In its report "How to Modernize and Improve the System of Insurance Regulation in the United States," the Federal Insurance Office (FIO) recommended the development of personal auto insurance policies for U.S. military personnel that would be enforceable across state lines. The FIO suggested that a common policy form could be adopted so that a transfer to a base in another state would not require a service member to obtain a new auto policy.
On May 19, 2014, Rep. Ed Royce (R-CA) and Rep. Tammy Duckworth (D-IL) introduced H.R. 4669, the "Servicemembers Insurance Relief Act of 2014" (Act), which would permit service members and members of their household to maintain their current residence for purposes of auto insurance when they move temporarily to comply with government orders. As a result, service members could keep their auto policy when they are transferred to another state. The FIO would play an instrumental role in implementing the legislation and certain state laws would be pre-empted.
The bill tasks the FIO with developing a "standard servicemembers' insurance choice notice" that insurance companies would provide to service members who notify their insurer of a temporary move in compliance with a temporary duty or a permanent change of station. The FIO would follow federal rulemaking procedures in adopting the notice and the standards for its delivery. The notice is to inform service members:
- Of their right to continue an existing auto insurance policy (insurers could make adjustments only with respect to location risk factors).
- That the insurer will provide information about other coverage options available as a result of the move.
- That the use of standard language requires no alterations or additions for an insurer providing the notice to be fully compliant with the Act.
An insurance company would not be required to determine whether a person who provides notice is actually a service member, or continue to provide coverage to a member who provides notice of a move. No penalties could be imposed upon a service member or member of his or her household solely based upon a service member's decision to maintain or not maintain a policy. Also, the state in which the policy was issued or renewed would retain the authority to examine and enforce an insurer's compliance with the Act.
The bill would pre-empt any state or local laws that:
- Requires a service member or member of their household to change auto insurance policies.
- Assert control over the regulation of an insurance policy that was not issued or renewed in such state.
- With respect to proof of insurance, prohibits the electronic delivery of insurance documents.
The legislation will not impact requirements that service members and members of their households comply with local financial responsibility requirements.