In 1997, Roz Baker and I co-chaired the Senate Committee on Commerce, Consumer Protection, and Information Technology. As co-chairs of the committee in charge of auto insurance, we committed ourselves to enacting broad, sweeping reform that would deliver lower auto insurance premiums for consumers.

Today, Hawaii consumers are provided with a "cafeteria plan," resulting in choice and cost-savings. Under the new law, required coverage is substantially pared down while required optional coverages are expanded. This allows consumers to tailor their automobile insurance to better fit their needs and reduce the premium costs for consumers who need only basic coverage as well as consumers who do not wish to buy all of the optional coverages.

With House Bill 100, HD1, SD1, CD1, the Legislature achieved the following goals:

Avoid medical cost-shift from Personal Injury Protection (PIP) to Employers/Prepaid Health premiums.
Avoid medical cost-shift from Personal Injury Protection (PIP) to Employers/Prepaid Health premiums. PIP benefits of $10,000 required. PIP benefits now include medical expenses only, no longer include wage loss, substitute services, death benefits, funeral expenses, or alternative care. Finally, chiropractic services are limited to 30 visits at no more than $75/visit or as defined by Hawaii State Chiropractic Association Guidelines.

Address cost drivers in auto insurance system.
Cost containment of medical expenses:

• repeals medical-rehabilitative threshold;
• PIP benefits substantially comparable to prepaid health care plans as defined by DLIR;
• requires PIP benefits of $10,000 (medical expenses only) as opposed to $20,000 (medical expenses – including alternative care, faith healing, wage loss, substitute services, death beneifts, funeral expenses, etc.);
• limits chiropractic services;
• allows consumer to receive PIP through managed care providers;
• alternative care made optional.

Cost containment of litigation:

• limits lawsuits to those that are serious enough to meet the verbal threshold and those for which personal injury protection benefits actually paid out exceed $5,000;
• PIP benefits now include medical expenses only; no longer include wage loss, substitute services, death benefits, funeral expenses, or alternative care;
• awards in lawsuits to recover for bodily injury reduced by greater of $5,000 or amount of PIP benefits actually paid out, up to $10,000;
• minimum bodily injury liability coverage lowered to $20,000 per person, with a $10,000 aggregate per accident cap.

Repair costs:

• preferred repair provider optional (choice of two required);
• require insurers to offer choice of using like kind and quality parts for repair work.

Fraud:

• establishes fraud violations and penalties;
• creates insurance fraud investigation unit within Insurance Division to investigate and prosecute insurance fraud.

Uninsured Drivers:

• amnesty from penalties for 2 years prior to effective date of Act for uninsured motorists if they get required insurance by 12/31/97;
• creates task force, consisting of Insurance Commissioner and two other members, to make recommendations regarding the problem of uninsured motorists, among other things

Miscellaneous:

• abolishes peer review process which was a medical and litigation cost driver;
• makes wage loss, death benefits, and funeral benefits optional;
• creates task force to develop a comprehensive plan for reducing costs, paying cost of motor vehicle insurance or benefits, maximizing coverage and benefits for residents; and alleviating the problem of uninsured motorists

Mandatory Rate Reduction - Mandates an actuarially supported rate reduction of 20-35% on premiums approved for policies effective 7/1/96 for insured's with policies containing mandatory minimum coverages. Adjustments required for insured's whose policies contain more than the mandatory minimum coverage.