State Of Ohio DEPARTMENT OF INSURANCE 2100 Stella Court, Columbus, Ohio 43215 (614) 644-2658        www.ohioinsurance.gov	Bob Taft, Governor J. Lee Covington II, Director

Testimony of
Holly Saelens, Assistant Director, The Ohio Department of Insurance
Before
The Ohio House Insurance Committee
Tuesday, June 5, 2001

 

Mr. Chairman and members of the committee,

My name is Holly Saelens and I am the Assistant Director for Policy and Legislation for the Ohio Department of Insurance. I appear before this committee today to offer testimony on Senate Bill 97 which revises the current statute regarding uninsured and underinsured motorist (UM/UIM) coverage on personal and commercial automobiles.

Senate Bill 97, as currently drafted, proposes to repeal the mandatory offering for UM/UIM insurance and makes this type of coverage optional. If the insurer decides to sell UM/UIM as part of the policy, the bill proposes to address how the coverage will apply. First, the bill defines who is an uninsured motorist or underinsured motorist. The bill also provides a list of specified circumstances where the policy can limit or exclude coverage to the insured. This list has been expanded from current law to allow for the scope of employment and named insured limitations in an insurance contract. This change addresses the court decision rendered in Scott-Pontzer v. Liberty Mutual Fire.

The bill was amended in the Ohio Senate at the request of the Department to provide the authority for the Department to conduct a periodic study of market availability and competition in the market for providing uninsured and underinsured motorist coverage. The purpose of this amendment is to measure and report the impact of this legislation, future court decisions and other factors that could effect the availability of this type of coverage. The ability to periodically monitor and report our findings will provide a good source of information for legislators and other stakeholders to determine how the market has responded and what, if any, other future actions should be considered.

Ohio is very fortunate to currently have an insurance market for automobile insurance that is highly competitive and has traditionally offered affordable rates for automobile insurance. Ohio domestic insurers write 36 percent of the commercial automobile coverage offered in the state, which results in a direct premium of approximately $250 million. When combined with foreign insurance companies, total written premium for commercial automobile insurance exceeds $700 million. Ohio currently has 261 commercial automobile insurers in Ohio.

The impact of the recent court decisions on the market for commercial automobile coverage has been significant. The Department recently has noted substantial increases in rates being filed for commercial auto UM/UIM coverage. Supporting data that justifies these rates indicate that the increases are due to the Pontzer decision and further compounded by the more recent Linko v. Indemnity Insurance Company. ODI information on rate filings of the top 15 insurers over the last 18 months indicate that rates for commercial auto UM/UIM coverage have increased on average 110 percent. These insurers represent 59 percent of the market. Comparable information for personal lines indicate that no similar trend is evident other than minimal increases due to other market factors and are reflective of national trends.

In terms of availability, there is no statutory requirement that companies notify the ODI when they stop writing new policies or renewing existing policies. To date, Travelers Group, Liberty Mutual, the St. Paul Group and Hartford Group all have voluntarily notified the department they would restrict writing of UM/UIM coverage for commercial automobiles. We also know that several other companies are contemplating or have actually restricted their offerings based on the uncertainty over future court decisions and the inability to accurately price this particular type of insurance risk.

S.B 97 proposes a solution to the uncertainty posed by the various court decisions by removing the mandatory offering requirement for uninsured and underinsured motorist. As a result of this legislation, it is the Department's expectation that rates will stabilize and potentially decrease. In addition, we expect that insurers who have left will return and new insurers will not hesitate to enter the Ohio market.

Thank you for giving me the opportunity to testify and I would be happy to try to answer any questions.