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Minutes for HB2104 - Committee on Insurance

Short Title

Motor vehicle liability insurance; amending uninsured motorist coverage provision requirements and increasing the minimum policy limit for bodily injury.

Minutes Content for Tue, Feb 7, 2017

Chairperson Vickrey opened the hearing on HB 2104.

Jason Thompson, Revisor of Statutes, briefed the members on HB 2104. The bill concerned two changes to motor vehicle liability insurance: 1): an amendment to the uninsured and underinsured motor vehicle coverage provision requirement to increase the minimum policy limit for bodily injury and 2) an increase to the minimum limits for bodily injury or death to one person from $25,000 to $50,000 and the limits for two or more persons from from $50,000 to $100,000  (Attachment 8)

Chris Conrade testified in support of the bill. He said the minimum caps were set in the early 1980s and the increase in the minimums were needed due to increased economic costs. He said in the case of small business owners with employee drivers, they had to assume the liabilities of their drivers for costs above the minimum caps. The bill was needed to protect small business owners who relied on employee drivers. (Attachment 9)

Richard James testified in support of the bill. He said his firm represented clients who were injured in motor vehicle accidents caused by other drivers. He said the $25,000 / $50,000 minimum caps shifted the financial burden of medical and economic cost from the "bad" driver to the injured party. He said although the cap was increased last year for property damage, healthcare costs had increased more than the cost of vehicles. He provided client examples: One client's policy declaration showed he had, and paid for, more then the minimum coverage for underinsured drivers. However, he wasn't allowed to "stack" coverage by making a claim on his own policy. The client, therefore, had to pay his medical costs over the $25,000 minimum the other, at-fault driver had. A second client had the same situation but because of a pre-existing health condition, Medicaid paid her medical costs over the other diver's $25,000 minimum. Again, she had been paying the uninsured and underinsured premium but was unable to use her insurance. The third example involved a client who had stopped to render aid when a drunk driver hit him. He was injured and two people were killed. In that case, the minimum $50,000 had to be divided between two widows and the injured client. Mr. James concluded that surrounding states (Missouri, Oklahoma and Colorado) allowed stacking. (Attachment 10)

Chris Combs, Wichita, testified he supported the bill. He was involved in an accident with an underinsured driver with minimum $25,000 coverage. His medical expenses maxed out the coverage and he did not have enough to cover necessary shoulder surgery. He paid the premium for uninsured and underinsured coverage but could not claim it (Attachment 11)

Marcus Fields, Wichita, testified he supported the bill. He said he was hit by a teenager with minimum coverage. He said medical expenses were over the $25,000 coverage and he could not afford plastic surgery to remove glass from his face. He said because of a hip injury he wasn't able to work and suffered financial hardship. (Attachment 12)

Kelli Pease, Park City, testified she supported the bill. She said she was hit by a car while crossing in a marked crosswalk. She said because of injury to both her gluteus mediu muscles and her hip she wasn't able to care for herself or her special needs child. She asked her attorney about using her policy for underinsured drivers but was told it wasn't allowed. She said Medicare had to pay her bills. She asked why she had to pay premiums on coverage she couldn't use (Attachment 13)

Blake Shuart testified he supported the bill. He said he had been working for three years to increase the minimums. He added insurance company interests should not override the consumer of that insurance. He said that even an increase to $50,000 allowed the insured to cover costs and negotiate with medical providers. Further, underinsured coverage in Kansas was illusory in that the insured paid premiums but could never collect because Kansas didn't allow an insured to collect under his own underinsured policy (Attachment 14)

Matt Birch testified he was in support of the bill. He said he lived in Kansas and his law office was in Missouri. He said the question to ask was who should bear the cost burden of an accident caused by another. He said the $25,000 coverage limit was nominal, not changed since 1981. The injured party, Medicaid and medical providers must bear the cost burden. He said it was difficult to explain to Missouri lawyers with Kansas clients why their clients paid for underinsured coverage but couldn't claim it (Attachment 15)

Bob Shields (Attachment 16) Callie Denton (Attachment 17), Travis Oller (Attachment 18), and Andrie Krahl (Attachment 19)  provided written testimony in support of the bill.

Chairperson Vickrey asked if members had any questions for the proponents. 

Representative Finney asked Mr. Birch if he recalled whether any of his clients had to file for bankruptcy.

Mr. Birch affirmed he did have clients who had to file for bankruptcy because of medical bills and lost wages.

Representative Finney asked if Mr. Birch had estimates on the amount of money Kansas insureds paid for underinsured coverage.

Mr. Birch replied he did not have the information but the Insurance Department might. He added he knew 100% of the consumers did pay for this coverage.

Representative Hawkins asked Mr. Conrade how often he wrote minimum coverage policies.

Mr. Conrade answered they have no clients with the minimums. Their agents strongly recommend higher amounts: $100,000 / $300,000 coverage.

Representative Bishop asked if the minimums were required on all policies.

Clark Shultz, Kansas Department of Insurance, replied all policies sold in Kansas required at least the minimum $25,000 / $50,000 coverage.

Representative Corbet asked Conrade whether action had been taken by the Insurance Department for charging for coverage the consumer couldn't use.

Mr. Conrade said he didn't know of any action.

Mr. Corbet questioned if the coverage rose to $50,000 how much the increase would raise the premium.

Mr. Conrade said they estimated the premium would increase about $4.00 per month.

Mr. Hawkins asked if both drivers had the $25,000 minimum, if stacked would there be a net of zero since both had the minimum.

Mr. Conrade answered that was correct.

Mr. Cox asked if uninsured and underinsured coverage was on the same line.

Mr. Conrade replied that was correct.

Mr. Elliott asked Conrade if they wrote umbrella or gap policies to cover any shortage.

Mr. Conrade confirmed there were umbrella policies.

Representative Dove told Conrade that he had personal experience in this situation. He asked whether the consumer knew what he was purchasing.

Mr. Conrade said they try and go through the policy with customers. He believed, by law Kansas consumers were ultimately responsible.

Representative Dove asked Mr. James if he ever asked one of his legal clients if they felt they were properly advised regarding vehicle insurance, or if they were advised to obtain higher coverage.

Mr. James replied that many of his clients were bombarded with on-line advertising touting low cost coverage. Customers see the cost was cheaper and don't realize they were giving up their higher limit policy for a minimum coverage policy.

Chairperson Vickrey closed the proponent portion and asked if there were any opponents to HB 2104

Aaron Mays said they were opposed to the bill. He said it was Allstate's position that if the minimum bodily injury coverage was raised to $50,000 it would make Kansas number one in the nation as far as minimum limits. It would also raise premiums. He said Allstate didn't typically sell minimum coverage insurance but he knew other companies did. He feared the rise in premiums might cause their consumers to drop off. He said they would rather deal with people with minimum policies than no policy at all (Attachment 20)

William Sneed acknowledged the financial difficulties earlier proponents had testified about but he opposed the bill. He said it was impossible to construct a perfect law and they needed the best law for the majority. He said there was a concern if the minimums were raised there would be more uninsured drivers (Attachment 21)

Marlee Carpenter testified they were opposed to the bill. She said the majority of insureds have over the minimum but there were people who could only afford the minimums. She said one of their company members covered the residual market for those unable to be covered through regular voluntary markets. They calculated the price would increase by 34% for those insureds (Attachment 22)

Mark Johnston (Attachment 23), Brandon Koch (Attachment 24), and David Monagham (Attachment 25) submitted written opposition to the bill

Chairperson Vickrey asked if there were any other opponents present then opened the hearing for questions.

Chairperson Vickrey asked if the 34% increase would apply to all policies or just the ones with the minimums.

Ms. Carpenter answered it would depend on the policies, with the minimum it would be 34% but for the higher limit policies it might not be that high.

Representative Hodge asked Ms. Carpenter why the minimum limits had not changed since since 1981 even though medical costs had risen.

Ms. Carpenter said Kansas was in line with other states' minimum coverage and the Insurance Department had a spread sheet with this information.

Representative Cox asked Ms. Carpenter whether coverage had changed since 1981.

Ms. Carpenter said they increased the property damage part last year.

Mr. Sneed added this had taken care of itself because people normally increased their coverage limits.

Mr. Eplee questioned if people were required to have higher minimums, and they dropped their insurance, wouldn't it be better since the insureds could use their uninsured motorist coverage.

Mr. Sneed answered he was somewhat correct, but if stacking was allowed it would cause an increase in premiums.

Ms. Carpenter added there was a law in Kansas requiring people be covered and there were penalties and fines if a driver didn't carry insurance.

Chairperson Vickrey said the hearing on HB 2104 would remain open for additional opponents expected Thursday.

Chairperson Vickrey adjourned the meeting at 10:40 a.m.