8.3 Hawaii Motor Vehicle Rates, Cancellation & Nonrenewal, and the Joint Underwriting Plan

8.3 Hawaii Motor Vehicle Rates, Cancellation & Nonrenewal, and the Joint Underwriting Plan

Three outline topics in the Hawaii Motor Vehicle Insurance Law concern the policy itself rather than the accident: premium determination (HRS §§ 431:10C-202, 203, 205, 207, 208), the Hawaii Joint Underwriting Plan (§§ 431:10C-401 to 412), and renewal, nonrenewal and cancellation (§§ 431:10C-109 to 114). Adjusters meet these rules when they confirm coverage on the date of loss, handle assigned claims, or answer insureds who fear that a claim will raise their premium.

Premium Determination

How Rates Are Made (§ 431:10C-202)

Motor vehicle rates are made under article 14 (rate regulation) and these additional rules:

• No price fixing. No insurer may agree, combine or conspire with another private insurer, or join any pool or trust, to fix, control or maintain motor vehicle rates. Violators and the officers and employees involved are subject to chapter 480 (antitrust) penalties. Advisory organizations that are not involved in ratemaking are excepted.
• Surcharges and credits in a rate filing must be separately identified. Only reasonable surcharges approved by the commissioner may be used. A surcharge for failing to maintain insurance is allowed only if the insured was convicted of driving without insurance within the preceding three years.
• Insurers must give the prospective insured a written explanation in easily understandable language of the reason for any surcharge or credit and how it is calculated.

The commissioner may accept reference filings from advisory organizations (manuals, classifications, territories, forms) that do not deal with rates (§ 431:10C-203).

Prohibited Rating Factors (§ 431:10C-207)

No insurer may base any standard or rating plan, directly or indirectly, on a person's:

This list is broader than in most states, which commonly allow age, sex and credit-based scores in auto rating.

Not-at-Fault Accidents (§ 431:10C-208)

No premium may be increased because of an accident in which the insured was not at fault, and such an accident may not be used in any way to affect later premium increases, including the loss of any discount. Adjusters' fault determinations therefore matter to the insured's future premium.

Review on Request (§ 431:10C-205)

A person aggrieved by how a classification, rule, rate or rating plan is applied to them may ask the commissioner in writing to review it. If there is probable cause or the complaint charges a violation, the commissioner holds a hearing and may order relief. The order is subject to judicial review under chapter 91.

Cancellation and Nonrenewal

When an Insurer May Cancel or Refuse to Renew (§ 431:10C-111)

Once issued, a motor vehicle policy (including required optional coverages) may not be cancelled or nonrenewed except when:

1. the license of the principal operator is suspended or revoked;
2. premium payments are not made after reasonable demand;
3. the nonrenewal or conditional renewal is within the limits of § 431:10C-111.5; or
4. the policy has been in effect 60 days or less, and cancellation is not based on a prohibited reason.

An insurer may also refuse to renew if the commissioner finds that writing more policies would impair its financial soundness, or if the insurer stops writing new policies of any kind in Hawaii. Optional coverage above the required amounts may be nonrenewed for drivers in the assigned-risk or serious-conviction classes.

Prohibited reasons: no insurer may refuse to continue a policy based solely on race, creed, ethnic extraction, age, sex, length of driving experience, marital status, residence, physical handicap, or the insured's election of any required or optional coverage or deductible. If an insured alleges such a reason, the burden of proof is on the insurer.

Notice (§ 431:10C-112)

Cancellation or nonrenewal is not valid unless the mailing is supported by a certificate of mailing validated by the U.S. Postal Service. If the insurer offered in writing to renew at least 30 days before expiration and the insured did not accept, the policy lapses at expiration, and the cancellation limits do not apply. Acceptance is effective on the date it is mailed.

The insurer's notice must state the reason for cancellation and explain the consequences of not returning the identification card (§ 431:10C-109(b)). A producer who violates the rejection and placement rule, or an insurer that knowingly violates the cancellation rules, is subject to a civil penalty of up to $1,000 per violation (§ 431:10C-113).

Identification Card Return and Refunds (§§ 431:10C-109, 10C-111(e))

• After cancellation, the insured has 30 days to return the insurance identification card, or an affidavit that it was lost or stolen.
• If the card is not returned, the insurer may withhold unearned premium until it is (premiums are treated as earned until then). If premium was unpaid, the insurer may sue for three times the unpaid premium, plus attorney's fees.
• Within 15 days after cancellation and return of the card or affidavit, the insurer must refund the pro rata unearned premium.

Owner's Duties When Insurance Ends (§ 431:10C-114)

An owner who fails to maintain the required insurance must immediately surrender the registration certificate and license plates to the county director of finance and may not operate the vehicle until it is insured again.

The Hawaii Joint Underwriting Plan (JUP)

Membership and Administration (§§ 431:10C-401 to 405)

• The JUP consists of all insurers authorized to write motor vehicle insurance in Hawaii, except those writing exclusively under § 431:10C-106. Membership is a condition of licensure.
• The commissioner maintains a JUP bureau in the Insurance Division. It receives, assigns and supervises the servicing of all applications for JUP coverage and all assigned claims, and notifies applicants and claimants of the assigned insurer.
• The assigned insurer has the rights and obligations of an insurer that issued a complying policy, or of a self-insurer or insurer that cannot pay.
• Costs are allocated fairly and equitably among plan members.
• A board of governors appointed by the commissioner advises on the bureau and plan. It has four members from nationally organized insurers or their domestic affiliates, one producer representative, and two members representing the plan's eligible classes. The board meets at least quarterly.

Access Through Producers (§ 431:10C-110)

When a producer (or an insurer's branch office) rejects an application for motor vehicle insurance or optional coverage, it must immediately offer to place the requested coverage with the JUP.

Who the JUP Covers (§ 431:10C-407)

The commissioner sets the classes. The plan must provide PIP and bodily injury and property damage liability coverage to classes that include:

• vehicles owned by licensed assigned risk drivers;
• vehicles owned by licensed drivers convicted within the preceding 36 months of heedless and careless driving, driving while license suspended or revoked, leaving the scene of an accident, vehicular manslaughter, or operating a vehicle under the influence of an intoxicant;
• first-class commercial uses (transporting passengers for hire or gratuity); and
• licensed public assistance drivers, foster care drivers, and physically handicapped drivers.

JUP Rates (§§ 431:10C-409, 10C-410)

The commissioner sets JUP rates, after consulting the board and holding a public hearing, at least annually. Rates must not be excessive, inadequate or unfairly discriminatory, and they may use classifications, territories and surcharges. They may not use the § 431:10C-207 prohibited factors. Special rules apply:

• Public assistance and foster care drivers pay no premium for the mandatory minimum PIP, bodily injury and property damage coverages. PIP medical benefits under that no-cost policy do not apply to a person receiving public assistance benefits (§ 431:10C-103.5(b)), because those persons have medical coverage through public assistance.
• Physically handicapped drivers, including those with hearing limitations, may not be charged more than a comparable driver without the limitation, except under an applicable surcharge standard.
• The commissioner may adjust rates for excess premiums and order refunds to a class (§ 431:10C-412).

Assigned Claims (§ 431:10C-408)

A person who sustains accidental harm may obtain motor vehicle insurance benefits through the plan when:

• no liability or uninsured motorist insurance applies to the accident;
• no applicable insurance can be identified; or
• the only identifiable insurance will not be paid in full because of an insurer's or self-insurer's financial inability.

Disqualified are persons engaged in criminal conduct, and the owner or registrant of an uninsured vehicle involved, or an operator or passenger who had reason to believe the vehicle was uninsured. An eligible claimant receives full PIP as if insured (except motorcycle and motor scooter accidents) and the rights of claim against the assigned insurer under the mandatory liability coverages.