Sponsor Statement for Sponsor Substitute for Senate Bill 202

"The Alaska Insurance Consumers Protection Act"

Senate Bill 202, the Alaska Insurance Consumers Protection Act, incorporates many consumer friendly reforms designed to give injured Alaskans a more even playing field when dealing with insurers.

Currently many Alaskans are not being fairly compensated by insurance companies who have skewed the current system to improperly and unfairly reduce claim payments.

Senate Bill 202 requires an insurer, within 15 days after a filed claim, to make an estimate of covered claims under the policy. The insurer has 30 days to pay this undisputed amount of the covered claim. In the event the claimant obtains a court judgment which is 10% greater than what the insurance company offered to pay, the insurer would also be required to pay certain attorney fees and actual costs incurred by the claimant. In addition to the attorney fees, the insurer would be required to pay a penalty equal to at least 20 percent of the damages awarded. This will act as a deterrent to the current epidemic of bad faith claims practice by which some insurance companies intentionally under value legitimate claims.

If a claim involving a covered loss cannot be reasonably determined within 15 days, the insurer shall make a determination within 15 days after the loss becomes determinable.

Senate Bill 202 prohibits insurers from placing restrictions or limitations on communications between claimants and service providers. These provisions are added to list of unfair claim settlement practices in existing law and would not allow an insurance carrier or repair shop to withhold information pertinent to a claim settlement. Currently many repair service providers consider themselves to be working for the insurance company and not the customer. This can prevent full and fair repairs.

In many arbitration and mediation cases, the insurance company requires the insured to pay a portion of the costs of arbitration or mediation before the arbitrator's or mediator's decision regarding assessment of costs. This type of

activity unfairly discourages claimants from pursuing arbitration. Insurance companies can intentionally make unfairly low offers knowing the cost of arbitration will make refusal by the injured person uneconomical. Senate Bill 202 ends this unfair practice and affords insured motorists the opportunity to pursue fair and equitable claims through arbitration.

Senate Bill 202 establishes that short term insurance policies shall be at least 7 days but no more than 30 days with premiums not exceeding 200% of the pro rata premium charged for longer term policies. In instances where consumers need short term insurance, they are often charged very expensive premiums for such coverage. SB 202 sets a fair and equitable limit on how much insurers can charge for such policies.

The legislation also requires insurers to provide a local or toll-free telephone number if the insurer sells automobile insurance.

Senate Bill 202 also requires an insurer, within 15 days after a filed medical claim, to make an estimate of covered claims under the policy. The insurer has 30 days to pay this undisputed amount of the covered medical claim. SB 202 imposes penalties on insurers who deny claims for medical payments under a policy and the claim is later determined to be covered. The insurance carrier would pay the actual costs, court costs and attorney fees as a penalty for initially denying the covered claim. In addition to the attorney fees, the insurer would be required to pay a penalty equal to at least 20 percent of the damages awarded.

Senate Bill 202 prohibits the current practice of many insurance companies of denying payment for necessary medical expenses until the injured party agrees to the insurance company’s terms of settlement.

Senate Bill 202 addresses and cures many of the inadequacies in our insurance laws and gives Alaskan consumers more equitable policy benefits.

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