SD29 - Motor Vehicle Insurance and Unisex Ratings

  • Published: 1991
  • Author: Joint Subcommittee
  • Enabling Authority: Senate Joint Resolution 61 (Regular Session, 1991)

Executive Summary:
The Joint Subcommittee began the second year of its study by conducting an organizational meeting in Richmond on July 2, 1990. At that meeting, Chief Deputy Attorney General H. Lane Kneedler summarized the Joint Subcommittee's work during its first year, and the Chairman invited representatives of the National Organization for Women (NOW) to comment on the unisex rating issue. The NOW representatives took the opportunity to explain NOW's position that auto insurance premiums should be based upon exposure to loss as measured by miles driven annually. This proposal, calling for "metered premiums," met with immediate objection from several insurance industry representatives.

On July 31, 1990, the Joint Subcommittee conducted the first of three public hearings in locations outside of Richmond. In Norfolk, the Joint Subcommittee heard support for gender-neutral auto insurance rates, and various recommendations endorsed by the Virginia Citizens Consumer Counsel. Also the Joint Subcommittee heard some of the consumer problems reported to the Norfolk Office of Consumer Affairs.

The next public hearing was held in Roanoke on August 23, 1990. The Subcommittee heard testimony from individual citizens experiencing claims settlement problems and increasing auto insurance premiums. The testimony regarding claims settlement problems prompted a discussion of a recommendation made by the Attorney General that the law should allow a civil penalty to be imposed upon an insurer that denies, in bad faith, a claim exceeding $1,000. The Subcommittee also heard testimony from a representative of Older Virginians on the inconsistency in the application of premium surcharges by insurers. In addition, a NOW representative addressed the Joint Subcommittee, explaining the organization's "metered premiums" proposal.

The third public hearing was conducted in Fairfax on September 26, 1990. This hearing focused on public comment concerning auto insurance, and a discussion of no-fault auto insurance.

At the meeting, NOW advocated the implementation of "metered premiums" to eliminate "the disproportionate premium burden imposed on low-mileage drivers." The presentation engendered discussion of the practical aspects of implementing such a system and the extent to which insurers already incorporate miles driven as a factor in establishing premiums. The Joint Subcommittee also heard from an individual citizen regarding a long delay in compensating him for a loss.

Various views regarding no-fault were then presented by a series of speakers. Considerable discussion ensued on whether circumstances in Virginia warrant moving to either a mandated or "choice" no-fault system.

The Joint Subcommittee returned to Richmond for a hearing on December 20, 1990, to discuss the Group Personal Lines Property and Casualty Model Act developed by the National Association of Insurance Commissioners ("NAIC") and to receive proposals for Joint Subcommittee endorsement.

Commissioner Foster discussed group auto insurance and the NAIC Model Act. He indicated that while no law prohibits an insurer from writing a group motor vehicle insurance policy in the Commonwealth, current insurance statutes relating to notice requirements and non-renewals present obstacles to the marketing of such group auto coverage. According to the Commissioner, the NAIC Model Act fails to address adequately some of the problems posed in writing group auto insurance policies. However, he noted that a preliminary draft group auto insurance bill produced by the Office of the Attorney General was an improvement on the NAIC Model Act. Commissioner Foster added that such legislation might be worth exploring because one major carrier had, in fact, conferred with the Bureau of Insurance about marketing a group auto plan in the Commonwealth.

The Office of the Attorney General then presented a series of administrative recommendations relating to auto insurance and proposals for three legislative initiatives. The recommended legislative initiatives would: (1) establish an industry-funded program to receive and reward information relating to auto theft; (2) authorize and facilitate group auto insurance; and (3) create a civil penalty for an insurer's bad faith failure to pay an insured's claim that exceeds $1,000.

The Commissioner of Insurance presented two legislative proposals: (1) a requirement that, under certain circumstances, an agent disclose to a client seeking auto insurance that the agent is subject to restrictions on the agent's ability to write coverage; and (2) a prohibition on denying original coverage because of two or fewer wholly or partially not-at-fault accidents.

The final issue raised at the December 20 meeting was the NOW "metered premium" proposal. Insurance industry representatives responded to NOW's arguments by explaining the methods by which the industry already considers miles driven in determining premiums.

On January 9, 1991, the Joint Subcommittee met in Richmond to vote on the proposals presented. The Subcommittee agreed to recommend the two proposals suggested by Commissioner Foster as well as the Attorney General's proposals to create an auto theft tip-reward program and authorize a penalty for an insurer's bad faith denial of a claim of an insured exceeding $1,000. In addition, the Joint Subcommittee approved the concept of authorizing group auto insurance.

The Joint Subcommittee declined, however, to endorse a policy statement proposed by Delegate Cohen relating to the relative weight given to various factors in establishing rates, and it also voted to pass by indefinitely the NOW proposal on "metered premiums."