Legislature(1999 - 2000)

02/02/2000 01:41 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 190 - VIATICAL SETTLEMENTS                                                                                                 
Number 0101                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT announced the next  order of business would be HOUSE                                                              
BILL NO. 190, "An Act relating to  viatical settlement contracts."                                                              
He noted that  Bob Lohr was online  from Anchorage.  He  asked Mr.                                                              
Lohr if he  had the most recent  version of HB 190, Version  N (1-                                                              
LS0576\N, Bannister, 2/1/00).                                                                                                   
                                                                                                                                
BOB  LOHR,   Director,  Division   of  Insurance,  Department   of                                                              
Community   and   Economic  Development   (DCED),   speaking   via                                                              
teleconference from Anchorage, affirmed that.                                                                                   
                                                                                                                                
Number 0135                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG made  a motion  to adopt  Version N  as a                                                              
work draft.  There being no objection, it was so ordered.                                                                       
                                                                                                                                
LESIL McGUIRE, Legislative Assistant  to Representative Pete Kott,                                                              
and  Committee Aide,  House Judiciary  Standing Committee,  Alaska                                                              
State Legislature,  came forward  to explain  the changes  made in                                                              
Version  N.  The  bill drafters  had inserted  changes to  reflect                                                              
some concerns  of members  last time.   Two concerns needed  to be                                                              
addressed.   The first deals with  the degree of  privacy afforded                                                              
to  the viator  and the  insured, as  well as  to a  viator or  an                                                              
investor.   The first change  occurs on  page 2, lines  16 through                                                              
20, subsection  (e), governing privacy  between the insured  - the                                                              
viator - and the  insurance company.  A sentence  added at the end                                                              
of subsection  (e) enables  the viator  to waive this  prohibition                                                              
against disclosure if it is in writing and has been signed.                                                                     
                                                                                                                                
MS. McGUIRE noted  that the second change occurs  on page 5, lines                                                              
21 through 26, which  is the exact language used  on page 2, lines                                                              
16  through 20.   She  indicated the  only difference  is that  it                                                              
governs  privacy   between  the  viator  and  the   Department  of                                                              
Community  and  Economic  Development   (DCED),  as  well  as  the                                                              
investor.   The same waiver language  is included.  Page  5, lines                                                              
12 through 20,  responds to a concern Representative  Kerttula had                                                              
with  respect to  buyer  information.   That  clause  is the  same                                                              
language that was  in the original HB 190 and  has been reincluded                                                              
in Version N.                                                                                                                   
                                                                                                                                
Number 0334                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said he has  been in contact with both the                                                              
Division of Insurance and the Division  of Banking, Securities and                                                              
Corporations  (DBSC), which  stated they  would like  to make  two                                                              
minor technical amendments.  He made  a motion to adopt Conceptual                                                              
Amendment 1 on  page 2, line 18, deleting "name"  and substituting                                                              
"identity".   The same change  would be made  on page 5,  line 23.                                                              
He asked Katy Campbell to comment on those changes.                                                                             
                                                                                                                                
KATY CAMPBELL,  Actuary L/H, Division of Insurance,  Department of                                                              
Community  and Economic  Development,  responded that  this was  a                                                              
discussion  that  took  place with  the  National  Association  of                                                              
Insurance  Commissioners  (NAIC).    The  concern  is  that  other                                                              
information could  be given  out, such as  an address,  that could                                                              
lead to identifying  an individual.   She said this takes  care of                                                              
anything that could identify that person.                                                                                       
                                                                                                                                
MR. LOHR concurred with the amendment.                                                                                          
                                                                                                                                
CHAIRMAN  KOTT  asked  whether  there  was any  objection  to  the                                                              
adoption of Conceptual Amendment  1.  There being no objection, it                                                              
was adopted.                                                                                                                    
                                                                                                                                
Number 0452                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   made  a  motion  to   adopt  Conceptual                                                              
Amendment 2  on page 5,  lines 17 through  20, which  would delete                                                              
all  of the  language  after the  word "includes"  and  substitute                                                              
"state-mandated  disclosure  form".    He  asked  Vince  Usera  to                                                              
comment.                                                                                                                        
                                                                                                                                
VINCE  USERA, Senior  Securities  Examiner,  Division of  Banking,                                                              
Securities and  Corporations (DBSC),  Department of  Community and                                                              
Economic Development, explained:                                                                                                
                                                                                                                                
     In  our  discussions,  when  we were  dealing  with  our                                                                   
     regulations,  we discussed ...  all provisions  with the                                                                   
     Viatical Association of America  [VAA].  They registered                                                                   
     strong disapproval  of giving out ... an  audited income                                                                   
     and  expense  and  balance statement  to  the  investor.                                                                   
     Now, our regulations  provide they must give  that to us                                                                   
     - to  the division  - in order to  prove that  they're a                                                                   
     going  concern and  that they  have  the wherewithal  to                                                                   
     meet  their obligations.   But  for one,  I don't  think                                                                   
     most  investors really  know how to  read the  statement                                                                   
     properly,   and,   second,  the   Viatical   Association                                                                   
     objected strongly that that's  going too far in removing                                                                   
     their level of privacy too.                                                                                                
                                                                                                                                
REPRESENTATIVE  MURKOWSKI said she  understands the  rationale but                                                              
wonders exactly what is required by the division.                                                                               
                                                                                                                                
Number 0593                                                                                                                     
                                                                                                                                
MR. USERA  replied that  the division requires  proof of  being in                                                              
business for  three years, audited  income and expense  statements                                                              
for the most recent year, and other  information.  The division is                                                              
going to look out  for the investor in that respect.   "If they're                                                              
a going concern, they'll get the  exemption," he added.  "They can                                                              
go  sell their  product.   But  I  don't think  giving  it to  the                                                              
investor   is  going  to   necessarily   save  the  investor   any                                                              
heartache."                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI referred  to the proposed deletion of the                                                              
provision on page 5, lines 19 through  20, regarding disclosure of                                                              
any significant negative factor that  may affect the outcome of an                                                              
investment; she said she happens to like this provision.                                                                        
                                                                                                                                
MR. USERA assured Representative  Murkowski that this provision is                                                              
still being required.                                                                                                           
                                                                                                                                
REPRESENTATIVE MURKOWSKI  wondered if there is any way  to let the                                                              
investor know.  For example, if she  were an investor and inquired                                                              
at the division about a company,  would the division tell her that                                                              
there were a few black marks on the company's record?                                                                           
                                                                                                                                
MR. USERA indicated it is unlikely  the company would be given the                                                              
exemption and  allowed to sell here  in that case, but  it depends                                                              
on the situation.   For example, it  may be a black mark  that the                                                              
company  had  overcome.    He  added,  "We  will  do  our  job  in                                                              
protecting  the  investor,  and if  that  requires  disclosure  of                                                              
certain  information  about  the   company,  I  believe  we  would                                                              
disclose it."                                                                                                                   
                                                                                                                                
Number 0717                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MURKOWSKI  expressed  concern  that  although  the                                                              
division has the  information, a wall may exist  that prevents the                                                              
investor from having access to it.   She said she doesn't know how                                                              
much information should be made available,  and she recognizes the                                                              
concern.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  responded  that  the  information  would                                                              
include  the  state-mandated  disclosure   form,  but  it  doesn't                                                              
exclude their giving other information,  which could be handled by                                                              
regulation.  He added, "'Includes  but not limited' is the way our                                                              
statute drafting manual is."  He  explained that he'd thought this                                                              
was an improvement  because it gives the department  a little more                                                              
flexibility  and perhaps -  under the  right circumstances  - they                                                              
would  give  more  information than  was  stipulated  in  statute.                                                              
"That's  why I  took  their recommendation  as  a 'positive,'"  he                                                              
concluded.                                                                                                                      
                                                                                                                                
Number 0784                                                                                                                     
                                                                                                                                
MR. USERA explained  that except for investigation  files, all his                                                              
division's files  are public  record.  He  stated, "If we  know of                                                              
something about the company that  is negative, ... we can and will                                                              
tell  them.    We already  provide  the  statement  of  risk,  but                                                              
disclosure of  any significant  factor may still  be in  the bill.                                                              
... And that doesn't have to be out.   We kept the word 'includes'                                                              
in order  to leave it  flexible enough  to allow ...  other items.                                                              
The  main  choking point,  if  you  will,  is audited  income  and                                                              
expense statements."                                                                                                            
                                                                                                                                
Number 0837                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GREEN referred  to line  18 and proposed  deleting                                                              
only  the language  [added  by  proposed Conceptual  Amendment  2]                                                              
after "disclosure  form",  then reinserting  "and a disclosure  of                                                              
any significant  negative factor".   He  asked whether  that would                                                              
pass muster.                                                                                                                    
                                                                                                                                
MR. USERA answered, "That would be fine with us."                                                                               
                                                                                                                                
Number 0871                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI pointed  out the need to say "factors" to                                                              
avoid excluding a factor if there were two.                                                                                     
                                                                                                                                
MR. USERA concurred.                                                                                                            
                                                                                                                                
Number 0894                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  made  a  motion  to  adopt  that  as  an                                                              
amendment to Conceptual Amendment 2.                                                                                            
                                                                                                                                
CHAIRMAN  KOTT  announced  that  there  was no  objection  to  the                                                              
amendment to  the amendment  and, therefore, Conceptual  Amendment                                                              
2, as amended, was before the committee.                                                                                        
                                                                                                                                
REPRESENTATIVE   ROKEBERG  restated   the  amended  amendment   as                                                              
follows:   "includes  the state-mandated  disclosure  forms and  a                                                              
disclosure  of any significant  negative  factors that may  affect                                                              
the outcome of the investment."                                                                                                 
                                                                                                                                
Number 0949                                                                                                                     
                                                                                                                                
MR. USERA said the word "negative" would not be included.                                                                       
                                                                                                                                
UNIDENTIFIED REPRESENTATIVES concurred.                                                                                         
                                                                                                                                
REPRESENTATIVE KERTTULA  asked whether there is  any definition of                                                              
"significant factor."                                                                                                           
                                                                                                                                
MR. USERA said he  thinks he knows what it is.   He suggested that                                                              
using  "negative"  would  limit  it  to  some  degree,  because  a                                                              
positive or  neutral factor may  significantly affect  the outcome                                                              
of  the investment.    For instance,  if the  insured  has a  life                                                              
expectancy of  15 years,  that is neither  a good nor  bad factor,                                                              
but it may cause the investment to be a loss.                                                                                   
                                                                                                                                
REPRESENTATIVE KERTTULA  said she is glad they  are including more                                                              
language,  but she  is still  a little  concerned.   Although  she                                                              
trusts Mr. Usera,  he isn't always going to be there,  and it is a                                                              
lot of  latitude.   She asked  whether the  statement of  risks is                                                              
something the companies had objected to as well.                                                                                
                                                                                                                                
MR. USERA  answered no,  that the companies  didn't object  to the                                                              
division's disclosure form; it is  based on Maine's form, which is                                                              
tried and true.   He said he had  beefed it up a little,  adding a                                                              
few more factors that have to be considered.                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG suggested  to Representative Kerttula that                                                              
it isn't needed there because it could be redundant.                                                                            
                                                                                                                                
Number 1065                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA responded  that  she doesn't  want to  be                                                              
redundant  but is  worried  about latitude  with  the state  form,                                                              
which could  change in future  years.   It would perhaps  make her                                                              
more comfortable  to include the  balance sheet, the  statement of                                                              
risks,  and  the  disclosure  of any  significant  factors.    She                                                              
restated the  need to say  as much as  possible because  Mr. Usera                                                              
won't always be with the division.                                                                                              
                                                                                                                                
MR. USERA answered:                                                                                                             
                                                                                                                                
     At least  in the early part,  we wanted the  latitude to                                                                   
     change the  disclosure form  at will, because  ... we're                                                                   
     interested  in protecting  the  public. ...  If we  find                                                                   
     something  that  the  public should  know  about,  we'll                                                                   
     incorporate  that  in  our   form;  and  we  can  do  it                                                                   
     overnight.   If it's  in statute,  we're hamstrung.   It                                                                   
     may   be  something   you  want  to   revisit,  from   a                                                                   
     legislative  standpoint, perhaps  in  another couple  of                                                                   
     years when  this activity  either becomes stabilized  or                                                                   
     doesn't rear its  ugly head, one or the other.   But you                                                                   
     have further information to go on.                                                                                         
                                                                                                                                
Number 1133                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA asked whether  Mr. Usera really would have                                                              
any problem including the balance sheet and statement of risks.                                                                 
                                                                                                                                
MR. USERA replied:                                                                                                              
                                                                                                                                
     The financial factors - the  income and expense, and the                                                                   
     balance sheet  - they're going  to give that to  us, and                                                                   
     it will be there, in our files  and disclosable. ... Any                                                                   
     investor who says, "I want to  see their balance sheet,"                                                                   
     we'll give  it to them.   But I  don't think we  want to                                                                   
     require that that be given as  a matter of course.  It's                                                                   
     more  paper  ....   Frankly,  the disclosure  forms,  we                                                                   
     tried to keep them short because  the more you disclose,                                                                   
     the less  effect you  have. ... There  comes a point  of                                                                   
     diminishing  returns,  because  the disclosures  are  so                                                                   
     voluminous that nobody reads them.                                                                                         
                                                                                                                                
REPRESENTATIVE  KERTTULA asked  whether the  division will  ensure                                                              
that  the public  understands  the  right to  have  access to  the                                                              
balance sheet.                                                                                                                  
                                                                                                                                
MR. USERA affirmed that, mentioning the division's web site.                                                                    
                                                                                                                                
Number 1204                                                                                                                     
                                                                                                                                
CHAIRMAN KOTT asked whether there  was any objection to Conceptual                                                              
Amendment 2, as amended.                                                                                                        
                                                                                                                                
REPRESENTATIVE KERTTULA said, "Yes."                                                                                            
                                                                                                                                
CHAIRMAN KOTT  announced, nevertheless, that seeing  no objection,                                                              
Conceptual Amendment 2 was adopted.                                                                                             
                                                                                                                                
Number 1230                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG made  a motion  to move  Version N  of HB
190,  (1-LS0576\N,  Bannister,  2/1/00),   as  amended,  from  the                                                              
committee with  individual recommendations  and the  attached zero                                                              
fiscal notes.   There being no objection, CSHB  190(JUD) was moved                                                              
from the House Judiciary Standing Committee.                                                                                    

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