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Minutes for SB14 - Committee on Insurance

Short Title

Providing for limited lines insurance coverage of self-storage units.

Minutes Content for Tue, Mar 7, 2017

Chairperson Vickrey opened the hearing on SB 14.

Jason Thompson, Revisor of Statutes, briefed members on the bill. He said the bill provided for limited lines of insurance coverage related to the of rental self-service storage units. It authorized the commissioner of insurance to issue a limited license to a self-service storage company to act as agent for an insurer. It also set out definitions and conditions  (Attachment 1)

Representative Hawkins asked if the limited license was similar to that of other limited lines such as burial insurance. He asked if the requirements for the bill were similar to the other lines.

Mr. Thompson replied that the conferees would have that information.

Whitney Damron testified in support of the the bill. He said the Self-Storage Association had over 700 such facilities in Kansas. Similar legislation had been passed in 25 states, including Louisiana, which had virtually identical language. He said the consumer would be informed they did not have to accept coverage, or that they may already have coverage under a homeowner or other policy. In summary, he said the coverage would be beneficial for consumers and there was a market ready to meet the need (Attachment 2)

Chairperson Vickrey opened the meeting for questions.

Representative Hawkins asked what the policy would insure against.

Mr. Damron said it would insure against loss of contents stored inside.

Representative Hawkins wanted to confirm it covered fire, lightening, snow; all the basic coverage.

Mr. Damron said it would cover the contents under those conditions but it did not cover the storage facility's losses.

Representative Hawkins asked about coverage for theft.

Mr. Damron confirmed it covered theft.

Representative Hawkins commented the $5,000 coverage limit might not be enough.

Mr. Damron said if a person stored an item with significant value that person would need to check with their agent about other coverage.

Representative Hawkins asked how a person proved the value of their contents.

Mr. Damron said that would need to be worked out with the insurance company.

Representative Hawkins said he was concerned people offering coverage would have no idea how claims were handled, how to inventory and value contents or how to provide proof of the contents. He asked about training and continuing education requirements.

Representative Cox commented he worked in the self storage industry (outside of Kansas), and said if a claim was made the insurance company would be the one working with the insured. He asked Mr. Damron if there would be a conflict if a consumer had other coverage.

Mr. Damron replied it would not pose a conflict, this was optional coverage.

Representative Corbet asked what choices did a consumer have if this coverage wasn't offered.

Mr. Damron said coverage was a challenge, especially for those with no home or vehicle.

Representative Finney asked what insurance did storage facilities have for a customer's contents. She asked about a facility's coverage for theft.

Mr. Damron answered storage facility insurance covered the structure, not the customer's contents.

Representative Bishop asked how many states had passed this type of coverage. She asked if this type of coverage was new.

Mr. Damron said 25 states had adopted similar bills, including Missouri. He said the storage industry was new, about 25 years, and policies had been around for about 10 years.

Representative Bishop asked if renters' insurance would provide coverage.

Mr. Damron answered homeowner and renters' policies may have coverage for items stored in a different location and recommended people ask their agents. He added these policies may have deductibles.

Representative Bishop asked the Chairman if the insurance department had weighed in on such policies.

Mr. Shultz, Insurance Department Deputy Commissioner, was present and answered the department enforced laws the legislature passed.

Representative Elliott asked if the underwriter did due diligence on a facility's structure.

Mr. Damron said he assumed the insurance company offering the policies did due diligence and background checks as part of their underwriting process.

Representative Elliott asked if an uninsured person in a adjoining unit caused damage to the insured's contents would the damage be covered.

Mr. Damron confirmed it would.

Representative Corbet asked him to confirm the bill only applied to contents.

Mr. Damron confirmed that was correct.

Chairperson Vickrey asked if there were any proponents.

Will Larson, attorney for the Kansas Association of Insurance Agents, testified in opposition of the bill. He said they had 385 agencies and 2,400 agents licensed with the insurance department for life and property casualty. He outlined the licensing and continuing education requirements and said they were concerned about the competency of the facility and the persons offering the insurance. He worried consumers were not informed they may have coverage through other policies. They were also concerned a facility might shift liability to others. They also opposed chopping up the insurance industry by allowing more limited line products. Last, they were concerned the premiums collected were not kept in a segregated trust account. (Attachment 3)

Chairperson Vickrey opened the meeting for questions.

Representative Corbet commented that if 25 states passed similar laws there must be a need for this type of insurance.

Mr. Damron added he knew of one state where a bill was not passed but did not know the specifics as to why not.

Representative Hawkins commented the securities industries required different levels of licensing and in the insurance industry they have full and partial licenses. He said it was essentially property coverage and the department required licensing of agents who sold property coverage.

Mr. Larson said a person might not need as much training but did need more than what was in the bill.

Representative Smith asked what kind of licensing requirements were there in the other 25 states.

Mr. Larson replied he wasn't sure what was required in other states.

Representative Cox added that in other states managers were required to do the training and had guidelines.

Representative Patton asked how rental car insurance purchased at the counter was handled in Kansas.

Mr. Larson said rental car employees were not required to have a license.

Chairperson Vickrey closed the hearing on SB 14.