STAND. COM. REP. NO. 2224

Honolulu, Hawaii

RE:    S.B. No. 2313

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committee on Commerce, Consumer Protection, and Affordable Housing, to which was referred S.B. No. 2313 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:

     The purpose of this measure is to provide consumers greater protection against insurance fraud.

     Specifically, this measure provides the following:

     (1)  Repeals the existing law relating to the Insurance Fraud Investigations Unit and establishes a new Insurance Fraud Investigations Branch to investigate and prosecute all lines of insurance fraud, except for workers' compensation claims;

     (2)  Expands administrative, civil, and criminal penalties for offenses of insurance fraud in all lines of insurance, except for workers' compensation claims, and for different types of insurance fraud, including fraudulent applications and sales; and

     (3)  Deposits all fines and settlements resulting from successful insurance fraud prosecutions into the Compliance Resolution Fund to assist the Insurance Fraud Investigations Branch to cover its operational expenses.

     Testimony in support of this measure was submitted by the Department of Commerce and Consumer Affairs, the National Association of Insurance and Financial Advisors, the American Council of Life Insurers, the Hawaii Medical Service Association, the Hawaii Association of Health Plans, and the State Farm Insurance Companies.

     Currently, the jurisdiction of the Insurance Fraud Investigations Unit of the Department of Commerce and Consumer Affairs is governed by section 431:10C-307.8, Hawaii Revised Statutes, and due to its placement in article 10C, the Insurance Fraud Investigations Unit's jurisdiction is limited to motor vehicle insurance fraud.  This placement causes confusion and may prompt arguments by defense council that the Insurance Fraud Investigations Unit lacks the authority to prosecute all lines of insurance fraud, which was the original intent in establishing the Investigations Unit.  Your Committee finds that allowing the Insurance Division of the Department of Commerce and Consumer Affairs to pursue fraud in any line of insurance, except workers' compensation claims, will ultimately result in a reduction in premiums for Hawaii residents.

     Your Committee believes that expanding the jurisdiction of the Insurance Fraud Investigations Unit to prosecute all lines of insurance fulfills the intent of this measure, which is to provide consumers greater protection against insurance fraud.

     As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Affordable Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2313 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.

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

____________________________

RUSSELL S. KOKUBUN, Chair