Legislature(2001 - 2002)

2001-03-13 Senate Journal

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2001-03-13                     Senate Journal                      Page 0636
SB 138                                                                                            
SENATE BILL NO. 138 BY THE SENATE RULES COMMITTEE                                                   
BY REQUEST OF THE GOVERNOR, entitled:                                                               
          "An Act relating to the business of insurance,                                            
          including changes to the insurance code to implement                                      
          federal financial services reforms for the business of                                    
          insurance and to authorize the director of insurance to                                   
          review criminal backgrounds for individuals applying                                      
          to engage in the business of insurance; amending                                          
          Rule 402, Alaska Rules of Evidence; and providing                                         
          for an effective date."                                                                   
was read the first time and referred to the Labor and Commerce and                                  
Judiciary Committees.                                                                               
The following fiscal information was published today:                                               
 Fiscal Note No. 1, zero, Department of Community and Economic                                      
Governor's transmittal letter dated March 9:                                                        
Dear President Halford:                                                                             
I am transmitting this bill to implement needed financial service                                   
reforms in our insurance code in compliance with the federal Gramm-                                 
Leach-Bliley Act (GLBA). These changes will assist the State in                                     
maintaining its regulatory authority over the business of insurance in                              
Alaska. The GLBA repealed depression-era restrictions on the                                        
insurance, banking, and securities industries and, more notably,                                    
removed some of the barriers that limited banks from engaging in the                                
business of insurance.                                                                              
Under the GLBA, specific standards are established with respect to                                  
consumer privacy, consumer protection, insurance producer licensing,                                
and insurance sales. It requires states to streamline and coordinate                                
their regulatory systems to make them faster, less burdensome, and                                  
more effective. This bill reforms our laws to conform to the GLBA                                   
and to continue the process of streamlining and coordinating insurance                              

2001-03-13                     Senate Journal                      Page 0637
Under the bill, the GLBA reforms would focus on three key areas:                                    
     · Establishing reciprocity for licensing nonresident insurance                                 
     · Implementing the GLBA consumer privacy standards                                             
          regarding sharing of personal information with affiliates and                             
          nonaffiliates; and                                                                        
     · Implementing GLBA consumer protection measures related to                                    
          the sale of insurance by financial institutions.                                          
These reforms are based on models adopted by the National                                           
Association of Insurance Commissioners (NAIC).                                                      
A significant portion of the bill would amend AS 21.27, the licensing                               
chapter of the insurance code, to provide for reciprocity in the                                    
licensing of nonresident producers. In this context, reciprocity means                              
that a nonresident producer would receive a license to transact                                     
insurance in this state to the same extent that the producer is licensed                            
in the producer's home state, without having to satisfy any additional                              
requirements. Licensing in this state would be accomplished by                                      
submitting an application, providing proof of licensing and good                                    
standing from the home state, and paying the license fees. Reciprocity                              
also would allow resident producers to obtain licensing in other states                             
without meeting state-specific requirements. All insurance producers,                               
however, would still be subject to state-specific requirements related                              
to unfair trade practices or consumer protection. The bill requires use                             
of uniform applications in an electronic format to speed up insurance                               
The GLBA requires that at least 29 states adopt either reciprocity or                               
uniformity in insurance producer licensing by November 2002, in                                     
order to maintain the authority to license nonresident insurance                                    
producers. Otherwise, a national organization authorized under the                                  
GLBA would assume that role. Enacting this bill into law in Alaska                                  
would achieve reciprocity and thereby help ensure the state retains the                             
authority to license nonresident producers.                                                         

2001-03-13                     Senate Journal                      Page 0638
Another time-sensitive issue under the GLBA relates to consumer                                     
privacy. The federal law sets a minimum privacy standard that states                                
must adopt and enforce by July 1, 2001, or risk losing the authority to                             
enforce state consumer protection standards with respect to financial                               
institution insurance sales. This bill expressly requires those regulated                           
under our insurance statutes to comply with the GLBA privacy                                        
standards and authorizes the state director of insurance to adopt                                   
corresponding regulations on consumer privacy.                                                      
In addition to the GLBA-related reforms, the bill addresses other                                   
important issues to facilitate state insurance regulation and to conform                            
to federal law. This includes the ability to obtain national criminal                               
history record checks for persons who want to engage in the business                                
of insurance. It also requires a person with a felony conviction                                    
involving dishonesty or breach of trust to obtain the express written                               
consent of the director of insurance before engaging in the business of                             
insurance. Without this consent, federal law prohibits such persons                                 
from working in the business of insurance. The amendment under this                                 
bill would assist the director of insurance in ensuring that prohibited                             
persons comply with the law.                                                                        
I urge your prompt and favorable action on this measure.                                            
                                 Tony Knowles