Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 1129
                                     S.D. 2
                                     H.D. 1

Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Consumer Protection and Commerce, to which
was referred S.B. No. 1129, S.D. 2, entitled: 


begs leave to report as follows:

     The purpose of this bill is to:

     (1)  Prescribe continuing education requirements for those
          working in the insurance industry and licensed by the

     (2)  Support this continuing education program through
          increased insurance licensing and other fees that are
          to be paid into a newly established Insurance Licensing
          Administration (ILA) special fund, to be used to
          administer the continuing education program; and

     (3)  Raise all fees required by section 431:7-101, Hawaii
          Revised Statutes (HRS), by 50 percent.

     Your Committee received testimony supporting this measure
from State Farm, and from the Hawaii State Association of Life
Underwriters (HSALU), who testified that the measure would
improve the professional competency of Hawaii's insurance agents
and protect consumers.  The Hawaii Independent Insurance Agents
Association submitted testimony in support of the idea of
continuing education and stating a need for legislation enabling
recognition of Hawaii's insurance licensing program and
continuing education courses by other states.

                                 STAND. COM. REP. NO. 1431
                                 Page 2

     Atlas Insurance Agency (AIA) testified in opposition to the
measure, stating that as an advocate for continuing education it
among other things, provides financial support to its agents for
the purpose of maintaining and increasing their professional
competence.  AIA stated that in this troubled economy, a
grandfather clause exempting currently licensed agents from
mandatory continuing education would better satisfy concerns
regarding reciprocity and recognition of state licenses in other

     The Department of Commerce and Consumer Affairs (DCCA)
testified in support of the bill, and also requested that
provisions be added to allow the Insurance Division to become
administratively self-sufficient through the consolidation of
most of its funds into a single special fund.

     Hawaii Employers Mutual Insurance Company (HEMIC), a newly
formed insurance company scheduled to become a fully fledged
insurer subject to the full panoply of state regulations on
January 1, 2008, requested that provisions be added to the bill
to exempt HEMIC from assessments imposed by the Workers'
Compensation Special Compensation Fund (SCF), and based on its
yearly total workers compensation premiums.  HEMIC testified that
this exemption would be limited to the first $25,000,000 of
premiums in any year, would allow HEMIC credit for the nearly
$2,000,000 already paid into the SCF, and would continue until
January 1, 2008.  HEMIC stated that the purpose of the exemption
is to allow HEMIC to build surplus and establish a solid
financial base, so that it may perform its primary mission of
stabilizing the workers' compensation insurance marketplace.  The
exemption would recognize the adverse impact that SCF assessments
would have given HEMIC's formative status as an insurance
company, and that the liabilities currently being paid by the SCF
were incurred before HEMIC's existence.

     The Department of Budget and Finance commented on this bill.

     As requested by the HSALU, and to address concerns regarding
state regulation without industry input, your Committee
recommends to the Insurance Commissioner that the following
organizations be consulted on the scope and nature of courses,
providers, and credits under the continuing education program
proposed in this measure:  Hawaii Chapter of Financial Service
Professionals, Chartered Property and Casualty Underwriters,
Hawaii State Association of Life Underwriters, Hawaii Independent
Insurance Agents Association, State Farm Insurance Companies, and
the Hawaii Insurers Council.

                                 STAND. COM. REP. NO. 1431
                                 Page 3

     Your Committee has amended this bill as suggested by AIA,
and for purposes of further discussion, by amending the
continuing education provisions of this bill to incorporate a
grandfather clause.  Your Committee has also made technical
nonsubstantive amendments to this part of the bill.

     In addition, your Committee has also adopted the amendments
proposed by DCCA in Part II of this bill, and those requested by
HEMIC, in Part III.  As amended, this bill in:

     (1)  Part II, establishes an Insurance Regulation Fund (IRF)
          into which all assessments, fees, fines, and other
          moneys collected by DCCA under Title 24, (Insurance),
          HRS, except for those paid into the Commissioner's
          Education and Training Fund, and Drivers Education Fund
          Underwriters Fee, shall be paid.  Moneys in the IRF
          shall be used by DCCA to administer Title 24; and

     (2)  Part III, provides HEMIC with an exemption from levy
          under section 386-153, HRS.

     To facilitate further discussion of the various proposals in
this bill, your Committee has left the effective date of this
bill blank.

     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 1129, S.D. 2, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as S.B. No. 1129, S.D. 2, H.D. 1, and be referred to the
Committee on Finance.

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

                                   RON MENOR, Chair