The Insurance Coverage Group of the Hawai`i State Bar Association recently met with Hawai`i Insurance Commissioner, J. P. Schmidt. The Commissioner gave his insight on the state of the Insurance industry on both the mainland and in Hawai`i.
At the national level, the Commissioner reported there are several bills before Congress to federalize the insurance industry. The Commissioner reported that Hawai`i is opposed to federal regulation of the industry, with the exception of reinsurance. Currently, insurance companies are regulated by 50 different state regulators. The Commissioner felt that given the current economic crises, state regulation of the insurance industry is working well. State commissioners work together on issues of common interest through the National Association of Insurance Commissioners. This Association has worked hard to develop a working relationship with Congress.
Turning to Hawai`i, the Commissioner believes insurance companies are in good shape and competition is thriving. The problem areas are commercial liability, especially construction and medical malpractice because no insurers providemalpractice coverage for hospitals. Further, health insurance remains a challenge as the two largest insurers, Hawaii Medical Service Association and Kaiser Permanente, control about 85 per cent of the market.
The Commissioner believes auto insurance in Hawai`i is competitive and the most profitable in the nation. For workers compensation, Hawai`i has enjoyed one of the largest reductions in premium rates in the country. There has been a reduction in premiums for life insurance. The Commissioner has had to revoke licenses, however, from life insurance agents who have taken advantage of seniors.
Regarding hurricane insurance, a number of new companies have entered the market. A hurricane insurer needs significant capital that may be due suddenly in the event of a catastrophic hurricane. Three insurers were approved to issue hurricane policies in Hawai`i a couple of years ago; subsequently, three more entered; and last year four new hurricane insurers came on board. Since meeting with our group, the Commissioner announced that Universal Insurance Holdings of North American was approved to buy ICAT Specialty Insurance Company, which has provided hurricane policies in Hawai`i since 2006. See coverage provided by the Pacific Business News here.
The Commissioner also reported that the Hawai`i Hurricane Relief Fund is dormant at this point, but consists of $184 million. The Fund is created from a variety of sources, including premiums, assessments, fees and taxes. Currently, there is serious discussion on whether this is the time for the legislature to raid the fund to cover the State's budget deficit.
Three bills submitted by the Insurance Division during the most recent legislative session to passed. They were:
1) HB 262 – Expands the authority of the insurance fraud investigations unit.
2) SB 892 - Authorizes the Commissioner to conduct criminal history record checks for agents seeking licenses to do business.
3) SB 92 - A cleanup bill addressing various problems in the Insurance Code.
The Commissioner is obviously well versed in national and local insurance issues. We appreciated his taking time to meet with our group.