OAIN: Arizona Rental Auto Insurance Bill Killed by House Committee

Rancho Cucamonga, USA, 03/16/2012 / SubmitMyPR /

An Arizona House committee voted 2-5 on Monday to kill a bill that could have resulted in higher premiums for drivers in the state due to a proposed shifting of liability for crash damages involving rental cars, according to OnlineAutoInsurance.com.

Coverage industry officials had testified that the bill would have hurt the average Arizonan's access to cheap auto insurance policies because of the liability shift that the legislation would have brought.

Currently, all Arizona rental agencies must buy liability insurance for their cars that provides at least $40,000 worth of damages caused by each individual driver who gets behind the wheel of a rental, which wouldn't have been changed by the bill.

What lawmakers had proposed to do was to make that coverage secondary, meaning that the personal auto liability insurance purchased by the renter for his or her own vehicle would have kicked in before the rental car agency's coverage. The rental agency's policy would only have provided compensation in the event that the renter's own policy was insufficient to cover the cost of all the damages. 

This change would have amounted to a cost shift, according to the Property Casualty Insurers Association of America (PCI), of millions of dollars.

That's because if the legislation would have gone all the way into being signed into law, the claims incurred by drivers of rental cars would have gone onto their own personal policies rather than the agency's policies.

And since claims that go onto the policies of rental vehicles are not generally lumped into the same pool as personal auto claims, this would have meant more losses to the pool of policies representing individual drivers.

Because losses would have gone up in this pool, insurers would have likely raised rates on all personal policyholders in the state.

The Arizona Senate had passed the legislation in early March on a slim margin—the vote was 16-14—but the bill is now dead, thanks to the House Banking and Insurance Committee.

Source: http://www.azleg.gov/

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