to transmit the vehicle identification numbers of vehicles in insured commercial fleets of five or more vehicles;

(4) Providing insurers with immunity from civil liability for errors and omissions in the recording, maintenance, or reporting of required insurance information, except for damages caused by gross negligence or wanton acts or omissions;

(5) Changing the effective date to July 1, 2050, to allow further discussion of the issues; and

(6) Making technical, nonsubstantive amendments for purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1055, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1055, S.D. 1, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,

 

____________________________

KENNETH T. HIRAKI, Chair