STAND. COM. REP. NO.143-02
Honolulu, Hawaii
, 2002
RE: H.B. No. 1698
H.D. 1
Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twenty-First State Legislature
Regular Session of 2002
State of Hawaii
Sir:
Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 1698 entitled:
"A BILL FOR AN ACT RELATING TO FORCE-PLACED INSURANCE,"
begs leave to report as follows:
The purpose of this bill is to contain costs of force-placed insurance. Force-placed insurance coverage protects the seller or lender's interest under a credit sales contract and is purchased by the seller or lender when the buyer fails to purchase and maintain insurance coverage. This bill requires the seller or lender to exercise the same level of care and diligence as the buyer when purchasing force-placed insurance.
The Insurance Commissioner submitted testimony supporting the intent of this bill. The Hawaii Bankers Association and the Hawaii Credit Union League submitted testimony in opposition of this bill.
Your Committee finds that a seller under a credit sales contract force-places the cost of insurance only when a buyer fails to fulfill a contractual obligation to maintain insurance coverage. A seller should be expected to exercise the same diligence as the buyer when pricing force-placed insurance and should be required to find a policy that is reasonable relative to the rate originally paid by the buyer.
Your Committee further finds that:
(1) The bill does not define the terms "force-placed insurance" or "rule of 78" although these terms are not universally understood; and
(2) It may be inappropriate to place the provisions of this bill in the Insurance Code because it is unclear whether sellers, when purchasing force-placed insurance, are engaging in the business of insurance.
Your Committee has amended this measure by:
(1) Providing that the rates charged to buyers for a force-placed policy shall not exceed 110 percent of the rate formerly paid by the buyer, rather than the rate formerly paid by the buyer under the buyer's lapsed policy;
(2) Defining "force-placed insurance" and "rule of 78";
(3) Removing this bill from the Insurance Code and, instead, adding a new section to Chapter 480, Hawaii Revised Statutes, which governs unfair and deceptive trade practices; and
(4) Making other 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 H.B. No. 1698, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1698, 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,
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____________________________ KENNETH T. HIRAKI, Chair |