Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 1071 entitled:

begs leave to report as follows:

The purpose of this bill is to specify in the Insurance Code, minimum levels of bonding and errors and omissions coverage requirements for managing general agents and reinsurance intermediary-managers.

Testimony in support of this bill was received from the Insurance Division (Division) of the Department of Commerce and Consumer Affairs. The Hawaii Independent Insurance Agents Association stated concerns.

Your Committee finds that the law grants the Insurance Commissioner (Commissioner) unfettered discretion to establish minimum levels of bonding and errors and omissions coverage for managing general agents and reinsurance intermediary-managers. The Division must not only set these amounts on a case-by-case basis, but must also respond to requests for clarification of these requirements on a case-by-case basis. The Commissioner testified that this utilizes resources that are disproportionately greater than the benefits achieved.

Your Committee understands that other states set specific bond and errors and omissions coverage levels for managing general agents and reinsurance intermediary-managers, and that the amounts in this bill fall midway in the range of the various levels required. Your Committee finds that in increasing government efficiency by specifying these amounts, there would be minimal impact on regulated business and consumer interests.

To allow further consideration of the effect of various levels of coverage, your Committee has amended this bill by leaving blank all applicable percentages in the bill. Technical, nonsubstantive amendments have also been made 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. 1071, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1071, H.D. 1, and be placed on the calendar for Third Reading.