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 S.B. No. 2207 entitled:

begs leave to report as follows:

The purpose of this measure is to reduce the notice requirement for cancellation of a motor vehicle insurance policy for nonpayment of premiums from thirty days to fifteen days.

The Department of Commerce and Consumer Affairs, GEICO, and the Hawaii Insurers Council testified in support of this measure. The Consumer Lawyers of Hawaii opposed the measure.

Current law requires a motor vehicle insurer to give a policyholder thirty days notice before canceling the policyholder's policy for nonpayment of premiums. This measure proposes to reduce that time period to fifteen days.

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 further finds that a fifteen-day notice period may not afford Hawaii consumers adequate notice. Most automobile insurance in Hawaii is written by national insurance companies with centralized billing and cancellation operations based on the mainland, and it may take from a week to ten days for cancellation notices mailed from these locations to be delivered to Hawaii residents.

Accordingly, your Committee has amended this measure to reduce the notice requirement from thirty days to twenty days.

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 S.B. No. 2207, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2207, S.D. 1, and be placed on the calendar for Third Reading.