CSSB 104(L&C): "An Act relating to regulation and examination of insurers and insurance agents; relating to kinds of insurance; relating to payment of insurance taxes and to required insurance reserves; relating to insurance policies; relating to regulation of capital, surplus, and investments by insurers; relating to hospital and medical service corporations; and providing for an effective date."
00CS FOR SENATE BILL NO. 104(L&C) 01 "An Act relating to regulation and examination of insurers and insurance agents; 02 relating to kinds of insurance; relating to payment of insurance taxes and to 03 required insurance reserves; relating to insurance policies; relating to regulation 04 of capital, surplus, and investments by insurers; relating to hospital and medical 05 service corporations; and providing for an effective date." 06 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 07 * Section 1. AS 21.06.030 is amended by adding a new subsection to read: 08 (h) A volunteer member of an advisory committee who has been appointed by 09 the director under a provision of this title to assist and advise the director on issues or 10 matters concerning a specific area of insurance is not entitled to payment of per diem 11 or travel expenses authorized under AS 39.20.180. 12 * Sec. 2. AS 21.06.110 is amended to read: 13 Sec. 21.06.110. Director's annual report. As early in each calendar year as 14 is reasonably possible, the director shall prepare and deliver an annual report to the
01 commissioner, who shall notify the legislature that the report is available, showing, 02 with respect to the preceding calendar year, 03 (1) a list of the authorized insurers transacting insurance in this state, 04 with a summary of their financial statement as the director considers appropriate; 05 (2) the name of each insurer whose certificate of authority was 06 surrendered, suspended, or revoked [BUSINESS WAS CLOSED] during the year 07 and [,] the cause of surrender, suspension, or revocation [THE CLOSING, AND 08 THE AMOUNT OF ASCERTAINABLE ASSETS AND LIABILITIES OF EACH 09 CLOSED BUSINESS]; 10 (3) the name of each insurer authorized to do business in this state 11 against which delinquency or similar proceedings were instituted [,] and, if against an 12 insurer domiciled in this state, a concise statement of the facts with respect to each 13 proceeding and its present status; 14 (4) a statement in regard to examination of rating organizations, 15 advisory organizations, joint underwriters, and joint reinsurers as required by 16 AS 21.39.120; 17 (5) the receipt and expenses of the division for the year; 18 (6) recommendations of the director as to amendments or 19 supplementation of laws affecting insurance [,] or the office of director; 20 (7) other pertinent information and matters the director considers 21 proper. 22 * Sec. 3. AS 21.06.160(a) is amended to read: 23 (a) Each person examined, other than [AS TO] examinations under 24 AS 21.06.130, shall pay a reasonable rate calculated on [ALL THE COSTS OF, 25 AND EXPENSES INCURRED BY DIVISION STAFF EXAMINERS, INCLUDING] 26 salary, [AND] benefit costs, and estimated division overhead for time spent directly 27 or indirectly related to the examination. Each person examined, other than 28 examinations under AS 21.06.130, shall pay actual out-of-pocket business 29 expenses, including travel expenses, incurred by division staff examiners [,] and 30 shall pay the compensation of a contract examiner, to be set at a reasonable customary 31 rate, for conducting the examination [,] upon presentation of a detailed account of the
01 charges and expenses by the director or under an order of the director. The 02 accounting may either be presented periodically during the course of the examination 03 or at the termination of the examination. A person may not pay and an examiner may 04 not accept additional compensation for an examination. 05 * Sec. 4. AS 21.09.210(b) is amended to read: 06 (b) Each insurer, and each formerly authorized insurer with respect to 07 premiums received while an authorized insurer in this state, shall pay a tax on the total 08 direct premium income received during the year ending on the preceding December 09 31 and paid for the insurance of property or risks resident or located in the state, other 10 than wet marine and transportation insurance, after deducting from the total direct 11 premium income the applicable cancellations, returned premiums, the unabsorbed 12 portion of any deposit premium, all policy dividends, unabsorbed premiums refunded 13 to policyholders, refunds, savings, savings coupons, and other similar returns paid or 14 credited to policyholders with respect to their policies. No deductions may be made 15 of cash surrender value of policies. Considerations received on annuity contracts are 16 not included in the direct premium income and are not subject to tax. The tax shall be 17 paid to the director at least annually but not more often than once each quarter on 18 the dates specified by the director. The method of payment must be by the 19 electronic or other payment method specified by the director. The tax [OR 20 BEFORE MARCH 1, AND] is computed at the rate of 21 (1) for domestic and foreign insurers, except hospital and medical 22 service corporations, 2.7 percent; 23 (2) for hospital and medical service corporations, six percent of their 24 gross premiums less claims paid. 25 * Sec. 5. AS 21.09.210(d) is amended to read: 26 (d) An authorized insurer shall, with respect to all wet marine and 27 transportation contracts written in this state during the preceding calendar year, [ON 28 OR BEFORE MARCH 1 OF EACH YEAR,] pay to the director a tax of three-quarters 29 of one percent on its gross underwriting profit. The director shall specify the dates 30 that payment is due and the electronic or other method by which payment is to 31 be made. The gross underwriting profit is computed by deducting, from the net
01 premiums on wet marine and transportation insurance contracts, the net losses paid 02 during the calendar year under the contracts. In the case of an insurer issuing 03 participating contracts, the gross underwriting profit may not include, for computation 04 of the tax prescribed by this section, the amounts refunded or paid as participation 05 dividends by the insurers to the holders of the contracts. In this subsection, 06 (1) "net losses" means gross losses less salvage and recoveries on 07 reinsurance ceded; 08 (2) "net premiums" means gross premiums less all return premiums and 09 premiums for reinsurance. 10 * Sec. 6. AS 21.09 is amended by adding a new section to read: 11 Sec. 21.09.245. Required notice. (a) If an insurer intends to change the 12 insurer's name, domicile, or other information provided on the certificate of authority, 13 the insurer shall file a notice of the change with the director within 30 days before or 14 after the intended change takes effect. 15 (b) If an insurer changes the insurer's articles of incorporation, bylaws, 16 business address, phone number, or other information maintained by the director, the 17 insurer shall file a notice of the change with the director not later than 90 days after 18 the effective date of the change. 19 (c) Failure by an insurer to provide notification required by this section may 20 result in a civil penalty of up to $1,000 and, additionally, a civil penalty of up to $50 21 for each day that the information is withheld from the director. 22 * Sec. 7. AS 21.09 is amended by adding a new section to read: 23 Sec. 21.09.320. Maintenance of records. (a) An insurer domiciled in a 24 jurisdiction other than this state shall keep at its principal place of business a complete 25 record of its assets, transactions, and affairs in accordance with the methods and 26 systems that are customary or suitable to the kind of insurance transacted. 27 (b) To meet the requirements of (a) of this section, the insurer shall keep the 28 records specified in AS 21.69.390(d) for 10 years from the date the record was created 29 or as required by the record maintenance requirements of the insurer's domicile 30 jurisdiction, whichever is longer. 31 * Sec. 8. AS 21.12.020(a)(4)(A)(iii) is amended to read:
01 (iii) in the case of a single assuming insurer, the trust 02 shall consist of trust money representing the assuming insurer's 03 liabilities attributable to business written in the United States and, in 04 addition, include a trust surplus of not less than $20,000,000; the single 05 assuming insurer shall make available to the director an annual 06 certification of the insurer's solvency [BY THE INSURER'S 07 DOMICILIARY REGULATOR AND] by an independent certified 08 public accountant or an accountant holding a substantially equivalent 09 designation as determined by the director; 10 * Sec. 9. AS 21.12.050 is amended to read: 11 Sec. 21.12.050. Health insurance defined. Health insurance is insurance of 12 human beings (1) against bodily injury, disablement, or death by accident or accidental 13 means; (2) against the resulting expenses of the injury, disablement, or death; (3) 14 against disablement or expense resulting from sickness or childbirth; (4) against 15 expense incurred in prevention of sickness; (5) for dental care; and (6) including every 16 insurance that applies to injury, disablement, or death. Transaction of health 17 insurance includes disability insurance and stop-loss insurance but does not include 18 workers' compensation insurance. 19 * Sec. 10. AS 21.12.050 is amended by adding a new subsection to read: 20 (b) In this section, "stop-loss insurance" means insurance purchased by a self- 21 insured employer to cover benefits the employer incurs in excess of a preset limit. 22 * Sec. 11. AS 21.14.010(a) is amended to read: 23 (a) A life and health domestic insurer, property and casualty domestic insurer, 24 or other insurer required by the director shall, on or before March 1, submit to the 25 director a report of its risk based capital covering the previous calendar year [, IF 26 REQUIRED BY THE DIRECTOR]. The report must be in a form and contain the 27 information required by risk based capital instructions. A domestic insurer required 28 to submit a report under this subsection shall file the report with 29 (1) the National Association of Insurance Commissioners; and 30 (2) the insurance regulatory agency in each state in which the insurer 31 is authorized to transact business [,] if the insurance regulatory agency has requested
01 the report in writing from the insurer; a report requested under this paragraph shall be 02 delivered 03 (A) not later than 15 days from the receipt of a request if the 04 report has already been filed with the director; or 05 (B) at the time the report is filed with the director, if the report 06 has not yet been filed with the director. 07 * Sec. 12. AS 21.14.200(18) is amended to read: 08 (18) "risk based capital instructions" means risk based capital 09 instructions for a life and health insurer or for a property and casualty insurer adopted 10 by order of [REGULATION BY] the director after an open meeting as provided 11 under AS 44.62.310 [AS 21.14.010]; 12 * Sec. 13. AS 21.18.050 is amended to read: 13 Sec. 21.18.050. Reserves and liabilities, in general. In a determination of the 14 financial condition of an insurer, capital stock and liabilities to be charged against its 15 assets shall include 16 (1) the amount of its capital stock outstanding, if any; 17 (2) the amount, estimated consistent with the provisions of this title, 18 necessary to pay all of its unpaid losses and claims incurred on or before the date of 19 statement, whether reported or unreported, together with the expenses of adjustment 20 or settlement; 21 (3) with reference to life and health insurance and annuity contracts, 22 (A) the amount of reserves on life insurance policies and 23 annuity contracts in force, valued according to the tables of mortality, rates of 24 interest, and methods adopted under this title that are applicable; 25 (B) reserves for disability benefits, for both active and disabled 26 lives; 27 (C) reserves for accidental death benefits; 28 (D) additional reserves that may be required by the director, 29 consistent with practice formulated or approved by the National Association of 30 Insurance Commissioners, on account of the insurance; 31 (4) with reference to health insurance, the amount of reserves required
01 under AS 21.18.080 - 21.18.086 [AS 21.18.080]; 02 (5) with reference to insurance other than specified in (3) and (4) of 03 this section, and other than title insurance, the amount of reserves equal to the 04 unearned portions of the gross premiums charged on policies in force, computed in 05 accordance with this chapter; 06 (6) taxes, expenses, and other obligations due or accrued at the date of 07 the statement. 08 * Sec. 14. AS 21.18.080 is repealed and reenacted to read: 09 Sec. 21.18.080. Reserve standards for health insurance. (a) The adequacy 10 of health insurance reserves must be determined based on the sum of policy reserves 11 determined under AS 21.18.082, claim reserves determined under AS 21.18.084, and 12 premium reserves determined under AS 21.18.086. 13 (b) Reserve adequacy must be determined by a prospective gross premium 14 valuation. For policies in force, in a claims status, or in a continuation of benefits 15 status on the valuation date, the gross premium valuation must take into account the 16 present value of all expected benefits unpaid, all expected expenses unpaid, and all 17 unearned or expected premiums, including expected future premium increases. 18 (c) A gross premium valuation must be performed whenever there is an 19 indication that reserves and future premiums may be insufficient to cover future claims 20 for a particular block of policies or for the entire health insurance block. If a reserve 21 inadequacy is determined to exist, the loss must be immediately recognized and 22 reserves increased to account for the inadequacy. The increased reserves will be 23 considered minimum reserves. 24 * Sec. 15. AS 21.18 is amended by adding new sections to read: 25 Sec. 21.18.082. Policy reserves for health insurance. (a) Except as provided 26 in (b) of this section, policy reserves are required for all individual and group health 27 insurance policies or groups of policies 28 (1) with level premiums or with a gross premium pricing structure at 29 time of issue that results in future benefits exceeding the corresponding future 30 valuation net premiums at any time; or 31 (2) for which gross premiums are restricted by contract, regulation, or
01 another reason that results in future gross premiums, reduced by expenses for 02 administration, commissions, and taxes, being insufficient to cover future claims. 03 (b) Policy reserves are not required for health insurance policies that cannot 04 be continued after one year from the date of issue. 05 (c) The structure of valuation net premiums used under a health insurance 06 policy must be consistent with the structure of gross premiums on the date the policy 07 is issued. 08 (d) For return of premium benefits, deferred cash benefits, policies with 09 premium rates that are not guaranteed, and where the effects of insurer underwriting 10 by policy duration are specifically used in the valuation morbidity standard, 11 termination rates that exceed the mortality rates in the tables required in (g)(2) of this 12 section may be used but may not exceed the lesser of 13 (1) 80 percent of the total termination rate used in the calculation of 14 gross premiums; or 15 (2) eight percent. 16 (e) The methods and procedures used to determine health insurance policy 17 reserves must be consistent with the methods and procedures used to determine claim 18 reserves for a health insurance policy. 19 (f) Negative reserves on a benefit may be offset against positive reserves for 20 other benefits in the same policy, but the total policy reserve with respect to all 21 benefits combined may not be less than zero. 22 (g) Except as provided in (d) and (h) - (k) of this section, policy reserves for 23 policies issued after July 1, 1997, must be determined based on 24 (1) a maximum interest rate equal to the maximum interest rate allowed 25 under AS 21.18.110 for the valuation of whole life insurance issued on the same date 26 as the health insurance policy; 27 (2) a termination assumption equal to the mortality table allowed under 28 AS 21.18.110 for the valuation of whole life insurance issued on the same date as the 29 health insurance policy or equal to a mortality table approved by the director for use 30 in determining the policy reserves; 31 (3) for long-term care policies issued after July 1, 1997,
01 (A) a mortality assumption equal to the 1983 Group Annuity 02 Mortality Table without projection; 03 (B) a lapse assumption for policy durations one through four 04 equal to the lesser of 80 percent of the voluntary lapse rate used in the 05 calculation of gross premiums or eight percent; and 06 (C) a lapse assumption for policy durations five and later of 100 07 percent of the voluntary lapse rate used in the calculation of the gross 08 premiums or four percent; 09 (4) a two-year full preliminary term method under which the terminal 10 reserve is zero on the first and second policy anniversary dates; 11 (5) a morbidity assumption for 12 (A) individual disability income insurance issued (i) after 13 December 31, 1997, equal to Tables A or B of the 1985 Commissioners' 14 Individual Disability Tables for policies; and (ii) before January 1, 1998, equal 15 to the 1964 or 1985 Commissioners' Individual Disability Tables; the insurer 16 shall indicate which morbidity table the insurer will use for all individual 17 disability income policies issued in a calendar year; 18 (B) group disability income insurance issued 19 (i) after December 31, 1997, equal to the 1987 20 Commissioners' Group Disability Table; and 21 (ii) before January 1, 1998, equal to the morbidity 22 assumption in use by the insurer before January 1, 1998; 23 (C) scheduled or fixed time period hospital, surgical, or 24 maternity benefit policies issued 25 (i) after December 31, 1997, equal to the 1974 Medical 26 Expense Table A from the Transactions of the Society of Actuaries, 27 Volume XXX; and 28 (ii) before January 1, 1998, equal to the morbidity 29 assumption in use by the insurer before January 1, 1998; 30 (D) cancer expense benefits for policies issued 31 (i) after December 31, 1997, equal to the 1985 National
01 Association of Insurance Commissioners Cancer Claim Cost Tables; and 02 (ii) before January 1, 1998, equal to the morbidity 03 assumption in use by the insurer before January 1, 1998; 04 (E) accidental death benefits for policies issued 05 (i) after December 31, 1997, equal to the 1959 06 accidental death benefit table; and 07 (ii) before January 1, 1998, equal to the morbidity 08 assumption in use by the insurer before January 1, 1998; or 09 (F) all other individual or group policy benefits equal to a 10 morbidity table established for reserve determination by an actuary qualified 11 to determine the morbidity table and approved by the director; the morbidity 12 table must contain a pattern of incurred claims cost that reflects the underlying 13 morbidity and may not be constructed for the primary purpose of minimizing 14 reserves. 15 (h) The reserve method for return of premium or other deferred cash benefits 16 must be a preliminary term method that is applied only in relation to the issue date of 17 the policy and is a 18 (1) one-year preliminary term method if benefits are provided before 19 the 20th policy anniversary; or 20 (2) two-year preliminary term method if the benefits are provided only 21 on or after the 20th policy anniversary. 22 (i) The reserve method for long-term care insurance must be calculated on a 23 (1) two-year full preliminary term method for a policy or certificate 24 issued on or before July 1, 1997; and 25 (2) one-year full preliminary term method for a policy or certificate 26 issued after July 1, 1997. 27 (j) Reserve adjustments due to rate changes, revised assumptions, or other 28 reasons for return of premium or other deferred cash benefits must be applied on the 29 effective date of the adoption of the reserve adjustment. 30 (k) An alternative method or basis of determining policy reserves may be used 31 if the aggregate policy reserve is not less than the aggregate policy reserves determined
01 under (c) - (j) of this section. 02 (l) An insurer shall annually review prospective policy liabilities on policies 03 valued by tabular reserves to determine the continuing adequacy and reasonableness 04 of the tabular reserves given future gross premiums. The insurer shall make 05 adjustments to the tabular reserves if the tests indicate that the basis of the reserves is 06 no longer adequate. 07 (m) Policy reserves that are valued based on the 1964 or 1985 Commissioners 08 Individual Disability Tables must include a provision for a waiver of premium benefit 09 with the minimum reserve for the benefit equal to the valuation net premium to be 10 waived. 11 (n) Policy reserves for long-term care insurance may not be less than the net 12 single premium for any nonforfeiture benefits provided by the policy or certificate. 13 Sec. 21.18.084. Claim reserves for health insurance. (a) Claim reserves are 14 required for all incurred and unpaid claims on all health insurance policies. 15 (b) Claim expense reserves are required for the estimated expense of settlement 16 of all incurred and unpaid claims. 17 (c) Claim reserves for prior valuation years must be tested for adequacy and 18 reasonableness using claim runoff schedules in accordance with the statutory annual 19 statement, including consideration of any residual unpaid liability. Claim reserve 20 adequacy must be determined in the aggregate. 21 (d) Claim reserves must be determined as follows: 22 (1) for policies that require policy reserves under AS 21.18.082(a), 23 based on a maximum interest rate equal to the maximum interest rate allowed under 24 AS 21.18.110 for the valuation of whole life insurance issued on the same date as the 25 date the claim was incurred; 26 (2) for policies that do not require policy reserves under 27 AS 21.18.082(b), based on a maximum interest rate equal to the maximum interest rate 28 allowed under AS 21.18.110 for the valuation of single premium immediate annuities 29 issued on the same date as the date the claim was incurred less 100 basis points; 30 (3) except as provided in (4) and (5) of this subsection, a morbidity 31 assumption for
01 (A) individual disability income insurance must be equal to the 02 morbidity assumption used in determining policy reserves under 03 AS 21.18.082(g)(5); 04 (B) group disability income insurance for policies issued 05 (i) after December 31, 1997, must be equal to the 1987 06 Commissioners Group Disability Table; and 07 (ii) before January 1, 1998, must be equal to the 08 morbidity assumption in use by the insurer before January 1, 1998; 09 (C) accidental death benefits must be equal to the actual amount 10 of claims incurred; and 11 (D) all other individual or group policy benefits must be equal 12 to a morbidity table approved by the director and established for reserve 13 determination by an actuary qualified to determine the morbidity table; 14 (4) for individual or group disability claims with a duration from 15 disablement of less than two years, morbidity assumptions may be based on the 16 insurer's experience if determined credible by the insurer or upon another basis 17 designed to place a sound value on the liabilities as determined by the insurer; 18 (5) if approved by the director, reserves for group disability income 19 claims with a duration from disablement of more than two years but less than five 20 years may be based on the insurer's experience for which the insurer maintains control 21 of underwriting and claim administration; request for approval to use this modified 22 reserve basis must include 23 (A) an analysis of the credibility of the experience; 24 (B) a description of how all the insurer's experience is proposed 25 to be used in setting the reserves; 26 (C) a description and quantification of the margins to be 27 included; 28 (D) a summary of the financial impact that the proposed plan 29 of modification would have on the insurer's last filed annual statement; 30 (E) a copy of the approval from the state of domicile; and 31 (F) all other information requested by the director;
01 (6) any generally accepted actuarial reserving method or other 02 reasonable method approved by the director may be used; the method used to estimate 03 liabilities may be an aggregate method; approximations based on groupings and 04 averages may also be used. 05 (e) Claim reserves that are valued based on the 1964 or 1985 Commissioners' 06 Individual Disability Tables must include a provision for a waiver of premium benefit 07 with the minimum reserve for the benefit equal to the valuation net premium to be 08 waived. 09 Sec. 21.18.086. Premium reserves for health insurance. (a) Unearned 10 premium reserves must be established for the period of coverage for which premiums, 11 other than premiums paid in advance, have been paid beyond the date of valuation. 12 (b) Due and unpaid premiums that are carried as an asset in the annual 13 statement must be treated as premiums in force and are subject to the unearned 14 premium reserve requirements of this section. Unpaid commissions, premium taxes, 15 and costs of collection associated with due and unpaid premiums must be carried in 16 the annual statement as an offsetting liability. 17 (c) Gross premiums paid in advance for a period of coverage starting after the 18 next premium due date following the valuation date may be discounted to the valuation 19 date and must be held as a separate liability in the annual statement or as an addition 20 to the unearned premium reserve established in this section. 21 (d) The minimum unearned premium reserve for a policy is the pro rata 22 unearned modal premium that applies to the valuation period beyond the date of 23 valuation. If a policy reserve is required for a policy, the unearned modal premium 24 is the valuation net modal premium on the policy reserve. If no policy reserve is 25 required for a policy, the unearned modal premium is the gross modal premium for the 26 policy. 27 (e) The sum of the unearned premium and policy reserves for all policies may 28 not be less than the gross modal unearned premium reserve on all policies as of the 29 date of valuation. The total unearned premium and policy reserves may not be less 30 than the expected claims for the period after the valuation date represented by the 31 unearned premium reserve.
01 (f) An insurer may use approximations and estimates in determining premium 02 reserves, including groupings, averages, and aggregate estimates. The approximations 03 or estimates must be tested periodically and not less frequently than triennially to 04 determine adequacy. 05 (g) Premium reserves based on the 1964 or 1985 Commissioners' Individual 06 Disability Tables must include policies on premium waiver as in-force contracts and 07 establish a minimum reserve for a waiver of premium benefit equal to the unearned 08 modal valuation net premium being waived. 09 * Sec. 16. AS 21.21 is amended by adding a new section to read: 10 Sec. 21.21.410. Custodians. (a) A custodial agreement between an insurer and 11 an institution holding the assets, securities, or investments of the insurer must provide 12 that the custodian is obligated to indemnify the insurer for losses involving an 13 insurance company asset or security in the custodian's custody resulting from the 14 negligence or dishonesty of the custodian's officers, employees, or agents, or caused 15 by burglary, robbery, holdup, theft, or mysterious disappearance, including loss by 16 damage or destruction. The agreement must also provide that, in the event of a loss, 17 an asset or security will be promptly replaced or the value of the asset or security and 18 the value of a loss of rights or privileges resulting from the loss will be promptly 19 replaced. 20 (b) The custodian for assets, securities, or investments of the insurer may only 21 be a bank, trust company, or securities firm that is properly authorized by the insurer 22 and approved by the director. 23 * Sec. 17. AS 21.27.010(f) is amended to read: 24 (f) A person who performs management services under a written contract for 25 an admitted insurer is not required to be licensed as a managing general agent [,] if 26 (1) either 27 (A) the person is a United States manager of the United States 28 branch of an alien admitted insurer; or 29 (B) the person's compensation is not based on the volume of 30 premium written; and 31 (2) the person
01 (A) is a wholly-owned subsidiary of the admitted insurer; 02 (B) wholly owns the admitted insurer; or 03 (C) is a wholly-owned subsidiary of the insurance holding 04 company subject to AS 21.22 that owns or controls the admitted insurer. 05 * Sec. 18. AS 21.27.010(i) is amended to read: 06 (i) A person licensed under AS 21.75 as an attorney-in-fact, or a person who 07 meets the requirements for exemption from licensure under AS 21.75, is not 08 required to be additionally licensed under this chapter while acting on behalf of 09 subscribers and within the scope and authority of a subscribers agreement of a 10 reciprocal insurer or exchange licensed under AS 21.75. 11 * Sec. 19. AS 21.27.040(a) is amended to read: 12 (a) Application for a license shall be made to the director upon forms 13 prescribed by the director. As a part of or in connection with [,] the application, the 14 applicant shall furnish information concerning the applicant's identity, personal 15 history, experience, business record, purposes, [OF THE APPLICANT] and other 16 pertinent facts [CONCERNING THE APPLICANT] that the director may reasonably 17 require. The applicant shall declare under oath and subject to penalty of denial, 18 nonrenewal, suspension, or revocation of a license issued by the director that the 19 statements made in or in connection with the application are true, correct, and 20 complete to the best of the applicant's knowledge and belief. Payment of an 21 application fee established under AS 21.06.250 must be submitted with the application. 22 * Sec. 20. AS 21.27.370(b) is amended to read: 23 (b) A person [LICENSEE] may not be promised or paid, directly or indirectly, 24 compensation for procuring an application or for placing a kind or class of insurance 25 for which the person [LICENSEE] is not then licensed to procure or place or for 26 insurance that the person [LICENSEE] is prohibited by this title from procuring or 27 placing. 28 * Sec. 21. AS 21.27.390(b) is amended to read: 29 (b) Except as otherwise provided by law, a [A] temporary license may not 30 be in effect for more than 90 consecutive days [,] and may not be renewed or reissued 31 for more than one additional 90-day period.
01 * Sec. 22. AS 21.27.405(b) is amended to read: 02 (b) If the director determines that a person has violated this chapter, the 03 director shall serve an order upon the person charged requiring that person to cease 04 and desist from engaging in the act or practice. [SERVICE REQUIRED UNDER 05 THIS SUBSECTION SHALL BE BY MAIL WITH A CERTIFICATE OF MAILING 06 FROM THE UNITED STATES POSTAL SERVICE.] A person aggrieved by the 07 cease and desist order may demand a hearing under AS 21.06.170 - 21.06.240. 08 * Sec. 23. AS 21.27.440(a) is amended to read: 09 (a) In addition to any other penalty provided by law, a person that the director 10 determines under AS 21.06.170 - 21.06.240 has violated the provisions of this chapter 11 is subject to 12 (1) a civil penalty equal to the compensation promised, paid, or to be 13 paid, directly or indirectly, to a person [LICENSEE] in regard to each violation; 14 (2) either a civil penalty of not more than $10,000 for each violation 15 or a civil penalty of not more than $25,000 for each violation if the director determines 16 that the person wilfully violated the provisions of this chapter; and 17 (3) denial, nonrenewal, suspension, or revocation of a license. 18 * Sec. 24. AS 21.27.640(b)(5) is amended to read: 19 (5) provide in or with its application 20 (A) all basic organizational documents of the third-party 21 administrator, including articles of incorporation, articles of association, 22 partnership agreement, trade name certificate, trust agreement, shareholder 23 agreement, and other applicable documents and all endorsements to the 24 required documents; 25 (B) the bylaws, rules, regulations, or similar documents 26 regulating the internal affairs of the administrator; 27 (C) the names, mailing addresses, physical addresses, official 28 positions, and professional qualifications of persons who are responsible for the 29 conduct of affairs of the third-party administrator; including the members of the 30 board of directors, board of trustees, executive committee, or other governing 31 board or committee; the principal officers in the case of a corporation or the
01 partners or members in the case of partnership or association; shareholders 02 holding directly or indirectly 10 percent or more of the voting securities of the 03 third-party administrator; and any other person who exercises control or 04 influence over the affairs of the third-party administrator; 05 (D) certified financial statements for the prior two years, or for 06 each year and partial year that the applicant has been in business if less 07 than two years, prepared by an independent certified public accountant 08 establishing [THAT ESTABLISH] that the applicant is solvent, that the 09 applicant's system of accounting, internal control, and procedure is operating 10 effectively to provide reasonable assurance that money is promptly accounted 11 for and paid to the person entitled to the money, and any other information that 12 the director may require to review the current financial condition of the 13 applicant; and 14 (E) a statement describing the business plan, including 15 information on staffing levels and activities proposed in this state and in other 16 jurisdictions and providing details establishing the third-party administrator's 17 capability for providing a sufficient number of experienced and qualified 18 personnel in the areas of claims handling, underwriting, and record keeping; 19 * Sec. 25. AS 21.34.040(c)(4) is amended to read: 20 (4) a Lloyd's syndicate or an insurer belonging to a [OTHER] similar 21 group, including incorporated and individual unincorporated insurers 22 [UNDERWRITERS], may qualify if it maintains a trust fund jointly and severally 23 with the other members of the group in an amount not less than $50,000,000, as 24 security to the full amount, for the protection of all policyholders [ITS POLICY 25 HOLDERS] and creditors of each member of the group in the United States; the 26 incorporated members may not be engaged in any business other than underwriting as 27 a member of the group and shall be subject to the same level of solvency regulation 28 and control by the group's domiciliary regulator as are the unincorporated members; 29 the trust fund must consist of instruments of substantially the same character and 30 quality as those that are eligible investments for the capital and statutory reserves of 31 admitted insurers authorized to write like kinds of insurance in this state or of
01 irrevocable, clean, and unconditional letters of credit; the trust fund must have an 02 expiration date that at no time is less than five years; 03 * Sec. 26. AS 21.34.040(c)(5) is amended to read: 04 (5) each syndicate or insurer belonging to an insurance exchange 05 created by the laws of individual states may qualify if the insurance exchange [IT] 06 maintains capital and surplus, or the substantial equivalent, of not less than 07 $50,000,000 in the aggregate; for insurance exchanges that maintain funds for the 08 protection of all insurance exchange policyholders, each individual syndicate shall 09 maintain minimum capital and surplus, or the substantial equivalent, of not less than 10 $3,000,000; in the event the insurance exchange does not maintain funds for the 11 protection of all its policyholders, each individual syndicate shall meet the minimum 12 requirements of (1) or (2) of this subsection; 13 * Sec. 27. AS 21.34.180(b) is amended to read: 14 (b) The surplus lines tax is due on the date specified by the director and 15 may [SECOND DAY OF MARCH FOLLOWING THE CALENDAR YEAR IN 16 WHICH THE PREMIUM IS WRITTEN. THE TAX SHALL] be paid by electronic 17 or other means as specified by the director. The tax shall be [TO AND] reported 18 on forms prescribed by the director [,] or, upon the director's order, paid to and 19 reported on forms prescribed by the surplus lines association. 20 * Sec. 28. AS 21.34.190(a) is amended to read: 21 (a) The fee for filing the statement under AS 21.34.180(b) is an amount equal 22 to one percent on gross premium charged less any return premiums as reported on the 23 statement [DURING THE PRECEDING CALENDAR YEAR]. The surplus lines 24 broker shall pay the fee at the time of filing of the statement. 25 * Sec. 29. AS 21.36.095(e) is amended to read: 26 (e) In this section, "insurer" includes 27 (1) an insurer, as defined in AS 21.90.900; 28 (2) a group health plan, as defined in 29 U.S.C. 1167(l) (Employee 29 Retirement Income Security Act of 1974); 30 (3) a health maintenance organization, as defined in AS 21.86.900; 31 (4) a hospital service corporation or medical service corporation, as
01 defined in AS 21.87.330; 02 (5) Comprehensive Health Insurance Association, established in 03 AS 21.55.010 [A WRITING CARRIER, AS DEFINED IN AS 21.55.500]; and 04 (6) an entity offering a service benefit plan, as referred to in 42 U.S.C. 05 1396g-1. 06 * Sec. 30. AS 21.36 is amended by adding a new section to read: 07 Sec. 21.36.185. Maintenance of complaint handling records. An insurer 08 shall maintain a complete record of all the complaints received by the insurer since the 09 date of the insurer's last market conduct examination under AS 21.06.120 or for four 10 years, whichever occurs first. This record must indicate the total number of 11 complaints, the classification of each complaint by line of insurance, the nature of each 12 complaint, the disposition of each complaint, and the time it took to process each 13 complaint. For purposes of this section, "complaint" means any written 14 communication primarily expressing a grievance. 15 * Sec. 31. AS 21.36.240 is amended to read: 16 Sec. 21.36.240. Failure to renew. An insurer may only [NOT] fail to renew 17 a personal insurance policy on the policy's annual anniversary [IN FORCE FOR 18 LESS THAN 12 MONTHS]. An insurer may not fail to renew a policy unless a 19 written notice of nonrenewal is mailed to the named insured as required by 20 AS 21.36.260 at least 20 days for a personal insurance policy, and at least 45 days for 21 a business or commercial insurance policy, before the expiration date of the policy or 22 of the anniversary date of a policy written for a term longer than one year or with no 23 fixed expiration date. If notice of nonrenewal is not given as required by this section, 24 the existing policy shall continue until the insurer provides notice for the time period 25 required by this section for that policy. This section does not apply 26 (1) if the insurer has in good faith manifested its willingness to renew; 27 (2) in case of nonpayment of premium for the expiring policy; or 28 (3) if the insured fails to pay the premium as required by the insurer 29 for renewal. 30 * Sec. 32. AS 21.36.290 is amended to read: 31 Sec. 21.36.290. Policy period. (a) A [EXCEPT AS DESCRIBED IN (b) OF
01 THIS SECTION, A] policy with a policy period or term [OF LESS THAN 12 02 MONTHS SHALL, FOR THE PURPOSES OF AS 21.36.210 - 21.36.310, BE 03 CONSIDERED TO BE WRITTEN FOR A POLICY PERIOD OR TERM OF 12 04 MONTHS EXCEPT IN CASE OF CANCELLATION UNDER ANY OF THE 05 CIRCUMSTANCES SPECIFIED IN AS 21.36.210, AND A POLICY WRITTEN FOR 06 A TERM] longer than one year or a policy with no fixed expiration date shall be 07 considered to be written for successive policy periods or terms of one year, and 08 termination by an insurer effective on an anniversary date of the policy shall be 09 considered a failure to renew. 10 (b) The rate for [FOR DETERMINING THE APPROPRIATE RATE OR 11 PREMIUM,] a personal automobile insurance policy may not be changed more 12 frequently than once every [WITH A POLICY PERIOD OR TERM OF LESS THAN 13 SIX MONTHS SHALL, FOR THE PURPOSES OF AS 21.36.210 - 21.36.310, BE 14 CONSIDERED TO BE WRITTEN FOR A POLICY PERIOD OR TERM OF] six 15 months. 16 * Sec. 33. AS 21.36.390 is repealed and reenacted to read: 17 Sec. 21.36.390. Notice to director. (a) An insurer or licensee that has reason 18 to believe that a fraudulent claim has been made against it shall send the director a 19 report disclosing information that the director may require. 20 (b) An insurer or licensee that has reason to believe that an insurance producer 21 with which it is doing business is involved in a defalcation, embezzlement, or violation 22 of the provisions of AS 21.36.360 shall immediately send the director a report 23 disclosing the basis for that belief and any other information that the director may 24 require. 25 (c) An insurer or licensee, its employee or agent, or another person acting in 26 good faith is not civilly liable for damages resulting from the filing of the report or the 27 furnishing of information required by this section or by the director. 28 (d) The director shall investigate facts reported under this section and shall refer 29 facts indicating a violation of law to the appropriate prosecutor or agency. 30 * Sec. 34. AS 21.39.045(b) is amended to read: 31 (b) The director shall accept a rate filing for workers' compensation insurance
01 if the filing includes a reasonable method of recognizing differences in rates of pay for 02 the construction industry, and the method uses a credit scale that begins at an 03 amount equal to the average weekly wage in this state for the construction industry 04 as determined by the Department of Labor. 05 * Sec. 35. AS 21.42.130 is amended to read: 06 Sec. 21.42.130. Grounds for disapproval. The director shall disapprove a 07 form filed under AS 21.42.120 or withdraw a previous approval of the form [,] only 08 if the form 09 (1) is in any respect in violation of or does not comply with this title; 10 (2) contains or incorporates by reference, where incorporation is 11 permissible, an inconsistent, ambiguous, or misleading clause, or exception and 12 condition that deceptively affects the risk purported to be assumed in the general 13 coverage of the contract; 14 (3) has a title, heading, or other indication of its provisions that is 15 misleading; 16 (4) is printed or otherwise reproduced in a manner that renders a 17 provision of the form substantially illegible; 18 (5) provides benefits for Medicare supplement [SUPPLEMENTAL 19 AND INDIVIDUAL HEALTH] insurance that are unreasonable in relation to the 20 premium charged. 21 * Sec. 36. AS 21.42 is amended by adding a new section to read: 22 Sec. 21.42.205. Coordination of benefits. (a) Unless prohibited by federal 23 law, an insurer authorized under AS 21.09 to offer, issue for delivery, deliver, or renew 24 an individual or group health insurance policy for major medical coverage on an 25 expense incurred basis; a health maintenance organization authorized under AS 21.86 26 to offer a contract to provide major medical health care services on a prepaid basis; 27 or a service corporation authorized under AS 21.87 to offer or renew an individual or 28 group subscriber's contract for major medical coverage shall include a coordination of 29 benefits provision in a major medical policy or contract. 30 (b) The director may adopt regulations to implement this section. 31 * Sec. 37. AS 21.42 is amended by adding a new section to read:
01 Sec. 21.42.265. Effective date of coverage. Unless otherwise provided by 02 law, the effective date of a change relating to coverage under an insurance contract as 03 a result of a change to this title is the issue date for a new policy or the renewal date 04 for a renewal policy. 05 * Sec. 38. AS 21.54 is amended by adding a new section to read: 06 Sec. 21.54.015. Rate requirements. Rates charged for a group health 07 insurance policy may not be excessive, inadequate, or unfairly discriminatory. 08 * Sec. 39. AS 21.66.110(a) is amended to read: 09 (a) Each [ANNUALLY EACH] title insurance company shall pay [ON OR 10 BEFORE MARCH 1,] a tax of one percent of the amount of gross title insurance 11 premiums received by it, including as premium income received from guaranteed 12 certificates of title and other guarantees of title [DURING THE PRECEDING 13 CALENDAR YEAR] covering property in this state, as shown by its annual statement 14 to the director. The director shall specify the due dates and the method of 15 payment. 16 * Sec. 40. AS 21.66.390(a) is amended to read: 17 (a) A title insurance company shall make rates that are not excessive or 18 inadequate, [AND] that do not unfairly discriminate between risks in this state that 19 involve essentially the same exposure to loss and expense elements, and that give due 20 consideration to 21 (1) the desirability for stability of rate structures; 22 (2) the necessity of assuring the financial solvency of title insurance 23 companies in periods of economic depression by encouraging growth in assets of title 24 insurance companies in periods of high business activity; [AND] 25 (3) the necessity for assuring a reasonable margin of underwriting and 26 operating profit; and 27 (4) investment income. 28 * Sec. 41. AS 21.69.310(a) is amended to read: 29 (a) Meetings of stockholders or members of a domestic insurer shall be held 30 in the city or town of its principal office or place of business in this state. The 31 meetings may be held, for good cause, in another location within the state upon
01 approval of the director. 02 * Sec. 42. AS 21.69.520(a) is amended to read: 03 (a) Subject to the director's prior written approval, a [A] domestic stock 04 or mutual insurer may borrow money to defray the expenses of its organization or [,] 05 provide it with surplus funds [, OR FOR ANY PURPOSE OF ITS BUSINESS,] upon 06 a written agreement that the money is required to be repaid only out of the insurer's 07 surplus in excess of that stipulated in the agreement. The agreement may provide for 08 interest not exceeding six per cent a year, which interest may or may not constitute a 09 liability of the insurer as to its funds other than the excess of surplus, as stipulated in 10 the agreement. A commission or promotion expense may not be paid in connection 11 with the loan. 12 * Sec. 43. AS 21.75.045(a) is amended to read: 13 (a) A person may not act in the capacity of attorney-in-fact for a subscriber 14 regarding a subject that is resident, located, or to be performed in this state or for a 15 reciprocal insurer licensed to do business in this state unless the person is licensed 16 under this chapter. The director may adopt regulations that establish qualifications for 17 being licensed as an attorney-in-fact. The attorney-in-fact for a [DOMESTIC] 18 reciprocal insurer [TRANSACTING ALL OF ITS INSURANCE ACTIVITIES ON A 19 SUBJECT RESIDENT, LOCATED, AND TO BE PERFORMED IN THIS STATE] 20 is exempt from licensing under this title if the attorney-in-fact 21 (1) is a wholly-owned subsidiary of the reciprocal; and 22 (2) does not act as attorney-in-fact for another unaffiliated reciprocal 23 insurer. 24 * Sec. 44. AS 21.76.020(b) is amended to read: 25 (b) By October 1 of each year, the administrator of a joint insurance 26 arrangement shall prepare and deliver to the Legislative Budget and Audit Committee 27 and the director a report showing the true and correct financial condition of the joint 28 insurance arrangement. The report must 29 (1) be attested to by the administrator and the board of directors; 30 (2) include an analysis, certified by a member of the American 31 Academy of Actuaries, of the sufficiency of the loss reserves; and
01 (3) be certified by a certified public accountant. 02 * Sec. 45. AS 21.76.080(e) is amended to read: 03 (e) Within 150 [60] days of the end of the fiscal year, the administrator shall 04 furnish a detailed report of the operation and condition of the fund to the board of 05 directors and the director of the division of insurance. [THE REPORT FURNISHED 06 TO THE DIRECTOR OF INSURANCE SHALL BE 07 (1) FILED IN THE GENERAL FORM AND CONTEXT 08 ACCEPTABLE TO THE DIRECTOR; 09 (2) IN ACCORDANCE WITH ACCOUNTING PRINCIPLES 10 ESTABLISHED UNDER THIS TITLE; AND 11 (3) AVAILABLE FOR PUBLIC INSPECTION.] 12 * Sec. 46. AS 21.78.293(b) is amended to read: 13 (b) The court shall review and adopt [MAY APPROVE, DISAPPROVE, OR 14 MODIFY] the receiver's report on claims by approving those claims that are 15 supported by substantial evidence and disapproving allowed claims that are not 16 supported by substantial evidence. Claims in a report that are not disapproved 17 [MODIFIED] by the court within a period of 120 [60] days following submission by 18 the receiver shall be treated by the receiver as allowed claims. 19 * Sec. 47. AS 21.87.140(c) is amended to read: 20 (c) Each service agreement shall further effectively provide in substance that 21 (1) the participant provider shall be compensated for services rendered 22 to a subscriber in accordance with terms [A SCHEDULE OF FEES] contained in the 23 agreement or attached to and made a part of the agreement [,] and that the participant 24 provider may not request or receive from the service corporation compensation for the 25 services that [WHICH] is not in accord with the terms [SCHEDULE]; 26 (2) compensation for services may be prorated and settled under the 27 circumstances and in the manner referred to in AS 21.87.300; 28 (3) if the participant provider withdraws from the agreement, the 29 withdrawal may not be effective as to a subscriber's contract in force on the date of 30 the withdrawal until the termination of the subscriber's contract or the next anniversary 31 of the subscriber's contract, whichever date is the earlier.
01 * Sec. 48. AS 21.87.150(c) is amended to read: 02 (c) Each service agreement must further effectively in substance provide that 03 (1) the participant hospitals shall be compensated for services rendered 04 to a subscriber in accordance with terms [A SCHEDULE OF CHARGES] contained 05 in the agreement or attached to and made a part of the agreement [,] and that the 06 hospital may not request or receive from the service corporation compensation for the 07 services that is not in accord with the terms [SCHEDULE]; 08 (2) compensation for services may be prorated and settled under the 09 circumstances and in the manner referred to in AS 21.87.300; 10 (3) if the participant hospital withdraws from the agreement, the 11 withdrawal may not be effective as to a subscriber's contract in force on the date of 12 the withdrawal until the termination of the subscriber's contract or the next anniversary 13 of the subscriber's contract, whichever date is the earlier. 14 * Sec. 49. AS 21.87.180(a) is amended to read: 15 (a) A service corporation may not issue or use a basic form of service 16 agreement or subscriber's contract, or application, identification, supplement, or 17 endorsement to be connected with the agreement or contract, until the form has been 18 filed with and approved by the director. This provision does not apply to riders 19 [AGREEMENTS, CONTRACTS, APPLICATIONS, IDENTIFICATION 20 SUPPLEMENTS], endorsements, or other forms of unique character designed for and 21 used with relation to a particular subject [SET OF CIRCUMSTANCES]. 22 * Sec. 50. AS 21.87.190(b) is amended to read: 23 (b) The service corporation shall, before use, file with the director (1) a 24 schedule of subscription rates, fees, or payments of any kind to be charged subscribers; 25 (2) every rating manual, schedule, plan, rule, or formula; and (3) [SHALL FILE] 26 before use, any modification to the rating manual, schedule, plan, rule, or formula. 27 Each filing must state the effective date and must provide a comprehensive 28 description of the coverage. The director may withhold the rating formula from 29 public inspection for as long as the director determines that withholding the 30 rating formula is necessary to protect the service corporation against unwarranted 31 injury or is in the public interest [EVERY PROPOSED CHANGE OR
01 MODIFICATION IN THE RATES, FEES, OR PAYMENTS]. 02 * Sec. 51. AS 21.87.200 is repealed and reenacted to read: 03 Sec. 21.87.200. Reserves. In addition to the surplus fund provided for in 04 AS 21.87.210, each service corporation shall establish and maintain unimpaired 05 reserves and liabilities required under AS 21.18.050. 06 * Sec. 52. AS 21.89.020(g) is amended to read: 07 (g) An insurance company offering automobile liability insurance in this state 08 shall offer a short term policy valid for no more than seven days. The coverage 09 available for the short term policy must be comparable to coverage available for longer 10 term policies. The provisions of AS 21.36.210 - 21.36.310 do not apply to short 11 term policies issued under this subsection. 12 * Sec. 53. AS 21.90.900(29) is amended to read: 13 (29) "policy" means the written contract of or written agreement for or 14 effecting insurance, by whatever name called, and includes all clauses, riders, 15 endorsements, and papers attached to it and a part of it; for a group, trust, 16 association, or similar entity, it also means a certificate or other evidence of 17 insurance that establishes the written contract of or written agreement for or 18 effecting insurance for an insured or other beneficiary of the entity; 19 * Sec. 54. AS 21.90.900 is amended by adding a new paragraph to read: 20 (41) "certified financial statement" means a financial statement upon 21 which an independent certified public accountant, or an accountant holding a 22 substantially equivalent designation as determined by the director, renders or disclaims 23 an opinion after performance of an audit. 24 * Sec. 55. AS 21.81 is repealed. 25 * Sec. 56. Sections 4, 5, 25 - 28, and 39 of this Act take effect January 1, 1998. 26 * Sec. 57. Except as provided in sec. 56 of this Act, this Act takes effect on July 1, 1997.