RELATING TO PROPERTY INSURANCE.

SB2964

THE SENATE

S.B. NO.

2964

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to property insurance
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

����
SECTION 1.
�
The
legislature finds that widespread underinsurance slows community disaster
recovery and increases the cost of aid provided by nonprofit and governmental
entities.
�
The legislature further finds
that the 2023 Maui wildfires revealed that many homeowners were severely
underinsured, leaving many affected residents unable to rebuild and forcing
them into debt or permanent displacement.

����
The legislature recognizes that Hawaii
faces rapidly escalating rebuilding costs due to the State's geographic
isolation and reliance on imported materials, high labor costs, limited
workforce availability, and lengthy permitting and rebuilding timelines.
�
These factors cause replacement costs to rise
quickly, often outpacing policy limits if coverage is not reviewed regularly.

����
The legislature notes that most homeowners
do not receive annual updates about whether their coverage matches the current
cost of rebuilding.
�
Homeowners often
discover that they are underinsured only after a catastrophic loss.
�
This lack of transparency leaves
policyholders vulnerable and less likely to recover fully following a disaster.

����
The legislature finds that other states
offer models for property insurance reform.
�

Colorado requires insurers to disclose construction cost estimates at
each renewal; to offer enhanced coverage, such as extended replacement cost and
law and ordinance coverage; and to consider homeowner-provided estimates.
�
California requires insurers providing
replacement cost estimates to update their data annually and to include in the
estimates detailed cost components such as labor, permits, demolition, and
debris removal.

����
The legislature finds that Hawaii does not
require annual replacement cost disclosures or offers to purchase full
replacement coverage.
�
Without these
protections, homeowners may unknowingly remain underinsured, post-disaster
rebuilding delays may increase, and nonprofit and government disaster relief
efforts may face higher costs and longer timelines.

����
Accordingly, the purpose of this Act is to
support faster and more resilient community recovery after disasters.
�
Specifically, this Act requires insurers to:

����
(1)
�
Give policyholders accurate, current
information about dwelling rebuilding costs; and

����
(2)
�
Annually disclose to policyholders whether
rebuilding costs are fully covered, and if not, to offer full coverage.

����
SECTION
2.
�
Chapter 431, Hawaii Revised Statutes,
is amended by adding a new part to article 10E to be appropriately designated
and to read as follows:

"
PART
��
.
�
REPLACEMENT
COST DISCLOSURE AND INSURANCE TO VALUE

����
�431:10E-A
�
Definitions.

�
As used in this part:

����
"Dwelling
coverage limit" means the maximum amount the homeowners insurer will pay
to repair, rebuild, or replace the home's physical structure and attached items
after a covered loss.

����
"Homeowners
insurance" has the same meaning as in section 431:14-110.8.

����
"Homeowners
insurer" has the same meaning as in section 431:14-110.8.

����
"Policyholder"
means the person named as the insured under the homeowners insurance.

����
"Replacement
cost" means the amount necessary to repair, rebuild, or replace damaged
property with materials of like kind and quality, without deduction for
depreciation.
�

����
�431:10E-B

�
Annual disclosure requirements.
�
(a)
�
At least once every twelve months and coinciding
with policy renewal, each homeowners insurer shall provide the policyholder
with a written replacement cost estimate prepared in accordance with section
431:10E-D that clearly states whether the current dwelling coverage limit will
cover the replacement cost.

����
(b)
�
The disclosure shall be titled
"Replacement Cost Disclosure" and shall be delivered:

����
(1)
�
In paper or electronic format; and

����
(2)
�
Separately from the policy renewal
package.

����
�431:10E-C
�
Offer to insure to replacement
cost.
�
(a)
�
If the dwelling coverage limit is less than the
replacement cost, the homeowners insurer shall offer the policyholder the
option to purchase additional coverage under the homeowners insurance to increase
the dwelling coverage limit to equal the replacement cost.

����
(b)
�
The offer shall:

����
(1)
�
Include the premium for the increased
coverage;

����
(2)
�
Remain open for thirty days; and

����
(3)
�
Be renewed annually.

����
�431:10E-D
�
Requirements for replacement cost
estimates.
�
Any replacement cost
estimate provided under this part shall:

����
(1)
�
Be specific to the insured property;

����
(2)
�
Be based on current local labor and
material costs;

����
(3)
�
Include all components of the
replacement cost, including the cost of:

���������
(A)
�
Labor and materials;

���������
(B)
�
Overhead and profit;

���������
(C)
�
Demolition and debris removal;

���������
(D)
�
Architectural and engineering fees;

���������
(E)
�
Permits and inspections; and

���������
(F)
�
Other necessary costs;

����
(4)
�
Take
into consideration any estimate from a contractor or an architect submitted by
the policyholder; and

����
(5)
�
Be updated annually to reflect current
costs.

����
�431:10E-E
�
Recordkeeping and transparency.
�
For at least five years after the
homeowners insurance term has expired,

homeowners insurers shall
maintain documentation that supports each replacement cost estimate and notes the
policyholder's decision to accept or decline replacement cost coverage.

����
�431:10E-F
�
Enforcement.
�
Failure to comply with this part shall
constitute an unfair or deceptive act or practice in the business of insurance under
section 431:13-103."

����
SECTION

3
.
�
Section
431:13-103, Hawaii Revised Statutes, is amended by amending subsection (a) to
read as follows:

����
"
(a)
�
The following are
defined as unfair methods of competition and unfair or deceptive acts or
practices in the business of insurance:

����
(1)
�
Misrepresentations and false
advertising of insurance policies.
�

Making, issuing, circulating, or causing to be made, issued, or
circulated, any estimate, illustration, circular, statement, sales
presentation, omission, or comparison that:

���������
(A)
�
Misrepresents the benefits, advantages,
conditions, or terms of any insurance policy;

���������
(B)
�
Misrepresents the
dividends or share of the surplus to be received on any insurance policy;

���������
(C)
�
Makes any false
or misleading statement as to the dividends or share of surplus previously paid
on any insurance policy;

���������
(D)
�
Is misleading or
is a misrepresentation as to the financial condition of any insurer, or as to
the legal reserve system upon which any life insurer operates;

���������
(E)
�
Uses any name or
title of any insurance policy or class of insurance policies misrepresenting
the true nature thereof;

���������
(F)
�
Is a
misrepresentation for the purpose of inducing or tending to induce the lapse,
forfeiture, exchange, conversion, or surrender of any insurance policy;

���������
(G)
�
Is a
misrepresentation for the purpose of effecting a pledge or assignment of or
effecting a loan against any insurance policy;

���������
(H)
�
Misrepresents any
insurance policy as being shares of stock;

���������
(I)
�
Publishes or
advertises the assets of any insurer without publishing or advertising with
equal conspicuousness the liabilities of the insurer, both as shown by its last
annual statement; or

���������
(J)
�
Publishes or
advertises the capital of any insurer without stating specifically the amount
of paid-in and subscribed capital;

����
(2)
�
False information and advertising
generally.
�
Making, publishing,
disseminating, circulating, or placing before the public, or causing, directly
or indirectly, to be made, published, disseminated, circulated, or placed
before the public, in a newspaper, magazine, or other publication, or in the
form of a notice, circular, pamphlet, letter, or poster, or over any radio or
television station, or in any other way, an advertisement, announcement, or
statement containing any assertion, representation, or statement with respect
to the business of insurance or with respect to any person in the conduct of
the person's insurance business, [
which
]
that
is untrue,
deceptive, or misleading;

����
(3)
�
Defamation.
�
Making, publishing, disseminating, or
circulating, directly or indirectly, or aiding, abetting, or encouraging the
making, publishing, disseminating, or circulating of any oral or written
statement or any pamphlet, circular, article, or literature [
which
]
that

is false, or maliciously critical of or derogatory to the financial condition
of an insurer, and [
which
]
that
is calculated to injure any
person engaged in the business of insurance;

����
(4)
�
Boycott, coercion, and
intimidation.

���������
(A)
�
Entering into any agreement to commit,
or by any action committing, any act of boycott, coercion, or intimidation
resulting in or tending to result in unreasonable restraint of, or monopoly in,
the business of insurance; or

���������
(B)
�
Entering into any agreement on the
condition, agreement, or understanding that a policy will not be issued or
renewed unless the prospective insured contracts for another class or an
additional policy of the same class of insurance with the same insurer;

����
(5)
�
False financial statements.

���������
(A)
�
Knowingly filing with any supervisory
or other public official, or knowingly making, publishing, disseminating,
circulating, or delivering to any person, or placing before the public, or
knowingly causing, directly or indirectly, to be made, published, disseminated,
circulated, delivered to any person, or placed before the public, any false
statement of a material fact as to the financial condition of an insurer; or

���������
(B)
�
Knowingly making any false entry of a
material fact in any book, report, or statement of any insurer with intent to
deceive any agent or examiner lawfully appointed to examine into its condition
or into any of its affairs, or any public official to whom the insurer is
required by law to report, or who has authority by law to examine into its
condition or into any of its affairs, or, with like intent, knowingly omitting
to make a true entry of any material fact pertaining to the business of the
insurer in any book, report, or statement of the insurer;

����
(6)
�
Stock operations and advisory board
contracts.
�
Issuing or delivering or
permitting agents, officers, or employees to issue or deliver, agency company
stock or other capital stock, or benefit certificates or shares in any
common-law corporation, or securities or any special or advisory board
contracts or other contracts of any kind promising returns and profits as an
inducement to insurance;

����
(7)
�
Unfair discrimination.

���������
(A)
�
Making or permitting any unfair
discrimination between individuals of the same class and equal expectation of
life in the rates charged for any policy of life insurance or annuity contract
or in the dividends or other benefits payable thereon, or in any other of the
terms and conditions of the contract;

���������
(B)
�
Making or permitting any unfair
discrimination in favor of particular individuals or persons, or between
insureds or subjects of insurance having substantially like insuring, risk, and
exposure factors, or expense elements, in the terms or conditions of any
insurance contract, or in the rate or amount of premium charge therefor, or in
the benefits payable or in any other rights or privilege accruing thereunder;

���������
(C)
�
Making or
permitting any unfair discrimination between individuals or risks of the same
class and of essentially the same hazards by refusing to issue, refusing to
renew, canceling, or limiting the amount of insurance coverage on a property or
casualty risk because of the geographic location of the risk, unless:

��������������
(i)
�
The refusal, cancellation, or
limitation is for a business purpose which is not a mere pretext for unfair
discrimination; or

�������������
(ii)
�
The refusal, cancellation, or
limitation is required by law or regulatory mandate;

���������
(D)
�
Making or permitting any unfair
discrimination between individuals or risks of the same class and of
essentially the same hazards by refusing to issue, refusing to renew,
canceling, or limiting the amount of insurance coverage on a residential
property risk, or the personal property contained therein, because of the age
of the residential property, unless:

��������������
(i)
�
The refusal, cancellation, or
limitation is for a business purpose [
which
]
that
is not a mere
pretext for unfair discrimination; or

�������������
(ii)
�
The refusal, cancellation, or
limitation is required by law or regulatory mandate;

���������
(E)
�
Refusing to insure, refusing to
continue to insure, or limiting the amount of coverage available to an
individual because of the sex or marital status of the individual; however,
nothing in this subsection shall prohibit an insurer from taking marital status
into account for the purpose of defining persons eligible for dependent
benefits;

����
����
(F)
�
Terminating or modifying coverage, or refusing
to issue or renew any property or casualty policy or contract of insurance
solely because the applicant or insured or any employee of either is mentally
or physically impaired; provided that this subparagraph shall not apply to
accident and health or sickness insurance sold by a casualty insurer; provided
further that this subparagraph shall not be interpreted to modify any other
provision of law relating to the termination, modification, issuance, or renewal
of any insurance policy or contract;

���������
(G)
�
Refusing to
insure, refusing to continue to insure, or limiting the amount of coverage
available to an individual based solely upon the individual's having taken a
human immunodeficiency virus (HIV) test prior to applying for insurance; or

���������
(H)
�
Refusing to
insure, refusing to continue to insure, or limiting the amount of coverage
available to an individual because the individual refuses to consent to the
release of information [
which
]
that
is confidential as provided
in section 325‑101; provided that nothing in this subparagraph shall
prohibit an insurer from obtaining and using the results of a test satisfying
the requirements of the commissioner, [
which
]
that
was taken with
the consent of an applicant for insurance; provided further that any applicant
for insurance who is tested for HIV infection shall be afforded the opportunity
to obtain the test results, within a reasonable time after being tested, and
that the confidentiality of the test results shall be maintained as provided by
section 325‑101;

����
(8)
�
Rebates.
�
Except as otherwise expressly provided by
law:

���������
(A)
�
Knowingly permitting or offering to
make or making any contract of insurance, or agreement as to the contract other
than as plainly expressed in the contract, or paying or allowing, or giving or
offering to pay, allow, or give, directly or indirectly, as inducement to the
insurance, any rebate of premiums payable on the contract, or any special favor
or advantage in the dividends or other benefits, or any valuable consideration
or inducement not specified in the contract; or

���������
(B)
�
Giving, selling, or purchasing, or
offering to give, sell, or purchase as inducement to the insurance or in
connection therewith, any stocks, bonds, or other securities of any insurance
company or other corporation, association, or partnership, or any dividends or
profits accrued thereon, or anything of value not specified in the contract;

����
(9)
�
Nothing in paragraph (7) or (8) shall
be construed as including within the definition of discrimination or rebates
any of the following practices:

���������
(A)
�
In the case of any life insurance
policy or annuity contract, paying bonuses to policyholders or otherwise
abating their premiums in whole or in part out of surplus accumulated from
nonparticipating insurance; provided that any bonus or abatement of premiums
shall be fair and equitable to policyholders and in the best interests of the
insurer and its policyholders;

���������
(B)
�
In the case of life insurance policies
issued on the industrial debit plan, making allowance to policyholders who have
continuously for a specified period made premium payments directly to an office
of the insurer in an amount [
which
]
that
fairly represents the
saving in collection expense;

���������
(C)
�
[
Readjustment of
]
Readjusting

the rate of premium for a group insurance policy based on the loss or expense
experience thereunder, at the end of the first or any subsequent policy year of
insurance thereunder, which may be made retroactive only for the policy year;

���������
(D)
�
In the case of any contract of
insurance, [
the distribution of
]
distributing
savings, earnings,
or surplus equitably among a class of policyholders, all in accordance with
this article; and

���������
(E)
�
[
A
]
Offering a
reward under a wellness program
established under a health care plan that favors an individual if the wellness
program meets the following requirements:

��������������
(i)
�
The wellness program is reasonably
designed to promote health or prevent disease;

�������������
(ii)
�
An individual has an opportunity to
qualify for the reward at least once a year;

������������
(iii)
�
The reward is available for all
similarly situated individuals;

�������������
(iv)
�
The wellness program has alternative
standards for individuals who are unable to obtain the reward because of a
health factor;

��������������
(v)
�
Alternative standards are available for
an individual who is unable to participate in a reward program because of a
health condition;

�������������
(vi)
�
The insurer provides information
explaining the standard for achieving the reward and discloses the alternative
standards; and

������������
(vii)
�
The total rewards for all wellness
programs under the health care plan do not exceed twenty per cent of the cost
of coverage;

���
(10)
�
Refusing to provide or limiting
coverage available to an individual because the individual may have a third‑party
claim for recovery of damages; provided that:

���������
(A)
�
Where damages are recovered by judgment
or settlement of a third-party claim, reimbursement of past benefits paid shall
be allowed pursuant to section 663-10;

���������
(B)
�
This paragraph shall not apply to
entities licensed under chapter 386 or 431:10C; and

���������
(C)
�
For entities licensed under chapter 432
or 432D:

��������������
(i)
�
It shall not be a violation of this
section to refuse to provide or limit coverage available to an individual
because the entity determines that the individual reasonably appears to have
coverage available under chapter 386 or 431:10C; and

�������������
(ii)
�
Payment of
claims to an individual who may have a third-party claim for recovery of
damages may be conditioned upon the individual first signing and submitting to
the entity documents to secure the lien and reimbursement rights of the entity
and providing information reasonably related to the entity's investigation of
its liability for coverage.

��������������
Any
individual who knows or reasonably should know that the individual may have a
third-party claim for recovery of damages and who fails to provide timely
notice of the potential claim to the entity, shall be deemed to have waived the
prohibition of this paragraph against refusal or limitation of coverage.
�
"Third-party claim" for purposes of
this paragraph means any tort claim for monetary recovery or damages that the
individual has against any person, entity, or insurer, other than the entity
licensed under chapter 432 or 432D;

���
(11)
�
Unfair claim settlement practices.
�
Committing or performing with such frequency
as to indicate a general business practice any of the following:

���������
(A)
�
Misrepresenting pertinent facts or
insurance policy provisions relating to coverages at issue;

���������
(B)
�
With respect to claims arising under
its policies, failing to respond with reasonable promptness, in no case more
than fifteen working days, to communications received from:

��������������
(i)
�
The insurer's policyholder;

�������������
(ii)
�
Any other
persons, including the commissioner; or

������������
(iii)
�
The insurer
of a person involved in an incident in which the insurer's policyholder is also
involved.

��������������
The
response shall be more than an acknowledgment that such person's communication
has been received and shall adequately address the concerns stated in the
communication;

���������
(C)
�
Failing to adopt
and implement reasonable standards for the prompt investigation of claims
arising under insurance policies;

���������
(D)
�
Refusing to pay
claims without conducting a reasonable investigation based upon all available
information;

���������
(E)
�
Failing to affirm
or deny coverage of claims within a reasonable time after proof of loss
statements have been completed;

���������
(F)
�
Failing to offer
payment within thirty calendar days of affirmation of liability, if the amount
of the claim has been determined and is not in dispute;

���������
(G)
�
Failing to
provide the insured, or when applicable the insured's beneficiary, with a
reasonable written explanation for any delay, on every claim remaining
unresolved for thirty calendar days from the date it was reported;

���������
(H)
�
Not attempting in
good faith to effectuate prompt, fair, and equitable settlements of claims in
which liability has become reasonably clear;

���������
(I)
�
Compelling
insureds to institute litigation to recover amounts due under an insurance
policy by offering substantially less than the amounts ultimately recovered in
actions brought by the insureds;

���������
(J)
�
Attempting to
settle a claim for less than the amount to which a reasonable person would have
believed the person was entitled by reference to written or printed advertising
material accompanying or made part of an application;

���������
(K)
�
Attempting to
settle claims on the basis of an application that was altered without notice,
knowledge, or consent of the insured;

���������
(L)
�
Making claims
payments to insureds or beneficiaries not accompanied by a statement setting
forth the coverage under which the payments are being made;

���������
(M)
�
Making known to
insureds or claimants a policy of appealing from arbitration awards in favor of
insureds or claimants for the purpose of compelling them to accept settlements
or compromises less than the amount awarded in arbitration;

���������
(N)
�
Delaying the
investigation or payment of claims by requiring an insured, claimant, or the
physician or advanced practice registered nurse of either to submit a
preliminary claim report and then requiring the subsequent submission of formal
proof of loss forms,
if
both [
of which
] submissions contain
substantially the same information;

���������
(O)
�
Failing to
promptly settle claims, where liability has become reasonably clear, under one
portion of the insurance policy coverage to influence settlements under other
portions of the insurance policy coverage;

���������
(P)
�
Failing to
promptly provide a reasonable explanation of the basis in the insurance policy
in relation to the facts or applicable law for denial of a claim or for the
offer of a compromise settlement; and

���������
(Q)
�
Indicating to the
insured on any payment draft, check, or in any accompanying letter that the
payment is "final" or is "a release" of any claim if
additional benefits relating to the claim are probable under coverages afforded
by the policy; unless the policy limit has been paid or there is a bona fide
dispute over either the coverage or the amount payable under the policy;

���
(12)
�
Failure to maintain complaint handling
procedures.
�
[
Failure of any insurer
]

Failing
to maintain a complete record of all the complaints [
that it
has
] received since the date of [
its
]
the
last examination
under section 431:2-302.
�
This record
shall indicate the total number of complaints, their classification by line of
insurance, the nature of each complaint, the disposition of the complaints, and
the time it took to process each complaint.
�

For purposes of this section, "complaint" means any written
communication primarily expressing a grievance;

���
(13)
�
Misrepresentation in insurance
applications.
�
Making false or fraudulent
statements or representations on or relative to an application for an insurance
policy, for the purpose of obtaining a fee, commission, money, or other benefit
from any insurer, producer, or individual; [
and
]

���
(14)
�
Failure to
obtain information.
�
[
Failure
]
In
the case
of any insurance producer, or an insurer where no producer is
involved,
failing
to comply with section 431:10D-623(a), (b), or (c) by making
reasonable efforts to obtain information about a consumer before making a
recommendation to the consumer to purchase or exchange an annuity[
.
]
;
and

���
(15)
�
Failure to
disclose replacement cost or offer to insure to value.
�
In the case of any homeowners insurer, failing
to comply with part
����
of article 10E
of chapter 431.
"

����
SECTION
4.
�
In codifying the new sections added
by section 2 of this Act, the revisor of statutes shall substitute
appropriate section numbers for the letters used in designating the new
sections in this Act.

����
SECTION 5.
�

Statutory material to be repealed is bracketed and stricken.
�
New statutory material is underscored.

����
SECTION
6.
�
This Act shall take effect upon its
approval.

INTRODUCED
BY:

_____________________________

Report Title:

Homeowners
Insurance; Underinsurance; Replacement Cost Value; Mandatory Disclosure; Offer
to Insure to Value; Record Keeping

Description:

Requires homeowners
insurers to provide policyholders with annual disclosures of replacement cost
value and the sufficiency of policyholder's coverage.
�
Requires homeowners insurers to offer annually
to policyholders increased coverage if the property is underinsured.
�
Requires homeowners insurers to maintain
records of disclosures and offers for 5 years.
�
Provides that failure to comply constitutes an
unfair or deceptive act or practice in the business of insurance.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.