NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

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F I S C A L   I M P A C T   R E P O R T

 

 

SPONSOR:

Larranaga

 

DATE TYPED:

03/07/03

 

HB

590/aHTC

 

SHORT TITLE:

Insurance Limits for Low Income Drivers

 

SB

 

 

 

ANALYST:

Hayes

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

FY03

FY04

 

 

 

NFI

 

 

 

 

 

 

 

 

 

 

(Parenthesis ( ) Indicate Expenditure Decreases)

 

SOURCES OF INFORMATION

 

Responses Received From

Public Regulation Commission (PRC)

 

SUMMARY

 

     Synopsis of HTC Amendments

 

The House Transportation Committee amendment inserts new language, subsection B on page 3:

B.  An insurance agent, insurance broker or insurer who accepts as part of the eligibility of an insured to receive insurance pursuant to Paragraph (2) of Subsection A of this section shall not be liable for any claim regarding the adequacy of the reduced or limited insurance coverage.

 

     Synopsis of Original Bill

 

Section 1 of House Bill 590 amends Section 66-5-208 NMSA 1978 regarding the Mandatory Financial Responsibility Act to reduce the amount of automobile liability coverage required for vehicle owners with incomes less than or equal to 150 percent of the federal poverty guidelines.

 

“Federal poverty guidelines” means the level of income defining poverty by family size developed annually by the United States Department of Health and Human Services and published in the Federal Register.

 

Section 2 of HB 590 adds a new section of the Mandatory Financial Responsibility Act that requires all insurance policies, regardless of income level, to automatically match another state’s financial responsibility limits when the insured vehicle is driving through another state, U.S. territory or Canada. 

 

Section 3 of HB 590 also adds a new section which directs the superintendent of PRC’s Insurance Division to adopt rules regarding forms that the insurance companies require from motor vehicle owners certifying to their low income status/eligibility for reduced liability coverage pursuant to the provisions of this bill. 

     Significant Issues

 

  1. Approximately 33 percent of New Mexico motorists do not have liability insurance on their vehicles as required by state law.  It is unknown what percent of those people qualify as low income pursuant to federal poverty guidelines.

 

  1. Lower insurance rates may compel individuals to obtain the required insurance.  Over time, automobile insurance rates for all New Mexicans may decrease as a result.

 

  1. The reduction in liability coverage for low-income people is approximately 50 percent as noted below:

 

Income Greater than 150% of poverty              Income Less than 150% of poverty

 

Bodily Injury or Death to 1                               $25,000                                               $10,000          

Bodily Injury or Death to 2 or more                  $50,000                                               $20,000

Destruction of Property of others                      $10,000                                               $  5,000

 

 

For all motorists, regardless of income level, if evidence is in the form of a surety bond or a cash deposit, then the total amount shall be $60,000.

 

  1. Virtually all automobile policies currently offer automatic coverage to match another state’s financial responsibility limits when the insured vehicle is traveling out-of-state.  It is unknown whether this legislation can effectuate reciprocity with Canada

 

ADMINISTRATIVE IMPLICATIONS

 

Passage of this bill will require approximately 300 insurance companies providing automobile insurance in New Mexico to file revised rate manuals with PRC’s Insurance Division to include the new lower limits.

 

In addition, PRC’s Insurance Division will need to devise and promulgate the forms that insurance companies must provide to applicants and policyholders to certify their low income status.

 

RELATIONSHIP

 

HB 107, No charge for new auto insurance

HB 108, Mandatory coverage for permissive drivers

HB 532, Mile-based auto insurance coverage

HB 697, Uninsured motorist punitive damages

 

CMH/sb