Dialog; Ensuring You're Insured: Hawaii's Auto Insurance Law

You You You You

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hey, hey If you are standing, you stagger. If sitting, your head grows light, your stomach growls. After gathering yourself, you mumble or shout, depending upon your personal emotional makeup, any one of the number of explosives we cannot use in prime time Friday night. Then you briefly ponder, putting one of your prized automobiles up on blocks and allowing its insurance to lapse. Slightly calmed, you start figuring out how to pay for your annual auto insurance premium. Good evening and welcome to a somber dialogue. My name is Dan Boylan and I, too, have suffered from auto insurance premium shock. The 1997 session of the Hawaii State

Legislature attempted to end our trauma. Hawaii's new auto insurance law mandates a 20 to 35 % reduction in minimum coverages. But to realize those savings, the automobile owner has to know what coverage he or she needs. And we can do end, can do without. We've got some people with us tonight who should know. Ray Gralty has been the state insurance commissioner since February 1997. Mr. Gralty knows the legislative end of government as well. He served in the state house of representatives from 1982 to 1986 and in the state senate from 1992 to 1996. He's a graduate of the state University of New York Albany and holds a law degree from the University of Hawaii. Tim Dayton is the general manager of Geico Insurance Company of Honolulu. He has a chartered property, casualty underwriter, a CPCU in the trade, and a licensed general agent. Mr. Dayton received his education at St.

John Fisher College. Where's that? Rochester, New York. And American University. Insurance Attorney Bert Sakuta is a partner in the law firm of Cronin, Fried, Sakia, Kikina, and Fairbanks. He has chaired the Hawaii State Bar Association's legislation committee since 1993 and is thus very familiar with the state's new auto insurance law. Mr. Sakuta received both his undergraduate and law degrees from the University of Hawaii. David E. Gay co -chairs the state senate's committee on commerce, consumer protection, and information technology, the committee that helped fashion the auto insurance bill last session. Prior to his election to the senate, Mr. E. Gay served nine years in the state house of representatives. An employee of GTE, Hawaii, and TEL, Senator E. Gay has a bachelor's degree in electrical engineering and an MBA from the University of Hawaii. A reminder, without your questions or comments for our guests, there will be very little dialogue and dialogue. So please call us at 973 -1000 with your auto

insurance questions or comments. The number again, 973 -1000. Neighbor Island residents may of course call us collect. Answering our phones this evening, our members of the American Marketing Association's University of Hawaii chapter. And our sign language interpreter is Loretta McDonnell. Tim Dayton, now I really need to save some money on my auto insurance. And what coverages do I need to get under this law? And what coverages, perhaps do I, can I pass up under this law? Well, first of all, that varies greatly from individual. The key thing about the new law is choice. And it's very important for each person to, first of all, shop around from one company to another, and secondly, to look carefully and do their best at understanding what coverages are on their policy, what coverages are being offered, and to choose wisely. It isn't one size fits all anymore. The state does require you to have three coverages, coverages for medical

attention that you need due to an injury, and coverages that will protect you if you either damage somebody else's property because you were negligent or seriously injured another person. Beyond that, there are a whole variety of optional coverages. And you have to pick and choose wage loss, alternative care, which would allow you to treat with, say, acupuncture, not covered under your basic coverage, covered under an optional coverage. Where are chiropractors? Chiropractors are covered in a limited amount under the basic coverage. That is one of the changes. There are 30 visits allowed, and there is a strict cap on what can be charged for each visit. There are people who need coverage for their own vehicle, comprehensive inclusion. Other people decide it's not worth paying for. There is coverage if you are concerned about your dependence on dying in a car accident.

So there are coverages that would provide you protection for that. What, what, there's got to be one that all of us could save a little on, isn't there Tim? Well, that you'd look at first if you were buying your own. Well, and I do, and I tell our customers when they call me, I would start with the basic personal injury protection because you can save a substantial amount of money if you have your own health insurance. In our case, we offer up to a 30 percent discount if you agree to treat with a provider network that Geico has chosen and contracted with. So that's a substantial save, as you can save on that particular coverage. Ray Gralty, people must be getting their bills now already since the year started. Have you been, has your phone been ringing off the hook when praise or complaints? The only people who call me are those that didn't save on their auto insurance. But I think just picking up on what Tim said,

I think that there are some savings that can be realized, particularly for those who pick 10 ,000 PIP. And we have an education campaign going on in which we're trying to suggest to people that they need to take, to take a very good look at that 10 ,000 PIP, particularly if they're working because there's no need to purchase more than that. In the past, they've had to purchase things that they really didn't need or that were duplicative, that now they are not being required to under the new law. David, you helped write this law. You must get a call or two occasionally or people coming before your committee and say, already come to the conclusion that it isn't working or it is working. Are you satisfied? Actually, I've had very few cause of people who actually said they didn't get a savings. And for those few constituents who actually do call and said they didn't get a savings, I tell them to shop around. You know, just driving in the other morning, listening on the radio. There are six different auto insurance companies advertising for new business. I mean, I think it's a great time for all of the residents of Hawaii. I think all of them will see a reduction in their auto insurance, but I have no doubt

about that. And the amount of reduction just depends on what your needs are. And it's a great time to be shopping because there are a lot of choices for people. Bert Secuda, I've sat here for three years listening to a discussion of auto insurance reform. And it's always been the lawyers versus the insurance agents and so forth. Are the lawyers happy? I would say that the lawyers are partly happy and partly unhappy. Well, then the politicians must have done their job. I think so. In this case, what the lawyers feel is that those who are injured, the good drivers, still pay for some of the damages caused by the bad drivers. It's still not a system where the person who is totally at fault bears the total burden of the cost. So you folks, you folks are absolutely opposed to the no -fall system. We're opposed to no -fall because no -fall primarily covers you for medical benefits. And here in Hawaii, with mandatory prepaid, most people just don't need it. So it's an unnecessary expense that duplicates coverage you already have.

Ray Gralte, I remember a few years ago, we had maybe five or six years ago when there was another chair of that your committee. We were promised all sorts of savings. So I think it was 15 % that time. This time we're told 20 to 35 % savings. Is that truly realistic? It's absolutely realistic if you're talking in terms of mandatory minimum coverage. As we've seen the filings, we've approved the filings. Every auto -insurer in the state of Hawaii has an approved filing for reductions from 20 to 58%. Some of the insurers even exceeded the target that the legislature said. And the question is, do you need mandatory minimum coverage or do you need more? That's where I think some of the people are having some problem trying to decide what exactly do I need. And I think one difference then, in terms of the legislature and dealing with the issue, down the stretch, we were in constant communication with insurance commissioner and the actuary all the way through the end process. We had probably 10 or 15 drafts in process. We had pricing on

almost virtually all of them. We had met a lot with the state actuary about what things would actually reduce costs and the insurers and attorneys about things that would actually reduce costs and things that would actually increase costs. So, you know, Ross and I felt very comfortable that we at least under Ross -Bakek and the other chair felt very comfortable about what the options were before us. We had priced out various scenarios. We had a pure tort bill that we had priced out with insurance commissioner's help. So we understood what the parameters were on that. We had our bills that we had priced out. So we worked very closely with the insurance commissioner's state actuary to make sure that what we were passing actually was achievable. Explain this to me, though, Tim. If the legislature can mandate to you 20 to 35 % lower rates for mandatory minimum coverages, why were you gouging us before? No, we weren't. The legislature last year came along at a good time. In the early

90s, probably up until 1994, auto insurance was very unprofitable in Hawaii. That started to change in late 93, 94. And the big issue from the insurance industry's concern was what was going to happen. We were faced with the possibility of an unknown change. From my company, we went to see race predecessor Wayne Metcalf in the fall of 1996 and took a substantial decrease. And at the time, I told him we would take another one in the spring if we could and the law allowed for it. So the real question and the accomplishment in my opinion of the law was more in the fact that it finally put an end to the uncertainty and allowed the competitive pressures of a profitable auto insurance

industry in Hawaii. People seem to think that it's not a good thing for the auto industry to be profitable. But if we were unprofitable last year and these changes were mandated, none of them would have occurred. The fact that we were profitable did allow for us to actually make the reductions required by law. But what did the ultimate bill do? Did it take out tort? Is there less tort in this bill or is there more no fault? There's actually more tort. There's more tort. No question. I think ultimately what this bill really did was it took a system where Hawaii mandated that all drivers have, in essence, a Cadillac insurance policy, even if all you needed was a Toyota policy. And what this bill did was said, wait, we don't all need Cadillacs. Some of us can drive Toyota's and we'd be very happy with it. And so it allowed you to break out those coverages that you had to buy before, but you no longer have to buy now. You have a choice

now and that allows you to save significantly. The other thing I think then that happened as part of that. I think that the old law was very easy to abuse. It was hard to get a handle on things. It was easy to run up and pad claims. There's a whole bunch of things that you could do to get up to the threshold to sue. The threshold was a target. I mean, we did in this reform bill address every cost driver that we could identify and it meant reducing the thresholds. Clamping down on what kinds of medical costs you can apply to premiums and a whole bunch of things. So I mean, I do think that it's a lot harder to abuse the system today than it was a year ago. And maybe Tim can respond to that more specifically. But clearly, if somebody's abusing the system, it's easier to identify them. I think the other thing that happened, and it partly gets back to Tim, you know, the attorneys and the insurers are fighting all the time because they're trying to, you know, stake a claim because we've made a decision and under raised leadership, the attorneys and insurance companies are really working together to

make this work. I mean, it's a very different environment. I take my hats off to Ray as insurance commissioner because he really got everybody in the room and said, look, this is the legislative policy. Let's make it work. And to the credit of insurers and attorneys, they all said, well, that's all make it work. And I'll take all the credit I can get. But I'll see this to the question of where the insurers making excess profits. I have a different take on it than Tim, obviously, because I feel that one of the most important elements in the new law is the fact that the commissioner now has the power to roll back rates, which is a power that was taken away from the commissioner in 1992 when things were not so good. So as a result of the commissioner having a hammer, I think that caused certain changes in the behavior of insurers such that they were willing to compete more. A couple of things happen. I think as Tim mentioned, prior to 1995 or 1994, they perhaps not making excess profits, but the legislature did a couple of things. And I bring this up because many people are under the assumption that the

reasons why they're getting savings are because the legislature simply gave them less. They are getting less coverage than what they had before and therefore they should pay less. Well, I think they need to look at certain other factors. Number one is that when the legislature changed the medical fee schedule, and I think most of the expenses in no fault are either medical or bodily injury claims, but when they reduce the fee schedule, that caused a reduction, or that caused an increase in the profits because it caused a reduction in the expenses, in the medical expenses that were being charged. The actuary has estimated that that was worth 5 to 8 percent. There's a second factor, which is the favorable loss experience. People in Hawaii are simply driving more carefully than before. Those savings were not being passed on to the consumers. And the third, I will admit, are the result of our coverage is being brought into line with what is happening in the rest of the country. Oh, Bert, you're not in your head. Are you agreeing that this hammer, this power that the commissioner now has, is in board? Definitely. As far as

insurance profits go, last year's results, which really were the results from 1995, put Hawaii at a national tops. They broke a record for profits in the 1990s across the nation. This year's results, which are really 1996 results, were much more. They're at 27 percent net return on equity, which is fantastic. I think businesses in Hawaii today would be happy with five. They'd be ecstatic with 10 percent. Some would be happy with a return. Unfortunately, I would have to disagree. If you take the insurance indices profit over the last decade, we ranked right smack dab in the middle of the country. So that is not an accurate statement. What I would say is that for an industry that has a lot of risk associated with it, that the profits that the insurers have had in the last decade have pretty much been on target. But all

of that's going backwards. Going forward, whether this law is successful or not will depend on the next few years. Insurance companies, in all honesty, I think we're very optimistic in their filings. I think that the commissioner was pleasantly surprised to see reductions that exceeded his expectations. And when we looked at it and analyzed our prices, we'd had some good years in Hawaii. So we felt we could afford, as an industry, and I'm speaking from my perspective, as Geico, to be optimistic about what was going to happen and to put the best spend possible on the new law. Well, that's a short term. The actual results, good or bad, will be what will determine rates and the availability of insurance two, three, four years from now. And I think that's really the critical point. I would agree with Tim that I think the changes that the legislature made were very important, significant, and systemic. And I think that the system that we knew before is no longer the system today. And I think that the consumer is greatly benefited by this

change. And I think it's going to take a couple of years before everybody realizes the savings that I think are in the system or that have been in the system and are hopefully are going to be passed on. Bird or David or Tim or Ray or anybody. Do you see anything already that if you had your brothers, you see is not your brothers. I don't want to ask it that way. But you can see already that there's something in this law that isn't going to work or is going to end up being a clinker that you can already see developing. Well, I think wage loss is the obvious one. The language drafted for the wage loss was not, I think, as intended. I will say that I'm optimistic looking at what David and his committee and what the House has done that that's going to be addressed. In this session. In this session. I agree. I would agree that there were several problems with the bill simply because it's a massive work. And I think anytime you have legislation that makes such a big change, you're going to have some kings. And by and large, I think both House

and Senate are addressing those this session. I'm sorry that we screwed up on the amnesty provision because many people out there have not bought insurance because the price of insurance has been so high as you started out. And I think we need to bring more people into the system and how you do it is to reduce auto insurance rates. But unfortunately. I am this to you mean that if a person has not been carrying an insurance, they're not going to be so charged. So charged if they come into the system. We had an effective date of January 1, 1998 for a period that was supposed to take place between July 1 and December 31, 1997. So nobody could take advantage. So we're trying to correct that as well in this cleanup bill as we call it. But we've already got this question. Why doesn't the police enforce auto insurance laws when one third do not pay? I understand that folks have done a survey about trying to find out the industry has at your direction or somebody has. We just got the results. And what are they? That 15 % are uninsured in Hawaii which is half of what people thought it was. People thought it was 30 % or one third. It's 15%. But nevertheless, that's

a problem that a motor vehicle insurance task force that was established under act 251 by the legislature is supposed to undertake. And we will be looking at various ways by which we can identify those who are driving uninsured and assess the appropriate penalties on those ones. What are the penalties for people who don't have insurance? What are they? Very stiff penalties. We have one of the stiffest in the nation. You get fine, $500 for the first defense. It goes up to $1 ,000 the next offense, $1 ,500 for the next one. If you can't pay, you do community service. If you are a repeat offender, they can take away your vehicle. So there are a lot of very strong penalties. The problem is not the penalty, I believe. The problem is an identifying exactly who's uninsured. My insurance says it did not contact me regarding my options. What should I do? Switch companies. Oh, advertising. I'm sorry. Should you? I think I would start looking around and call. I think one of the points that's very important here is

there is competition. Senator Ige, David said he are at six advertisements. Five years ago, there weren't any in Hawaii. So if somebody doesn't feel that they got the best price, pick up the phone and call the various insurance companies who are trying to sell insurance. And I think there's a requirement that so many days before we knew it, they have to send you the application form. I forget the number of days, 30, 35, something in that vicinity. And if it's not happening, call the insurance commissioners office. We'll investigate and find out why. Two viewers call. Why do we need medical insurance for auto if we already have regular medical insurance? Is there a reason? That goes back to the basic philosophy of no fault. Remember, the law was created because oftentimes when there's a collision, it's very hard to determine who's at fault. And the primary focus of no fault is that we shouldn't be fighting about that. We should take care of the person who's injured. And so that's why it's a $10 ,000 minimum. I think that the average injury when there is an injury is something like $7 ,000 bucks or something. So the whole focus of the construction of the no fault law is really

that we shouldn't be arguing if there is an injury up to $10 ,000, the focus should be on getting the person whole and making him whole. And there's a political reason, I think, that these are different baskets. You've got prepaid basket, you've got no fault basket, you've got workers come, and you don't want to call shift to the employers for the injuries that are sustained in a motor vehicle accident. And I think we need to keep that separate. And as David mentioned, if the average medical claims in an accident is $7 ,000, that's why we keep $10 ,000 as the amount of personal injury protection coverage or medical coverage that you need under your no fault policy. And you pay for that no matter what, under the new, under the new says that's part of the basic minimum mandatory coverage. And the minute the doctors bills go to $10 ,000 and one, your prepaid medical insurance picks it up anyway. So there was no reason for you to buy more than $10 ,000 in the first place. But the first $10 ,000 is paid by your auto insurance. That's correct. I'm slow, but I'll get there. A few more programs on this subject. I'll have it down. Save money. The caller has a, I think

we've answered this caller as a medical insurance plus a supplemental policy. Does he need a medical auto insurance as well? No, no, bird says. No. What percentage of policyholders actually make use of under insured and of under insuring? Do we know yet? Well, I don't think it's so much the percentage. It's that the person who uses it really needs it. It is an optional coverage. You can reject it. And the issue isn't so much what percentage. I could, I don't have the statistics, but you know, those are available. But it's not a high percentage, but the severity, the amount that's paid out and the importance of it are very real. I guess do you want to take a chance with 15 % of the population being uninsured that one of those folks might hit you and therefore not be able to adequately take care of your injuries? I haven't seen it in the card yet, but I'm sure it's here somewhere. I'm going to, I'm going to ask it, why don't we do that

pay at the palm where we end up? I mean, we cover everybody. Come on. Well, that starts with the premise that bringing in this 15 % is actually going to reduce the premium for the persons already insured. And that only works if you can charge that person in adequate rate. And I don't believe that bringing in that 15 % is going to have a substantial impact on the cost of insurance. What it is going to do is it's going to make people feel better from an equity. If I had to buy it, why doesn't it so and so have to buy it? Pay at the pump would eliminate competition. It would add another government layer. It would be substantially less efficient than any kind of private system. That is absolutely opposite of the way why you should go. David, I remember, though, when someone called a year ago, when we had a similar program and you said, we all look into it. I mean, we did look into it and in fact, the task force would be looking into it very deeply.

We looked at it last year, last year. It's very complex. You know, people make it sound very simple, but you still got to decide what the coverage is or who gets covered for what kind of what kind of benefit you're providing for medical, what kinds of benefits you're providing for for collision and damage and all of those kinds of things. You still got to establish a way to make a claim and to get your car repaired. There's a whole lot of issues that are involved. And the fundamental problem that I have with Pay at the pump is that it really drives costs for people who live the farthest. And you know, I don't know if, you know, the farther you live, the more you pay flat out. I mean, is that a fair issue? Speaking as a as a true representative from Pearl. And why an eye, he'd be vehement. He'd be crawling at the mouth. Bert Secuda, because the new law has has an occurrence cap and liability coverage. Does the change impact underinsured and underinsured motor rescuations? Absolutely, Dan. This is the situation. I hit you. You have $100 ,000 of damage. Let's say I break your neck, but I only have $20 ,000 in

insurance now. And not only that, the under any circumstance, the most my insurance company will pay is $40 ,000, no matter how many people I hurt. So that's where your underinsured motor rescuverage comes in. Anything above my $20 ,000 of benefits that you require now comes from your own underinsured motor rescuverage. So as you can see, that's coverage that protects you, and that's why it's important. If a policyholder decreases his or her insurance, do the passengers also decrease the insurance? I'll defer to Bert on that. Do you follow Asperg? Yes. Everybody shares in the same policy that applies to the car. Now, for passengers who also have their own insurance policy, your own underinsured motor rescuverage will help you. And so that's why it pays to have good underinsured motor rescuverage. I'll say this, though, on the point that Bert has just made, Hawaii was unique in the nation in that our bodily injury liability limits were 25

,000 per person and unlimited per accident. So as a result, every motor vehicle in the state of Hawaii was what they call a deep pocket, and burdened his firm, and everybody that does planes work loves deep pockets. But we were also paying the second highest premiums in the nation. So what the legislature did, David, and everybody in the legislature said, let's bring us in line with the rest of the country. Half the states have 20, 40 or less. There's another 20 states with 25, 50. They chose 20, 40. So now we are in line. We were unique in the nation, Dan. Our 60 -minute deep pocket of time is running out, and our dialogue is half over. We must take a break, but we'll be right back with more insurance talk with Messers Dayton, Walty, Egate, and Sakuuta. And now a people -century preview, 1924, a consumer revolution, mass

production, a lot of goods, a lot of wealth, and the struggle on how to divide it. On the line, just one in a series of extraordinary films that explore our center, people's center. Monday night at night. He was a poet, a family man, a doctor. Then, right upon the carriage became leader of the Bosnian Serbs. Now, he stands accused as the world's most notorious war criminal. Charges that were carried, genocide, so why hasn't he been brought to justice? Watch the world's most wanted man on front line. Tuesday at 9 p .m. Welcome back to Dialogue to ensure that you're insured our dialogue is on Hawaii's auto insurance law. Taking your questions and comments for this evening are members of the American Marketing

Association's University of Hawaii chapter, and we very much appreciate their help tonight. To join our dialogue with insurance experts, Senator David Egate, Tim Dayton, Bert Sakuuta, and Insurance Commissioner Ray Gralty, please call 973 -1000 with your questions or comments. And neighbor island residents, remember, you get a real deal better than the new insurance premiums. You can call us collect. How can the public shopper insurance somebody wants to know when they do not know what to look for in a so -called good insurance company? Price, service, availability, and financial security. You don't know that till you hit, though, what the service is going to be, do you? Well, I think you can get a fairly good picture of it when you call and ask for a quote. You know, you'll find some companies will be very enthusiastic, some will give you a quote over the phone, others will set an appointment for you. So I think that would be your first tip off. I would also ask

friends, who are they insured with? What kind of service have they gotten on their claims, on their policy? If you have questions when you call, what kind of explanation is the person giving you? Are they taking the time to explain the new coverage is the complexity? Are laws very complex? People have a lot of questions. I'll add and say that my experience is that people are very price sensitive. They want to know which one is the cheapest they're calling. Mr. Commissioner, can you please tell me which one is the cheapest? And I think it depends on the coverage. But there are a couple of things that they can look at when trying to see which one they want to even call. It's hard to call 15 or 17 different auto insurance companies. That takes a long time and I think people are very convenience -oriented. But there's two things that we did that might be helpful. Number one is that we published the rates that every auto insurer has filed on all the islands that use mandatory minimum basic coverages as the profile. And that is available by calling the insurance division. We fax it to people. You send us an envelope. We mail it back to you.

We even have a web page in which it's interesting. We had over 6 ,400 hits and in February 4 ,800 hits on our website. So I think that's an indication that many people are wanting to shop around. The second thing that we did was we took not just the mandatory minimum coverages but we took even those that have more than mandatory minimum, 100, 300 and with all the different deductibles and so on. And we provided that information, the profile for that information. And we showed the range from minus 2 % to minus 41%. So that information gives them some idea of the spread and therefore the importance of being able to shop around. Then I think you can't overemphasize the need to shop around. Let me give you an example. Just this past Monday one of our employees brought the renewal sheet to me. I took a look

at it and it was very high. I said, do this for me. Just make one call to get another quote. That person spent 15 minutes and saved $800 a year. Not that. Here's the philosophical question. There should be a freedom of choice. Insurance should be optional. Not mandatory. Mandatory. David, as a man who works at the legislature, what do you think of that? Well, I mean we've looked at that and that's another question that the insurance task force is looking at whether it should be optional mandatory. We've had discussions both ways. I mean there are insurers who believe it should be optional. There are a lot of insurers who believe it should be mandatory. So I think the book is still open on that question, but we are looking at it and ultimately it comes back to, does it really create a better system for the citizens of the state? I mean that's what I think we're interested in. Well, we've had the actuary look at some numbers preliminarily and we're in the process of getting certain additional information. But the preliminary indication is that

you're going to see an increase in the uninsured motorist when you make it optional and therefore people are going to have to buy more to protect themselves. And secondly, young people under 30 are gone and who are males are going to find tremendous increases in their auto insurance policies because those folks premiums are being subsidized by the older folks because they are having the large number of declines. So we run the risk of seeing auto insurance go sky high for that population. You had to bring up that category. I've got one of those in my house. The insurance industry, as David said, is not really all in agreement as to whether that's a good idea or not. I think more companies would say that they would go along with not having insurance mandatory, but it certainly is a split. I think the important thing is if insurance is no longer mandatory, there would be a lot less regulation and the cost shifting would occur. You know, as the commissioner said, a young driver would

pay a lot more because frankly we would have to rate much differently than Hawaii allows today. It's someone calls and I have to read this because usually it's the other way around. Thanks. Everyone on the panel should be shot except for boiling. I am pretty sure. Geico costs $1 ,800 for six months of coverage compared to progressive, which costs $1 ,800 a year. ARP will provide full coverage for $1 ,200 a year because they write their policy in Hawaii. Progressive does not. I think those numbers must be a little bit wrong, but again, people think prices are too high, even under the new policy. Then if they're paying $1 ,800 a year for basic coverage, they are just paying too much or there's something about this particular insured accident tickets, very expensive car. They're not telling us everything. If you go out and buy a $30 ,000 accurate, you can expect to pay $400 for insurance. Insurance companies are making an excuse to make the rates

higher. It's crazy. State should have some regulation and fixed rates. It's impossible to pay $300 a month for getting a ticket one and a half years ago. Are people paying $300 a month in insured insurance premiums for a ticket that's 18 months old? It stays in your record for three years and you get rated for that period of time after three years. It varies quite a bit by company. One company may have a lower rate to start with, but a much steeper surcharge program. That person really needs to shop around. The real interesting thing in that is that there are actually companies that are focusing on that market, the guys who are, so I think the competition is bearing out. If you are really paying that much for insurance, you're really ought to be shopping around a lot. But the violation does stay on your record for three years. I think that's an underwriting guideline that's followed throughout the country. But help me, Tim. For somebody to pay $300 a month, that's $3600 a month for coverage. There's more than one speeding ticket. There is something more in terms of it's influencing that because it's easy to find coverage. That's a lot less expensive than

that. That's minimum coverage for a single ticket. How are welfare recipients subsidies handled for no fault insurance? They really don't have any insurance. If they do get in an accident, then it goes into the joint underwriting plan. Essentially, other insurers are covering that them. If there are more, if there are more torts, someone's asking you, Ray, if there are more torts, how can there be a cost reduction when torts raise cost that pay for birds hourly rate? That's what it is. Well, I think one of the unique things about Act 251 was to create something called the Covered Lost deductible because the legislature was concerned about the proliferation of lawsuits by firms like birds in the event that there was no deductible. The new law has both a threshold and a deductible, a $5 ,000 threshold and a $5 ,000 deductible on any recovery or settlement involved in the accident. I think it has both. The short answer, Dan, is that although there may be a few more tort claims, that is claims for

injuries, the amounts that you can receive under today's law is substantially less so that over the long term, I think payouts are going to be much less than they have been in the future in the past, and that's why future rates should reflect that. Currently under the, well, let me ask you that, follow that up, Dan. Do you think when you guys came in with these new approximations of what it would cause for the minimums that there is a possibility you could go lower sometime in the future? Well, there's certainly. There's a possibility that we could go lower and we could also go higher. It's really going to depend on what happens this year and next year. I mean, we have to, in the best of times with the same law every year, we still have to make assumptions and project what our costs are going to be. That's a tough job under any circumstance, especially with a major new law. I think it is true that the industry put the best spin on it, and we were optimistic. Frankly, I think the industry did exactly

the opposite in 1992. We were very pessimistic about how those reforms would work, and they worked better. But your profits weren't as high as that? For our profits. We didn't have profits. You mean our losses? Your losses were, yeah. Right. And so I think as an industry, when those reforms were passed in 1992, we were very pessimistic and very conservative. I think we've been very optimistic, and I think the commissioner will attest to the fact that we came forward and brought the best possible rate actions as an industry we possibly could, and we'll see if that holds up. I think I'll see this. It's too early to tell, but we are watching the fast -track data. There's this data that comes out on a quarterly basis, and the loss experience, and therefore the profitability of auto insurance companies in Hawaii continues to be very good. So if I work too bad on what was going to happen a year from now, based on what we see today, I will say that we can expect that there would be further reductions. Thanks could change. It's early,

but if we are to look at the data now, I'll say a year from today, there'll be even more happy people in the world. Instead of telling the public to shop, get together with newspapers and provide definitive standards of insurance and compare the benefits of the companies. Why don't you guys mandate that? It's very difficult to do that. I mean the policies are all very different. There's a whole bunch more than just pricing. I mean, Tim talked about service, and about repairs, and a whole bunch of other things. The insurance commissioner does a good job of trying to give you snapshots on mandatory minimum coverage. The insurance commissioners have all the prices for all the companies based on mandatory. They did create a profile for more than mandatory coverage, and they can, that is on their website and can be mailed from their office. Good drivers are still paying more than bad drivers. Somebody says. Agreed? I think that's possible under many circumstances, where a good driver pays for damages that happens to their car because the other person's either uninsured or underinsured.

There is no substantial reduction on auto insurance. Low -income people can't afford it. Even the people without accidents have to pay high insurance premium. Give more choice, including no fall. I already got a renewal and have not received any reductions. Something's wrong. Call the insurance commissioners office 586 -2790 and we'll check on it. Let's try that again. 586 -2790. Call him if you didn't get. Why do you have to pay double liability if you own cars in more than one state? I don't know that it's double liability. I mean, if somebody owns two cars, they're going to pay because the assumption is that somebody's driving those two cars. I can certainly understand that somebody might be a snow bird or somebody who spends six months here and six months there. The insurance company really doesn't have any way to figure out if somebody's driving that car or not. Most states require insurance. I could not write

a policy that was issued as a white policy and ensure somebody who was driving a car they owned and lived in Utah. Someone says the so -called 20 to 30 percent reduction of the premium is not cheaper for the person who needs a certain kind of insurance. Well, we admit that. We're just talking about the mandatory... I'll say this. The bill specifically addressed mandatory minimums, but it also said the commissioner has the power to roll back rates if the profits are excessive. It also takes into account the medical fee schedule changes and we think that there are some savings for everyone. There should be some savings for everyone. Well, you're not going to get 20 to 35 percent in every instance, but there should be some savings for everyone as a result of the favorable loss experience and the change of the medical fee schedule. Then let me say this about savings because to be fair to the insurance industry, savings comes in several different ways for most Hawaii policy holders. First of all, you are at least normally on a two times a year or six month renewal process. Therefore, if you have a

$200 savings a year, you'll get them $100 at a time as opposed to $200 at a time. The other way is that some of the major carriers here are what we call mutuals and what they do is they give a third rebate on the premium so that you will actually get your reduction in three steps. So you'll get three small reductions which together add up to one big reduction and so it's not as visible for many of our insures. Why do insurance companies, why aren't insurance companies required to notify the state or city when someone terminates insurance on a car? Somebody want to ask you, Senator, do you get what I have to say? Maybe I'll ask Tim. That would be an extremely expensive process and how much would our customers want to pay for that? That's the real problem. I would like to say one thing. Race auto insurance task force is looking at that whole issue of uninsured motorists. They're working with the industry to figure out some mechanism. They're looking at other states that have very low

uninsured motorist rates and trying to look at what they do and how they do it and whether it's applicable to our state. So uninsured motorists is an issue that we are looking at and hopefully we'll get a better handle of it next year. If he's telling the truth though about, and he's the truth for me, I assume he is telling the truth about these young guys who are causing all the trouble. I mean, young males who are having mostly accidents and they're the guy who's going zoom, zoom, zoom like this around young age one. They're all driving pre -ludes. Why don't we raise the driving age on these kids and keep them out of cars? We have a bill to do that every single session and it's a very tough thing to do. I don't know. That is a public policy issue question that we can answer. We did discuss last year about allowing people insurance companies to rate by age and clearly those with teenage drivers would see their premiums go up and we just felt that

tackling that issue at this point in time was not a real good idea. One of the benefits of being commissioner, you don't have to worry about policy issues like that, you know, those in David's lab. Tim, is there a possibility of future prepaid auto insurance cards on a monthly basis? I don't understand that, do you? Well, I think that kind of comparing it to a prepaid phone card, I'm not really sure that I would understand how that would work. Many insurers will give you a pay plan, a monthly pay plan. So, you know, if that's what they're looking for again, they should shop around. But it's a cost of what those cards are that system is going to entail and the end, we're all going to pay for it because the insurance company's going to pass it on. So you can get real fancy, no doubt, and reduce the number of uninsured motors by having a system like that. What is it going to cost? Dan, I'll make a pitch for your pay at the pump. If you did it by pay at the pump, you could pay a dollar or two every time you filled up instead of three or four hundred dollars at a crank. Thank you, Bert. Or 20 or 30 dollars every time you fill up rather than three or four hundred dollars a year. Do you really want the government to run

this program for you? Why doesn't a YA copy North Carolina's policy of taking away the license plates of those who do not keep up with their insurance? We're working on it. We're getting there. They are actually insurance commissioners' test forces actually looking at North Carolina as a model. All right, you've mentioned this task force nine times. I'm sorry. You are, or, Ray, what is the task force? I don't know about this. Well, it's a three -member task force. Mr. Takitani and Mr. Yamamoto are with me, and we're supposed to give Mr. Takitani from Maui. From Maui and Mr. Yamamoto is from Honolulu, and we were appointed by the governor of the Senate president and the speaker of the House, and we are supposed to give recommendations to the legislature, to David and to Wayne, and to the Ron Minor, and to suggest to them ways by which we could improve the system, and secondly, to deal with the uninsured motorist problem. I had a policy insurance for two cars, sold one car, and informed the agent. However, I'm still being charged and forced to pay for two cars. What is my

recourse to inform them? What should this person do? This insurance agent and call Ray? 5 -8 -6 -2790. Call Ray. Do you do a lot of this? I mean, it's a lot of what you do, I'm a bunch of some sort of somebody complains about TM or something. You've got to call them up and say, hey, Tim, we have two full customers, angry. We have two full -time investigators and two additional emergency hire, temporary investigators answering the phones since January 1st when the people get a rebate on his premiums for the time that he hasn't had that car. If the premium goes down, when some people sue me, the valuation will go down, too. So there's not fair, it seems there's no protection for us. Why is it like that? I don't understand the question. The individual has a choice as to whether to lower the amounts of liability coverage, and that's very important. A lot of people don't understand why they need more or less. You

know, they think, well, I'm a safe driver, maybe I could get by with less. And I think the real question is, what do you have to protect financially? That really determines whether you need higher levels of coverage. You really need to talk to a good, knowledgeable rep to find out what it is that you need on your policy. What does the police do to identify uninsured motors? Do they do anything at the moment? Except ask for their insurance card when they stop them for some. They ask for their insurance card when there's an accident, when they're apprehended. I believe even at the road blocks, they ask for their insurance cards. You know, it's interesting because people keep saying that the police doesn't enforce it, but I think in race test, force learned there's something like 34 ,000 citations for uninsured motorists in a typical year. So I mean, police are stopping people for uninsured motorists. Say that number again? There was 34 ,000 citations

for driving without auto insurance last year. Someone calls and maybe we're in our 50th minute or so, but maybe we haven't done this. About the new law, can some of its options be explained a little bit more clearly? We've explained some, but what are all the options where you may be able to save money or you may buy more? Bert, you want to start? Let me start. The way to approach auto insurance from the consumer standpoint is to first look at your bodily injury coverage because so many of the options flow from your choice on the bodily injury. So that's what you start with. Once you've made that decision, that is the maximum that you can get on your options for uninsured and underinsured motorist coverages. The other thing is if you have multiple cars, you really should consider stacking coverages for uninsured motorists and underinsured motorist coverage. Stacking just means if you have two cars, your $20 ,000 policy provides you with 40 ,000 of benefits because it's

two times 20 ,000. If you have three cars, it's $60 ,000 worth of benefits. And very often, if you do the calculations, you'll find that you can get the same amount of coverage for less money by doing that. The second thing you should look at is what are you doing with your deductibles? A lot of people are carrying unrealistically low deductibles. The reason it's low is because for many people, you don't want to make a claim that's going to be a few hundred dollars because the premiums you're going to pay in search charges and loss of your discount is going to more than offset that. So talk to your agent about a realistic deductible amount. If you do just those simple things, you're going to be able to save substantial money. Any additions? Well, in the no fault, in a personal injury protection coverage, in the medical coverage, you have a couple choices there. As Bert said, there are deductibles not only for the car repair, but there's a deductible for that. But I think one that's even better, there's a managed care option. And if you talk to your insurance company, some companies have

reductions on the PIP premium of up to 40%. If you agree to treat with a network that they're suggesting, they'll tell you who it is in their network. And I would add two things. Number one, inside, I would take a good look at the wage loss because that's going to be very expensive under the new law because there's fewer people who are going to be opting for it. And secondly, take a good look at that 10 ,000 PIP. I doubt that you would need more than that. Ray, someone says the stiff penalty for uninsured motorists is a load of bulls. And someone else says this whole conversation is bull. Why not just get rid of all this and just have true no fault? You'd be happy if you had true no fault. Not necessarily. I didn't support the no fault law three years ago. And Bert knows that. From an insurance company standpoint, we like things that are clear, predictable, and so forth. We'll work with any system. We were concerned that the no fault law, Geico was, was very complicated.

The savings weren't clear. We didn't support that law. So no, we would certainly support a good pure no fault law, but it would have to be one that was well thought out, eliminated as much potential for fraud and abuse. So forth. I came down to that thinking. We're going to talk about insurance. We end up talking about cattle. Under the new law, drivers will be underinsured. Someone says, how do you feel about this? I mean, do these minimum managers, I think, do minimum? Do minimum? They can be very minimum in many cases. The theory behind lowering the minimum amount of coverage, though, was that a lot of these people would otherwise be uninsured because they couldn't afford anything. So for them, something was better than nothing. Please ask, please repeat the website, raise slowly, twice. I'm told. All right. W -W -W dot Hawaii spelled out, dot gov slash from two o 'clock insurance spelled out. And twice, you have to do it twice. W

-W dot Hawaii dot gov slash insurance. I always do with the yellow cards. Tell me to do it. You have to do that. Does my insurance cover when driving another car rental or somebody else's car in another state? Generally, yes. You do have to have permission, but your liability coverage is certainly will apply. And if you have comprehensive in collision, it would also apply where people sometimes get into problems that are they rent a car and let their friend drive it. Now you have a problem. What does the word stacked? I was thinking about this when you said this. What does the word stacked mean for the underinsured or uninsured people? Stack means that the amount of coverage you have is multiplied by the number of cars you have. So if I have 20 ,000 in coverage and I have two cars, two times 20 is 40 ,000, that's the benefit I would have under a stacked coverage. Even though my policy

says 20 ,000, I actually have 40 ,000. If I have four cars, then I have 20 times for 80 ,000. Why the auto insurance program won't work since a lot of it will be subsidized by tourists? I mean, why the pump auto insurance program won't work since a lot of it will be subsidized by tourists? It would be subsidized by tourists, wouldn't it? Well, I mean, it would be, but it still gets to be pretty complicated about, you know, I think the estimates that we saw, if you wanted to replace the entire insurance program that we have today by pay at the pump is that, you know, gasoline prices would raise by more than a dollar, which means that you'd be paying a whole lot more money for gas. But it is true that the tourists would have to be subsidizing and not get anything out of it, because they would be covered by their own policies back home and they would be paying at the pump here. So the state of Hawaii would be benefited. I'm not sure how you could craft it so that their own policy back home would cover them. I think that they, if they were paying for it, they'd be entitled to any coverage. Well, they would get probably their medical anyway. Folks, it's,

you're all saying a lot of questions and we really appreciate it and we, these are the ones we didn't get to and I apologize, but we are out of time for this evening dialogue. We appreciate very much, of course, you're sharing your expertise with us tonight. Our thanks as well to our volunteers from the American Marketing and Associations University of Hawaii chapter. You folks did very, very good work. No dialogue next week, nor the week after. Hawaii Public Television will be raising money with two weekends of live pledge. So my colleague Lynn Waters and I will be here for that. Check your credit card balances and your checkbook and plan to join us for some great entertainment and an opportunity to support Hawaii Public Television and Hawaii, Dayton, EGAY, Gralty and Sakuuta. They're already getting their credit cards out. They're going to give a lot this year. Until then, for all of us at Hawaii Public Television, thank you for watching dialogue. Aloha. Dialogue is brought to you by Hawaiian Electric Company,

people with a powerful commitment. Among the accomplishments of the 1997 legislature was Act 251, the reform of Hawaii's auto insurance law. It required reductions of 20 to 35 percent for mandatory minimum coverages and Hawaii's insurance companies

complied. Some to the tune of 50 percent reduction. But you have to know what insurance options to buy. Insurance Commissioner Ray Gralty, Senator David EGAY, Geiko's Tim Dayton and Attorney Bert Sakuuta will tell us on dialogue Friday night at 8. Among the accomplishments of the 1997 legislature was Act 251, a reform of Hawaii's auto insurance law. It required reductions of 20 to 35 percent for mandatory minimum coverages and Hawaii's insurance companies complied. Some to the tune of 50 percent reduction. But you have

to know what insurance options to buy. Insurance Commissioner Ray Gralty, Senator David EGAY, Geiko's Tim Dayton and Attorney Bert Sakuuta will tell us on dialogue tonight at 8.