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SPONSOR: |
Silva |
DATE TYPED: |
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HB |
532 |
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SHORT TITLE: |
Mile Based Auto Insurance Coverage |
SB |
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ANALYST: |
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APPROPRIATION
|
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
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$125.0 |
Recurring |
General
Fund |
Responses
Received From
Public Regulation Commission (PRC)
SUMMARY
Synopsis
of Bill
House Bill 532
requires auto insurers to begin providing policyholders with the option of
having their premium based on the number of miles driven known as “vehicle-mile
exposure” instead of on current rating methods known as “vehicle-year
exposure”.
Significant Issues
The PRC states
expected annual mileage is already a rating factor in pricing auto
insurance. Although HB 532 doesn’t make
this clear, the intent is likely to base the rate on actual miles driven, which
would require certified odometer readings at the beginning and end of each
policy period, with appropriate premium adjustments at the expiration of the
policy term.
The PRC finds HB 532
unclear on whether the new optional method allows the current array of rating
elements (e.g. age, sex, driving record, intended use of vehicle) to remain in
place or if it replaces them with miles driven.
HB 532 will require
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 Insurance Division. It
will also require the two national insurance statistical reporting
organizations to add new data fields to capture experience from mileage-rated
policies.
FISCAL IMPLICATIONS
The
Insurance Division of the PRC will have to add an actuarial FTE to handle the
administrative requirements of HB 532 at an estimated cost of $125.0.
ADMINISTRATIVE IMPLICATIONS
HB
532 creates a significant new actuarial duty for the Insurance Division. 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.
TECHNICAL ISSUES
The PRC provided the following:
The term “class” in Section 1-B needs to be
defined. This definition should make
clear which current rating elements, if any, will be used to define a
“class”.
Section 1-E-(2b) requires the Superintendent to
analyze the effect of mileage rating on the number of uninsured vehicles. However, no one currently knows the number of
uninsured vehicles in
Section 1-E-(3c) mentions that the Superintendent
shall make rules regarding “proof of financial responsibility”. This has nothing to due with rating
methodology.
Section 1-E-(3d) mentions auditing
odometer readings to determine whether coverage is in force. Does this mean that the policyholder
purchases a certain number of miles of coverage (like buying a phone card)
after which he’s uninsured? If so, this
is not made clear in the bill.