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Minutes for HB2233 - Committee on Insurance
Short Title
Amending the definition of service contract to include certain motor vehicle-related contracts, exempting such contracts from regulation as insurance.
Minutes Content for Thu, Feb 9, 2017
Chairperson Vickrey opened the hearing for HB 2233.
Jason Thompson, Senor Assistant Revisor of Statutes, briefed the members on HB 2233. He said the bill dealt with the definition of a service contract and made it clear the contracts were exempt from regulation as insurance (Attachment1)
Tim Burleson testified in support of the bill. He said the bill clarified the scope of services to be covered under a service contract such as repairs for tire damage, windshield, paintless dent repair and key and/or key-fob replacement. It also clarified towing, rental and roadside services (Attachment 2)
Don McKeely provided written testimony in support of HB 2233 (Attachment 3)
Chairperson Vickrey asked if the members had any questions.
Representative Bishop asked about the rational for the bill.
Mr. Burleson answered it clarified interpretation of the law as it was today.
Representative Bishop asked if this was model service contract language already developed by the Council of Insurance Commissions.
Mr. Burleson affirmed it was and said many other states had the same service contract language that defined service contracts and excluded them from insurance laws.He said it didn't change how service contracts were regulated, only solidified the existing practices.
Representative Bishop wanted to confirm there were consumer protections under the Attorney General and district attorneys.
Mr. Burleson confirmed protections applied and that 90% of the contracts were sold when a vehicle was purchased at the dealership. Dealer advertising and deceptive trade practices rules applied.
Representative Finney asked how these were different than the regular insurance coverage on vehicles.
Mr. Burleson answered that some insurance policies didn't offer this coverage; mostly they were on the higher level policies, not standard policies. He said service contracts were meant to fill the gaps that car insurance didn't cover.
Representative Finney asked how a consumer would find these contracts.
Mr. Burleson said 85-90% of the contracts were offered at the time a vehicle was purchased, similar to other products' point-of-sale service contracts.
Representative Elliott asked if the service options were available a la carte?
Mr. Burleson confirmed they were and that dealerships varied on the spectrum of services offered and a consumer could pick a la carte.
Representative Bishop asked how a consumer would know how much each option cost.
Mr. Burleson said normally the costs were itemized in the consumer's contract. For example, the key fob cost is separate from windshield repair.
Representative Bishop said her concern was whether the service contract costs were hidden from the consumer.
Chairman Vickrey asked if there were any opponents to the bill.
Marlee Carpenter testified in opposition to the bill. She said she had been working with the proponents to determine how the bill worked in other states. She said their concern was bill item b(4), lines 35-4, subsections B and C in that they felt those items were already covered by property and casualty policies (Attachment 4)
Chairperson Vickrey asked Ms. Carpenter if the service contracts could be considered gap insurance to pay for things costing less than the insurance deductible.
Ms. Carpter affirmed and said service contracts were not regulated under insurance. She said they did not have a problem with key-fobs as they were not covered in an insurance policy. Other items such as windowshield crack and repair, and paintless dent removal were already covered under an insurance policy.
Chairperson Vickrey asked whether these items would be paid by insurance since the repair might be less than the deductible.
Ms. Carpenter responded many insurance policies had a zero deductible for windshield crack repair so it would be in competition with the service contract. They are exploring this in other states.
Representative Cox asked what she would like to see regarding working with proponents.
Ms. Carptenter answered they are looking at how other states are doing it.
Representative Neighbor asked how long Ms. Carpenter has been looking at this with other states.
Ms. Carpenter said they had been talking about it since Friday last week and hope to have something ready by next week.
Representative Parker asked if the service contracts prevented insurance from covering these things.
Ms. Carpenter said, "no," that they are just regulated differently.
Representative Dove said he was concerned that a customer would have to pay for double coverage.
Chairperson Vickrey closed the hearing on HB 2233.
