STAND

 

STAND. COM. REP. NO.3302

Honolulu, Hawaii

, 2002

RE: H.B. No. 1700

H.D. 1

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred H.B. No. 1700, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE POLICIES,"

begs leave to report as follows:

The purpose of this measure is to allow insurance policy advertising, information, and translation to be provided in languages other than English.

The Insurance Commissioner and State Farm testified in opposition to this measure. Your Committee received no favorable testimony and therefore held the measure.

Upon reconsideration, your Committee heard testimony relating to a proposed Senate draft that replaced the contents of this measure with language that temporarily reduces the minimum nonforfeiture interest rate for individual fixed annuity contracts from three per cent to one and one-half per cent.

State Farm Insurance Companies, Pacific Guardian Life Insurance Company, and the National Association of Insurance and Financial Advisors testified in support of the proposed draft.

The minimum nonforfeiture interest rate is the minimum interest rate guarantee that may be used in an individual fixed annuity contract to determine its cash value. This statutory rate is intended to represent the level below which interest rates are not expected to fall. The rate was established by the National Association of Insurance Commissioners (NAIC) model law in 1976 when interest rates were higher than current rates and were expected to continue at that level.

The three per cent minimum rate established in 1976 is not compatible with current economic and market conditions. Therefore, this measure seeks a temporary reduction in the rate to one and one-half per cent to provide immediate relief for the industry. Meanwhile the NAIC, which supports this change to the minimum interest rate and proposed a drop-dead date of July 1, 2004, intends to work with the industry in developing a long-term solution to the problem through its Life and Health Actuarial Task Force.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1700, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1700, H.D. 1, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection and Housing,

		____________________________ RON MENOR, Chair