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HB |
790 |
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SHORT TITLE: |
Mile-Based Auto Insurance Coverage |
SB |
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APPROPRIATION
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Appropriation
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Estimated
Additional Impact |
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FY04 |
FY03 |
FY04 |
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See Narrative |
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Relates to HB 532
Responses
Received From
Public
Regulation Commission (PRC)
Taxation
& Revenue Department (TRD)
SUMMARY
Synopsis
of Bill
House Bill 790
requires auto insurers to provide policyholders with the option of obtaining coverage
by pre-purchasing a set number of miles of coverage at a set cost per mile
(analogous to a phone card) instead of the current method of purchasing
coverage for a set period of time.
Significant
Issues
HB 790 requires each
of the approximately 300 insurance companies actively writing auto insurance in
New Mexico to create, file and maintain dual rating systems, to rate each
policy both ways, and to submit periodic detailed reports of the results to the
PRC. It will also require the two
insurance statistical reporting organizations (ISO and AAIS) to add new data
fields to capture experience from mileage-rated policies.
Estimated annual mileage is already an
ingredient in pricing auto insurance.
The flaw in the current method is the estimate provided by the
policyholder is never audited, leaving policyholders with an incentive to
underestimate their annual mileage. This
un-audited method appears to be in violation of the
The PRC notes establishing a system and
requirement for certified odometer readings would solve this problem with the
current rating methodology as well as produce more equitable premiums among
policyholders.
The National Organization for Women supports the
concept for “mile based” insurance as being more equitable for women since
women generally drive less miles in a year than men, and end up paying more
insurance per mile than do men.
TRD
believes HB 790 might encourage greater
compliance with the Mandatory Financial Responsibility Act. An individual who
drives very few miles in a year might be will to pay a lower premium to insure
a vehicle.
FISCAL IMPLICATIONS
The
Insurance Division will have to add an actuarial FTE to handle the
administrative chores contained in the bill. The total annual cost for salary
and associated expenses will be $120.0.
ADMINISTRATIVE IMPLICATIONS
HB 790 creates a significant new actuarial duty
for the Insurance Division of the PRC.
This duty will include reviewing approximately 300 filings of the new
rating methodology, analyzing the effect of the new methodology on policyholder
premiums and on the number of uninsured vehicles, and promulgating appropriate
rules.
RELATIONSHIP
Relates to HB 532,
Mile Based Auto Insurance
TECHNICAL ISSUES
The PRC provided the following:
Section 1-D-(2b) requires the superintendent to
analyze the effect of mileage-rating on the num-ber of uninsured vehicles. However, no one currently knows the number of
uninsured vehicles in
Section 1-D-(3c) mentions that the
superintendent shall make rules regarding “proof of financial
responsibility”. This has nothing to due
with rating methodology.