Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR Larranga

DATE TYPED 2/5/05

HB 528

SHORT TITLE Reduce Low-Income Insurance Limits

SB

ANALYST Wilson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulatory Commission (PRC)

Department of Public Safety (DPS)

SUMMARY

Synopsis of Bill

House Bill 528 reduces the amount of auto insurance coverage that low-income vehicle owners

will be legally required to buy. It also requires that all insurance policies regardless of the poli-

cyholder’s income level automatically match another state’s financial responsibility limits when

the insured vehicle is driving through another state.

Significant Issues

The PRC supplied the following:

•

The roughly 50% reduction in the financial responsibility limits contained in the bill will,

for actuarial reasons, produce approximately a 20% reduction in policy premium.

•

Losses and premiums for underinsured motorist coverages purchased by non-low-income

drivers will increase.

•

Virtually all automobile insurance policies already offer automatic coverage to match an-

other state’s financial responsibility limits when the insured vehicle is traveling out-of-

state.

House Bill 528 -- Page 2

The DPS provided the following:

•

House Bill 528 will create a classification of eligibility for lower insurance limits based

on income. The effect would be to penalize vehicle owners who earn above 150% of the

federal poverty guidelines. Recovery by the victims of a motor vehicle accident will de-

pend on which classification was involved.

•

House Bill 528 provides no mechanism for monitoring a change in income.

FISCAL IMPLICATIONS

This bill will require the approximately 300 insurance companies writing auto insurance in New

Mexico to file with the Insurance Division revised rate manuals that include the new low limits.

ADMINISTRATIVE IMPLICATIONS

This bill requires the Insurance Division to promulgate the forms that insurance companies must

provide to applicants and policyholders to certify their low-income status

TECHNICAL ISSUES

DPS notes this bill makes no accommodation for joint ownership income of a vehicle or aggre-

gate family income. The bill also fails to include a severability clause to protect the remainder of

the statute from parts that are constitutionally questionable.

OTHER SUBSTANTIVE ISSUES

DPS believes this bill conflicts with the legislative purpose of the Mandatory Financial Respon-

sibility Act which was to protect the public from “catastrophic financial hardship” as the result of

a motor vehicle accident. Equal protection requires that citizens be treated fairly when compared

to each other. While there is no requirement that a fundamental constitutional right be applica-

ble, to survive a constitutional challenge, House Bill 528 will have to show its proposed classifi-

cation based on income serves an important governmental objective and is substantially related

to the achievement of that objective. San Antonio Independent School Distr., v. Rodriguez, 411

U.S. 1 (1973).

DW/yr