Final
1st Meeting Interim Committee on Auto Insurance

AUTO INSURANCE SYSTEM

Votes:
Action Taken:
<none><none>




10:05 AM -- Call to Order

Representative Coleman called the meeting to order, commented on the committee's charge, and discussed today's agenda.


10:12 AM -- Introductions

The committee members introduced themselves. Representative Coleman gave members an opportunity to ask questions about the interim committee's activities. The following materials were distributed: the July 27 agenda (Attachment A), a memorandum prepared by Legislative Council Staff entitled Duties of the Insurance Commissioner(Attachment B), and a memorandum prepared by Legislative Council Staff entitled Overview of the Interim Committee on Auto Insurance(Attachment C).


10:14 AM -- Colorado Division of Insurance

Tambor Williams, Executive Director, Department of Regulatory Agencies, commented on the transition from no-fault to the tort system and introduced her staff members. The Division staff distributed the following materials: Analysis of Auto Injury Insurance Claims From Four No-Fault States, published by the Insurance Research Council, 2004 (on file at the Legislative Council office), a table prepared by the Division of Insurance which summarizes Colorado's insurance statutes (Attachment D), a hard copy of the Division of Insurance Power Point presentation entitled No-Fault to Tort . . .Where Are We Now? (Attachment E), a response prepared by former Commissioner of Insurance Doug Dean to Colorado Health Institute Study entitled "The Jury is Out," (Attachment F), a Division of Insurance document entitled Consumer's Guide to Auto Insurance, (Attachment G), and Division of Insurance publication called Auto Insurance Premium Comparison, February, 2005, (Attachment H). Executive Director Williams said that no-fault insurance was ripe for sunset in the year 2000. She said that the no-fault insurance system was broken and not serving the needs of Coloradans.


10:15 AM

Commissioner Of Insurance Dave Rivera commented on the features of each system and said that the consensus has been that the no-fault system "did not live up to its billing." He said that there were instances of organized fraud under no-fault, and that the system became very expensive. He said that under no-fault the public had to pay for unsustainable increases in personal injury protection lines. Finally, he added that many medical treatments that were not medically necessary were authorized under no-fault.


10:21 AM

Commissioner Rivera said that Colorado returned to the tort system after twenty-nine years as a "monetary threshold state." He said that under tort there is a requirement for the determination of fault and that costs are paid by the person who is at fault. Tort also allows for the recovery of noneconomic damages. He said that initially savings of ten to fourteen percent in premiums were expected under the tort system. He commented on initial rate filings since the transition to tort.


10:27 AM

Representative Carroll asked the Commissioner a question regarding the comparability of policies under the two systems, and if the Division has the ability to make such a fair comparison. She asked if a fair comparison of policies under the two systems were to be made, whether the comparison would show overall savings or costs for consumers under tort.


10:31 AM

Representative Coleman said that the Commissioner will be invited back to a future Committee meeting to respond to the questions from committee members if he is unable to answer today. Senator Wiens asked the Commissioner to also provide the actual costs of policies when providing statistical information rather than simply providing percentage increases or decreases. He said that these numbers would be useful to Committee members as policy makers.


10:34 AM

Representative Coleman asked the Commissioner to elaborate on his comments regarding organized fraud under no-fault. She asked that the Commissioner provide the committee with evidence that fraud existed under no-fault and information regarding the scale of the problem. She asked about the costs of this problem to policy holders and where the fraud was documented. She asked for similar information relating to the Commissioner's comments relating to "fish tanks," "aroma-therapy," and spas.


10:36 AM

Senator Wiens inquired about the impact of the transition to tort on the cost of health care policies. He asked what percentage of emergency room visits result from auto accidents.


10:38 AM

Representative Coleman said that it would be helpful if the Commissioner would provide members with the names of insurance carriers and the number of insured under the various insurance lines when providing information to the Committee.


10:41 AM

The Commissioner said that the Division could survey insurance companies and attempt to identify increases that were specifically attributable to the transition from no-fault to tort. Representative Cloer asked if the Commissioner was continuing to request this information from carriers. He said that he would like to know what the impact has been on premium costs since January of 2004.


10:45 AM

In regard to increases in health insurance costs due to the transition, Representative Carroll asked if these changes were due to administrative cost increases or the result of benefit increases or both. The Commissioner responded that increases were attributable to both factors.


10:48 AM

The Commissioner said that five new carriers have entered the Colorado market since the advent of tort. He said that a better regulatory environment now exists, that the market is becoming more competitive, and that consumers have increased choice under tort.


10:49 AM

The Commissioner commented on consumer protection by the Division and Colorado's rate filing system. He described the "prior approval system," the "no-filings system," and the "file and use system" which is used by the State of Colorado. He said that Colorado's system gets product to the market quickly and requires fewer FTEs to administer.


10:59 AM

The Commissioner commented on credit scoring. Representative Coleman asked how Colorado's insurers use credit scoring and what variances there are in the use of credit scoring by our insurers. She asked if the use of credit scoring is authorized by the Division or in the policies of individual companies.


11:00 AM

Representative Carroll asked about the frequency with which rate filings are "kicked back" to insurers for being excessive.


11:01 AM

Representative Cloer said that prior to the transition to tort, most carriers claimed that there would be drastic decreases in premiums due to the transition. He asked if the Division could determine what decreases actually occurred on a percentage basis, and whether the costs of the policies has "crept back up" in recent years.


11:02 AM

The Commissioner commented on consumer outreach under the Division. He commented on the frequency of consumer complaints. He summarized by saying that consumers have more choice under the new system, that there is more competition, and that the average consumer has benefitted from rate reductions. He said that the Division has played an important role in consumer protection and that complaints have diminished.


11:04 AM

Representative Carroll asked the Division to provide information tracking consumer complaints related to access to and the quality of health care provided as a result of automobile accidents if such information is available.


11:08 AM

Senator McElhany said that he has received complaints from constituents relating to the failure of health insurers to promptly pay claims related to auto accidents. He said that in some instances health insurers are refusing payment and instructing accident victims to seek compensation from the insurer of the person who was at fault in the accident. Senator McElhany asked if the Division has received such complaints from consumers and if such a practice would violate statute or regulations. The Commissioner said that these situations would be covered under "prompt pay" laws. Representative Coleman expressed her concern about prompt pay under the tort system.


11:11 AM -- Recess


11:23 AM -- Colorado Consumer Insurance Council

Marcy Morrison, Colorado Consumer Insurance Council, commented on the role of the Consumer Council. She said that there is also a "Producer's Council" under the Division. She distributed a 2005 roster of the Consumer Insurance Council, (Attachment I). She has been the chairman of the Consumer Insurance Council for five years. The Council is appointed by the Insurance Commissioner. The Council meets quarterly (generally on the second Wednesday at 10:30 AM of the month beginning each quarter), and annually with the Producer's Council. The Council meets at the Division offices (1560 Broadway.)

Ms. Morrison offered the use of the Council as a sounding board for any ideas that legislators may have relating to insurance, including as a resource for ideas relating to legislation. She said that information relating to insurance is not readily accessible and is quite difficult to understand for the average consumer. She said that it is difficult to find people from outside of the Denver area to serve on the Council. She commented on the impact of auto accidents on health insurance costs. She said that the committee should focus on acquiring objective data. She spoke about the role of the Producer's Council which also desires to communicate well with the public. Julie Hoerner, Department of Regulatory Agencies, commented on the creation of the Producer's Council. Representative Coleman requested the roster of members of the Producer's Council.


11:54 AM -- Lunch Recess


1:38 PM -- History of Colorado's No-Fault Insurance System

Mr. Richard Laugesen introduced himself. He is a long-time attorney handling matters relating to insurance in Denver. He distributed the following materials: Richard Laugesen, Attorney At Law, Curriculum Vitae, (Attachment K), Brief History and Background of Colorado's Present Motor Vehicle Insurance System, Richard Laugesen, (Attachment L), The Uninsured/Under-insured Motorist Insurance Statute, Richard Laugesen, (Attachment M), (book) Colorado Motor Vehicle Insurance Laws, Fall 2005, The University of Denver College of Law (On File at the Office of the Legislative Council Staff), (Table of Contents of the Book) Colorado Motor Vehicle Insurance Laws, Fall 2005, The University of Denver College of Law, (Attachment N), and (a photocopy of the Act, HB 73-1027) Concerning A System of Motor Vehicle Insurance, (Attachment O).

Mr. Laugesen commented on the history of Colorado's auto insurance laws and distributed several other handouts. He spoke about some of the shortcomings of the tort system historically. He commented on the origins of personal injury protection. He said that the no-fault model was proposed as a compulsory system in order to minimize its costs. He commented on the chronology of auto insurance laws in Colorado. In 1966, Colorado required insurers to offer uninsured motorists coverage. In 1973, Colorado enacted a no-fault reparation system mandating certain types of coverage. In 1983, laws relating to uninsured motorists were modified to include under-insured motorist coverage. In 1991, a statute was adopted permitting managed care as an option. In July of 2003, the Reparations Act (No-fault system) was allowed to sunset. The state has been transitioning out of the no-fault system since 2003. After this year insurers were no longer required to write these policies. Claims from the no-fault system are still being settled. He said that some of the coverages available under no-fault were moved to Part 6 of this Article, for example, compulsory liability insurance, and uninsured motorist coverage.


1:38 PM

Representative Carroll asked about the frequency with which liability coverage levels should be increased. Mr. Laugesen said that about twenty states still have some form of no-fault. He said that health insurance is not a satisfactory substitute for automobile insurance and that there continue to be large gaps in coverage for the public. He said that the adequacy and availability of insurance should be of primary concern, rather than insurance costs. Mr. Laugesen said that he is not advocating a return to no-fault, but he believes that it served well and could have been fixed rather than scrapped. He said that basic needs should be covered and there should be uniformity in insurance coverage offered.


2:35 PM -- Recess


2:42 PM -- Presentation by the Colorado Health Institute

Pamela Hanes, Executive Director of the Colorado Health Institute, provided background about the Colorado Health Institute, a nonprofit organization. She provided a power point presentation, Colorado Health Institute, The Shift from No-fault to Tort Auto Insurance: Is the Jury Still Out?, July 27, 2005, (Attachment J).

Ms. Hanes talked about the shift to a full tort system and the fiscal impacts of such shift. Her comments also touched on the need for complete, accurate and easily understood information. The intent of moving to tort was to provide more choice to consumers and to give greater ability to manage premiums. She said that the question of which insurance products are achieving the greatest savings is difficult to answer at this point. She provided a list of questions relating to savings in premiums. She said that even insurance offerings from various companies are not known. She commented on the speed with which claims are paid.


3:03 PM

Ms. Hanes commented on administrative cost increases under tort and cost shifting. She said that some people may be over-insuring when it comes to medical coverage and noted that many Coloradans may not be adequately protecting their assets. Ms. Hanes observed that, in the last 25 years, five states have repealed their no-fault laws. Thirteen states still have a no-fault system. Pennsylvania has re-adopted some no-fault provisions. She noted that there are many factors which affect rates in a particular state including geography and population density, and said that it is difficult to isolate the impact of changes in the laws.

She commented on premiums in Colorado, Kansas and Utah. She said that much statistical information relating to insurance premiums resides within the insurance industry, is used in rate setting, and is not public. She said that there are mechanisms to control costs even within a "PIP environment." She provided statistics to the Committee showing a significant variation in loss ratios among Colorado insurance carriers. In this regard, Representative Coleman said that she would like the Insurance Commissioner to address the question of what the standards there are for data reporting by the carriers to the Division and whether this data reporting is required by statute or in rules.


3:30 PM -- Adjourn

The first meeting of the Interim Committee on Automobile Insurance adjourned. The next meeting will be Tuesday, August 9, 2005 at 10:00 a.m.