SENATE BILL REPORT

SB 6758

BYSenators Moore and Kreidler

Creating the Washington Automobile Insurance Corporation.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 1, 1990

Senate Staff:Walt Corneille (786-7416)

AS OF FEBRUARY 1, 1990

BACKGROUND:

Currently all auto insurance is provided through private companies that market policies to the general public.  Each company sets their own rates which have to be approved by the Insurance Commissioner.  The forms used in the current insurance policies have to be reviewed by the commissioner for clarity.

The content of each policy depends upon the company marketing the policy and may differ in various respects from company to company.

Currently no state provides for a state-run insurance corporation as is done in several of the provinces of Canada.  It has been suggested that greater cost savings could be realized by the auto insurance purchasing public of the state of Washington if a state-administered and underwritten program of automobile insurance was created to underwrite and market auto insurance to the citizens of the state of Washington.

SUMMARY:

The Washington Automobile Insurance Corporation is created as a public nonprofit corporation.  The board of directors of the insurance corporation consist of 11 members, eight appointed by the Governor, that must possess the knowledge, experience and integrity necessary to ensure the respect of the people and the business and financial community of the state of Washington.  Other members of the board include the Insurance Commissioner, the president of the corporation, and the Chairman of the State Investment Board.  The Insurance Commissioner and the president of the corporation are nonvoting members of the board.  The board of directors is required to appoint a president and fix the salary of the president.  The corporation's main office is required to be in Olympia, Washington.

The corporation is empowered to engage in and carry on the business of automobile insurance and reinsurance, and operate and administer plans of automobile insurance.  The corporation is empowered to carry out other specified duties necessary for the implementation of a insurance program, including conducting surveys, entering into agreements with agents, prescribing forms, evaluating damages and losses, reinsuring, and carrying on any other activity necessary for the settlement, adjustment or investigation of claims.  The corporation must retain separate and distinct accounts and record all money paid into the corporation and all payments made by the corporation.  The corporation is not subject to state allotment laws, nor are appropriations required for expenditures from the accounts of the corporation.  The corporation also has the power to issue debt instruments, dispose of securities, mortgage or pledge property and raise money by way of loan on any securities.

The corporation is required to administer a plan of universal compulsory automobile liability insurance of a minimal amount to be set by rules adopted by the corporation.  The corporation also may offer a contract for extension insurance over and above the minimal amount set by rule by the corporation so long as the insured is eligible for coverage under a uniform compulsory universal liability policy.  Any policy issued by the corporation may not be cancelled before an anniversary date other than for nonpayment of premium.  The corporation may not consider sex, age or marital status when establishing premiums.

The corporation is not subject to the insurance code except for provisions pertaining to examinations by the commissioner, annual reports and investments.

The corporation may market the insurance product by appointment of agents that currently hold a license or that shall become licensed.  Any agent selling insurance of the corporation must be licensed pursuant to the insurance code.  Any agent appointed may not be terminated without just cause.  The commission the agents receive must be fixed on an annual basis.

Before applying for any class or kind of license or permit for a motor vehicle or a trailer for the use or operation under Title 46 RCW, or before the transfer of ownership, an applicant must pay the basic premium for the class of certificate of insurance or any additional premium that is assessed the applicant and is due and owing.

The corporation must establish classes and subclasses of motor vehicles and set a premium payable for an owners certificate for the class or subclass of motor vehicle or trailer.

The corporation may assess additional premium based on the accident record of the owner or driver, the degree of fault of the owner or driver with respect to any accident, and the class or type of vehicle to be operated based on the use to which it will be put or any other basis established by rules.  No additional premium may be assessed based upon age, marital status or sex of the owner or driver.

The Director of the Department of Licensing is required to notify the insurance corporation of any violation report or conviction of any law regulating vehicle traffic or regarding the use or operation of a motor vehicle.  The director must also notify the corporation of any suspension or cancellation of a license or permit.

The corporation is required to report to the Legislature annually and may be inspected by the State Auditor as often as deemed necessary and the State Treasurer may at any time direct the auditor to examine and report to the Treasurer on the financial or accounting operations of the corporation.  The Governor or Legislature may at any time require any additional reports as deemed necessary.

The corporation is required to be self-sustaining and must pay all claims and any other debts or obligations out of funds generated by premiums or investments.

The Legislature has the right to amend or appeal all or any part of this act.  There is no vested right of any kind against any amendment or repeal so that all rights, privileges or immunities conferred by the act exist only subject to the power of the Legislature to change this act.  The initial appropriation to the corporation must be paid back with statutory interest no later than June 1, 1999.

Appropriation:  $300 million

Revenue:   yes

Fiscal Note:    requested