STAND. COM. REP. 3122

Honolulu, Hawaii

, 2004

RE: H.B. No. 1820

H.D. 1

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred H.B. No. 1820, H.D. 1, entitled:

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

begs leave to report as follows:

The purpose of this measure is to permit the cancellation of a motor vehicle insurance policy within the first sixty days, where cancellation is not based on prohibited discrimination, and to reduce the notice requirement for cancellation of a policy for nonpayment of premiums from thirty days to fifteen days.

The Department of Commerce and Consumer Affairs, AIG Hawaii, Hawaii Insurers Council, GEICO Direct, and Hawaii Independent Insurance Agents Association testified in support of this measure. The Consumer Lawyers of Hawaii opposed the measure.

This measure authorizes the cancellation of a new policy within the first sixty days thereof where cancellation is not based on illegal criteria. Your Committee finds that authorizing this extended underwriting period will enable insurers to ensure that a policy is properly rated while allowing consumers to obtain coverage in a timely manner.

Additionally, this measure proposes to reduce from thirty days to fifteen days the notification requirement for cancellation of a policy due to nonpayment.

Your Committee finds that the majority of the states establish a ten-day cancellation requirement, most of the other states have a fifteen-day or twenty-day notice requirement, and Hawaii, West Virginia, and the District of Columbia have a thirty-day notice requirement.

Your Committee further finds that longer notification periods are not necessarily advantageous for consumers. Shorter cancellation periods allow for smaller minimum down payment amounts and monthly payment plans, and result in lesser amounts of free coverage (coverage provided during the cancellation period), the cost of which must be spread among responsible policyholders who make their premium payments.

Your Committee has amended this measure:

(1) To clarify that the certificate of mailing requirement for a notice of cancellation or nonrenewal applies to all such notices, and not only to a notice for cancellation based on nonpayment; and

(2) By making technical amendments for consistency and to reflect preferred drafting style.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1820, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1820, H.D. 1, S.D. 1, and be placed on the calendar for Third Reading.

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

____________________________

RON MENOR, Chair