What’ s Old is New Again: Budget Woes Continue
2016 Legislative Wrap-up Report
What’ s Old is New Again: Budget Woes Continue
F ollowing the longest Legislative Session in history last year, the 2016 edition was the shortest session in 42 years. While the last two session lengths were dramatically different, both shared one major thing in common: a massive state budget deficit. In the waning days of this session, the legislature had to address a nearly $ 400 million revenue shortfall. While there was discussion of imposing the state income tax on nonwage business income to increase revenues( the full House even held a vote on the matter), there was not sufficient support. Thus, in early May, the legislature passed a financial plan that balanced the books through account shuffling and cuts. The final budget bill redirects about $ 115 million in state sales tax intended for KDOT into the general fund, delayed payment of over $ 90 million to the state employees’ pension fund, and allowed for Governor Brownback to make additional cuts to state government agencies. Facing a pending K-12 finance lawsuit before the Kansas Supreme Court, the legislature did include a provision that eliminated the potential for the Governor to make cuts to K-12 education through allotments. Ultimately, with his allotment authority, the governor made about $ 10 million in cuts to state agencies, slashed about $ 56 million to the state’ s Medicaid program KanCare, and cut higher education by about $ 30 million.
2016 INSURANCE BILLS The requirement of K-12 schools to pool property & casualty insurance and change to minimum auto limits were the major pieces of legislation this Session. Here’ s a recap of key insurance bills:
K-12 Pooling The House introduced a bill that established a school district-funded P & C pool and mandated participation by all school districts in the pool. The bill stemmed from the Alvarez & Marsal efficiency audit report. After an initial consideration of the recommendation, the House Education Budget Committee recommended that a bill be introduced. The bill was then referred to the House Insurance and Financial Institutions Committee but a hearing was never held.
Minimum Auto Limits A bill that increases from $ 10,000 to $ 25,000 the minimum motor vehicle liability insurance policy limit for property damage passed and was approved by the Governor. The bill calls for all limits to be reviewed again in 10 years. The increased minimum limit will be effective from and after January 1, 2017.
Where You Reside The KAIA introduced a bill to clarify the definition of“ residence premises.” The bill attempted to address a problem, arising from the definition on standard Insurance Services Office homeowner forms, that has popped up some courts which have held that there is no coverage if the named insured is not residing in the house at the time of the loss. There are many situations where the named insured may not actually be residing in the house at the time of the loss. For example where the named insured moves into a nursing home, where the named insured is on military duty, during the sale of a house where the named insured moves out before then new buyer assumes ownership, etc. The bill was met with concern by carriers which were unsure of possible unintended consequences. The KAIA will work with carriers over the interim to address their concerns.
Pool Audit Bill The full House rejected a motion to pass a bill to eliminate certain pool financial examinations / audits by the Kansas Insurance Department. The bill would have eliminated provisions directing the Insurance Commissioner to conduct an examination of the affairs and financial condition of municipal group-funded liability pools and group-funded workers compensation pools every five years. Instead, under the bill, the Commissioner would have been permitted to conduct these examinations as the Commissioner deems it necessary. Citing concerns with risks associated with pools, the KAIA opposed the bill and urged the legislature to retain the Commissioner’ s independent oversight of the pools.
Affiliate Transfer of P & C Policies A bill enacting a new law to permit the transfer of insurance policies within a group of affiliated property and casualty insurance companies passed and was approved. The new law, effective July 1, 2016, would require, 30 days before the end of the existing insurance policy term, notice to the insured’ s last known address and made available to the agent of record that the insurance policy
14 KANSAS INSURANCE AGENT & BROKER | MAY- JUNE 2016 |