Legislature(2001 - 2002)

04/27/2001 01:10 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 184 - INSURANCE CODE AMENDMENTS                                                                                            
Number 2128                                                                                                                     
CHAIR ROKEBERG  announced that the  last order of  business would                                                               
be  HOUSE BILL  NO.  184, "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."   [Before  the committee  was                                                               
CSHB 184(L&C).]                                                                                                                 
Number 2103                                                                                                                     
BOB  LOHR,   Director,  Division  of  Insurance,   Department  of                                                               
Community &  Economic Development  (DCED), explained that  HB 184                                                               
is the  result of federal legislation  that passed in 1999  - the                                                               
Financial  Services Modernization  Act, also  referred to  as the                                                               
Gramm-Leach-Bliley Act (GLBA).   This Act took  down the barriers                                                               
among insurance, banking, and securities  that were erected right                                                               
after the  [Great Depression]  by the Glass-Steagall  Act.   As a                                                               
result of  GLBA, regulation of  these three sectors  - insurance,                                                               
banking, and securities - has had  to adapt to "the new reality."                                                               
He  noted  that the  Federal  Reserve  was  appointed to  be  the                                                               
"umbrella   regulator"  over   all  sectors,   but  below   that,                                                               
functional [state]  regulation was the  key with respect  to each                                                               
of  the other  sectors,  and, specifically  for insurance,  state                                                               
authority  to regulate  insurance  is preserved.   The  insurance                                                               
sector  is  unique  in  the  federal  picture  because  there  is                                                               
essentially  no  federal  regulation  of  insurance,  unlike  the                                                               
banking and  securities sectors  in which  there is  both federal                                                               
and state regulation.                                                                                                           
MR. LOHR  explained that  under GLBA,  the federal  government is                                                               
requiring  states  to  adopt  specific  standards  for  insurance                                                               
regulation without  which national regulation will  "kick in"; HB                                                               
184  is  designed  to maintain  state  government  authority  for                                                               
regulation of  insurance.   He noted that  there are  three areas                                                               
covered by  HB 184.   One area  pertains to producer  licensing -                                                               
licensing  of agents  and  brokers;  if 29  states  do not  adopt                                                               
licensing  statutes  that  treat  nonresidents  on  a  reciprocal                                                               
basis,  then a  national  system of  licensing  will be  imposed.                                                               
Thus  far 45  states  have introduced  legislation to  accomplish                                                               
reciprocity, which  allows someone  licensed in another  state to                                                               
be granted a nonresident license in  Alaska and vice versa for an                                                               
Alaskan licensee, as  long as there is not a  regulatory issue to                                                               
prevent it such as a  criminal background or other problems found                                                               
by the  regulating agency.   Basically, by  sending money  to one                                                               
location, a  person could be  licensed in  all 50 states  and the                                                               
District of  Columbia through a  24-hour process.   The licensing                                                               
fees would in turn be distributed to the appropriate states.                                                                    
MR. LOHR  said that a second  area covered by HB  184 pertains to                                                               
privacy.  House Bill 184  addresses what information a person may                                                               
share that  is obtained from insurance  applications, which could                                                               
include  financial  information  and/or health  information,  and                                                               
what  degree  of restrictions  are  appropriate  with respect  to                                                               
marketing and  sharing information.   A third area covered  by HB                                                               
184  involves consumer  protection for  banks selling  insurance.                                                               
Currently there are consumer  protection provisions for insurance                                                               
companies, but  now that banks  are permitted to  sell insurance,                                                               
additional provisions  are necessary in order  to ensure consumer                                                               
protection in those areas too.                                                                                                  
Number 1816                                                                                                                     
MR.  LOHR,  in  response  to   questions,  said  that  there  are                                                               
currently  some   barriers  to  nonresident  reciprocity.     One                                                               
provision in HB  184 says that there will  be no "post-licensing"                                                               
barriers, that  is, no  additional barriers  to licensing.   Some                                                               
states,  for  example,  do not  have  very  much  "surplus-lines"                                                               
activity  for a  non-admitted insurer  selling insurance  in that                                                               
state.  Alaska does  have a good deal of "that,"  he said, and as                                                               
a  result,   requires  a  $200,000  bond   from  a  surplus-lines                                                               
licensee.  Some  states, he noted, require up to  a $200,000 bond                                                               
but  other states  do not  require  anything, so  with regard  to                                                               
reciprocity,  "if it's  good  enough in  their  state, it's  good                                                               
enough in  ours," and  while this bond  can become  an additional                                                               
restriction  on licensing,  it also  provides Alaskans  with some                                                               
important consumer  protections.  What  is proposed by HB  184 is                                                               
to maintain the  ability of the director to  have a surplus-lines                                                               
requirement but not  to have it in the  licensing chapter; rather                                                               
to move it from there to a  separate section where it is not tied                                                               
in as a licensing restriction.                                                                                                  
MR.  LOHR mentioned  that trust  accounts  [are an  example of  a                                                               
licensing requirement]; a trust account  is used when an agent or                                                               
broker  is receiving  funds  that are  going to  be  used to  buy                                                               
insurance from the  company - those funds must  be maintained and                                                               
accounted for  separately from any  other funds.   In HB  184 the                                                               
term   "trust   account"   has  been   replaced   by   "fiduciary                                                               
responsibility";  the net  effect is  identical and  the director                                                               
maintains the  authority to require  trust accounts, but  "we de-                                                               
link  it"  from  the  notion of  being  an  additional  licensing                                                               
requirement.    He  opined that  this  terminology  change  would                                                               
satisfy  the  requirement   of  reciprocity  without  sacrificing                                                               
consumer protection.                                                                                                            
REPRESENTATIVE   COGHILL   asked   what  regulations   Mr.   Lohr                                                               
anticipates developing.                                                                                                         
MR. LOHR  said, for example,  that some  of the provisions  of HB                                                               
184  have  delayed  effective  dates,  and  if  the  Division  of                                                               
Insurance determines that additional  regulations are needed, the                                                               
authority  is there  to develop  them; essentially  reenacting by                                                               
regulation what is  currently in statute until  after the delayed                                                               
effective dates.   He noted, however, that  some negotiations are                                                               
occurring at  the national  level because  "we" don't  know quite                                                               
what it takes  to trigger reciprocity since that will  be a "post                                                               
state legislative decision";  once a bill is enacted  in at least                                                               
29  states, that  legislation  will be  submitted  for review  to                                                               
determine whether the states are  reciprocal.  In states that are                                                               
not,  regulations could  be adopted  to fix  the problem  without                                                               
further statutory  change.  On  the issue of  fingerprinting, Mr.                                                               
Lohr  noted  that the  Division  of  Insurance is  attempting  to                                                               
strengthen  the fingerprinting  requirements  by simplifying  the                                                               
process through which fingerprints  of licensee applicants can be                                                               
used to obtain "FBI data" for criminal background checks.                                                                       
Number 1561                                                                                                                     
LINDA  BRUNETTE, Licensing  Supervisor, Central  Office, Division                                                               
of  Insurance, Department  of  Community  & Economic  Development                                                               
(DCED), added  that currently the Division  of Insurance requires                                                               
any individual - both residents  and nonresidents - who transacts                                                               
the business  of insurance and who  is applying for a  license to                                                               
submit a fingerprint card for a criminal background check.                                                                      
MR. LOHR noted that a  separate process for companies grants what                                                               
is called a Certificate of  Authority.  In response to questions,                                                               
he  noted that  the  privacy  provisions begin  on  page 43  with                                                               
Section 59, that  there is no specific reference  in this section                                                               
to GLBA,  that subsection  (b) grants  authority to  the director                                                               
[to  adopt regulations  that provide  protection  for a  person's                                                               
financial  and  health  information],   and  that  paragraph  (5)                                                               
contains  reference  to  the  Health  Insurance  Portability  and                                                               
Accountability Act (HIPAA) as the  default regulations for health                                                               
CHAIR  ROKEBERG  mentioned  that  the House  Labor  and  Commerce                                                               
Standing Committee  favored a default  "opt in"  regarding health                                                               
insurance information.                                                                                                          
MR.  LOHR noted  that directions  for "opt  in", which  prohibits                                                               
sharing,  start  with  subsection  (a), and  that  the  following                                                               
paragraphs itemize exceptions.                                                                                                  
CHAIR ROKEBERG  pointed out that  paragraph (4) contains  a large                                                               
list of  different insurance activities  that would  be exempted;                                                               
he  added  that  he  finds  this  method  of  listing  exceptions                                                               
REPRESENTATIVE  COGHILL noted  that  subsection  (b) still  gives                                                               
authority to make regulations.                                                                                                  
CHAIR ROKEBERG  noted that  while this is  correct, the  issue is                                                               
what type of policy call  the legislature is making, whether "opt                                                               
in" or "opt out."                                                                                                               
MR. LOHR  explained that the  term "opt out" means  that personal                                                               
information  may   be  shared  with  others   unless  the  person                                                               
specifically says  that it  can not be  shared; whereas  "opt in"                                                               
means  that  personal  information   may  not  be  shared  unless                                                               
explicit permission  to do so is  given.  He added  that "opt in"                                                               
is typically  more protective of  privacy than  "opt out."   If a                                                               
person  does   not  respond  to   an  "opt   out"  questionnaire,                                                               
information can  be shared.  If  a person does not  respond to an                                                               
"opt in" questionnaire, the information will not be shared.                                                                     
Number 1241                                                                                                                     
CHAIR ROKEBERG  noted that what  is happening "with  this federal                                                               
law is  that we are  in a position where  we have to  conform our                                                               
statutes  with national  practice."   He said  that the  question                                                               
faced by  the legislature  is which  default Alaskans  will have:                                                               
"opt in" or  "opt out."  He  opined that one of  the goals should                                                               
be  to provide  a "level  playing field"  for local  insurers and                                                               
banks that compete  against national entities.   He remarked that                                                               
he has come  to the conclusion that  national insurance companies                                                               
are making national policy, so  in order for Alaskan companies to                                                               
compete, they should  not be out of step.   He suggested that the                                                               
default for health  insurance should be "opt in"  and the default                                                               
for other types of insurance should  be "opt out."  He added that                                                               
Amendment 1  addresses this issue.   Amendment 1  reads [original                                                               
punctuation provided]:                                                                                                          
          Sec.    21.36.162   Nondisclosure    of   personal                                                                  
     information.    The  director shall  adopt  regulations                                                                  
     regarding   the  release   of   financial  and   health                                                                    
     information  regarding  an   individual  who  seeks  to                                                                    
     obtain, obtains,  or has obtained an  insurance product                                                                    
     or  service  from  a  licensee   that  is  to  be  used                                                                    
     primarily for personal,  family, or household purposes.                                                                    
     The regulations  must be no  less restrictive  than the                                                                    
     model regulations  adopted by the  National Association                                                                    
     of    Insurance    Commissioners   (NCOIL)    Financial                                                                    
     Information  Privacy Protection  Model Act,  adopted by                                                                    
     the NCOIL Executive Committee on  November 17, 2000 and                                                                    
     amended on March 2, 2001.                                                                                                  
MR.  LOHR  explained  that  Amendment 1  would  replace  most  of                                                               
Section 59, beginning on page 43,  line 15, through page 45, line                                                               
MS  BRUNETTE  pointed  out  that Amendment  1  contains  a  typo:                                                               
"National Association of  Insurance Commissioners" should instead                                                               
read  "National   Conference  of  Insurance  Legislators".     As                                                               
corrected, Amendment 1 reads [original punctuation provided]:                                                                   
          Sec.    21.36.162   Nondisclosure    of   personal                                                                  
     information.    The  director shall  adopt  regulations                                                                  
     regarding   the  release   of   financial  and   health                                                                    
     information  regarding  an   individual  who  seeks  to                                                                    
     obtain, obtains,  or has obtained an  insurance product                                                                    
     or  service  from  a  licensee   that  is  to  be  used                                                                    
     primarily for personal,  family, or household purposes.                                                                    
     The regulations  must be no  less restrictive  than the                                                                    
     model  regulations adopted  by the  National Conference                                                                    
     of Insurance Legislators  (NCOIL) Financial Information                                                                    
     Privacy  Protection Model  Act,  adopted  by the  NCOIL                                                                    
     Executive Committee  on November  17, 2000  and amended                                                                    
     on March 2, 2001.                                                                                                          
Number 0855                                                                                                                     
MR. LOHR  said that  this change  would provide  for an  "opt in"                                                               
default  for health  information, and  an "opt  out" default  for                                                               
financial information.   He said  these defaults would be  set as                                                               
"the minimum floor";  the Division of Insurance  would be allowed                                                               
to adopt  regulations that would  provide for no less  than these                                                               
CHAIR ROKEBERG called an at-ease from 3:06 p.m. to 3:13 p.m.                                                                    
Number 0703                                                                                                                     
STEVE  CLEARY, Alaska  Public Interest  Research Group  (AkPIRG),                                                               
testified  via  teleconference.   He  said  that the  AkPIRG  has                                                               
concerns  about  privacy  rights.    [The  AkPIRG]  is  a  strong                                                               
proponent  of an  "opt in"  default for  health information,  but                                                               
does  not support  the use  an  "opt out"  default for  financial                                                               
information.     The  latter  is  inappropriate   and  will  hurt                                                               
consumers, he opined.  He pointed  out that the mailings sent out                                                               
informing consumers that their information  will be shared unless                                                               
they  respond  will  contain  very   fine  print,  and  therefore                                                               
consumers may  not be cognizant  of the fact that  their personal                                                               
financial  information is  going to  be shared  rather than  held                                                               
private.  Mr. Cleary said that  the AkPIRG would also like to see                                                               
included in  HB 184 "a private  right of action."   Right now, he                                                               
explained,  individuals   need  to  wait  for   the  Division  of                                                               
Insurance to act  on their behalf, but a private  right of action                                                               
would allow  individuals to proceed  on their own.   He concluded                                                               
by saying  he would like  to give  further testimony at  the next                                                               
meeting after taking more time to  review HB 184 and its proposed                                                               
CHAIR  ROKEBERG remarked  that the  director of  the Division  of                                                               
Insurance  and various  people from  the  insurance industry  all                                                               
recommend using the NCOIL model  as the baseline for regulations.                                                               
He noted  that he intends  to put a  sunset on that  provision so                                                               
that the legislature can review the issue.                                                                                      
Number 0366                                                                                                                     
JOHN L. GEORGE,  Lobbyist for American Council  of Life Insurance                                                               
(ACLI), National Association of  Independent Insurers (NAII), and                                                               
American  Family Life  Assurance Company  (AFLAC), said  that the                                                               
organizations he  represents favor  the adoption of  Amendment 1;                                                               
without it,  the language  is too  complicated and  far different                                                               
from what is  being applied in other states.   Most companies, on                                                               
the other  hand, are already familiar  with the NCOIL model.   In                                                               
response to  questions, he  said that the  "opt out"  default for                                                               
"non  health insurance"  has  to  be in  place  for  the sake  of                                                               
uniformity.    To have  an  "opt  in"  standard for  "non  health                                                               
insurance" purposes would be different  from what "everyone else"                                                               
has.    The "opt  out"  standard  allows insurance  companies  to                                                               
continue  with  their  everyday business  while  still  providing                                                               
consumers with the option of stating  that they do not want their                                                               
information shared.                                                                                                             
Number 0163                                                                                                                     
SHELDON  E.  WINTERS,  Attorney  at  Law,  Lessmeier  &  Winters,                                                               
Lobbyist for  State Farm Insurance  Company ("State  Farm"), said                                                               
simply   that  State   Farm  supports   Amendment   1  with   the                                                               
understanding that a "sunset" provision will be added.                                                                          
Number 0058                                                                                                                     
REED  STOOPS,  Lobbyist  for   Health  Insurance  Association  of                                                               
America (HIAA),  said simply that  the HIAA supports  Amendment 1                                                               
even though  health information is treated  more stringently than                                                               
financial  information.    Consistency  around  the  country,  he                                                               
opined, is  paramount to the  industry in order to  allow Alaskan                                                               
companies  to do  business under  the same  basic rules  as other                                                               
states.    He  noted  that   the  regulatory  process  for  "this                                                               
particular subject" is fairly extensive under the NCOIL model.                                                                  
TAPE 01-77, SIDE A                                                                                                              
Number 0030                                                                                                                     
CHAIR ROKEBERG  opined that with  the provisions of the  GLBA and                                                               
the  provisions encompassed  by  HB 184  going  into effect,  the                                                               
consumer   will   have   substantially   more   protection   than                                                               
MR. LOHR concurred  with that point.  There is  no protection for                                                               
insurance information  gathered from  applications at  this point                                                               
in time;  whatever level of  privacy standard that is  adopted by                                                               
the  legislature  will   be  an  increase  over   what  there  is                                                               
currently, he said.                                                                                                             
CHAIR ROKEBERG  asked whether Mr.  Lohr would be offended  if the                                                               
legislature  were to  attach a  letter of  intent regarding  "opt                                                               
in/opt out."                                                                                                                    
MR. LOHR  opined that a  letter of  intent is not  necessary; the                                                               
mandate to the director is very  clear, it is not permissive, and                                                               
it  does "set  a  floor."   Therefore,  he  added,  he could  not                                                               
imagine a  scenario under HB 184  where it would not  be "opt in"                                                               
for   health   information   [and   "opt   out"   for   financial                                                               
CHAIR ROKEBERG  argued, however, that the  language simply refers                                                               
to the  NCOIL model and  does not specify what  the legislature's                                                               
policy is with regard to "opt in/opt out."                                                                                      
MR.  LOHR  said,  "it's  your  call, but  I  don't  believe  it's                                                               
Number 0159                                                                                                                     
CHAIR ROKEBERG made a motion  to adopt Amendment 1, as corrected.                                                               
There  being  no  objection,  Amendment   1,  as  corrected,  was                                                               
Number 0203                                                                                                                     
CHAIR ROKEBERG made a motion to adopt Amendment 2, which read                                                                   
[original punctuation provided]:                                                                                                
     *Sec. X  AS 21.18. is  amended by adding a  new section                                                                    
     to read:                                                                                                                   
          Sec.21.18.160.  Valuation of investments.  For                                                                        
     the purposes  of this chapter,  the value or  amount of                                                                    
     an  investment acquired,  held,  or invested  in or  an                                                                    
     investment  practice  engaged   in  under  this  title,                                                                    
     unless otherwise  specified in this title,  must be the                                                                    
     value at which assets of  an insurer are required to be                                                                    
     reported for  accounting purposes under this  title and                                                                    
     as  required under  procedures prescribed  in published                                                                    
     accounting  and  valuation  standards of  the  National                                                                    
     Association of  Insurance Commissioners,  including the                                                                    
     purposes  and  procedures   manual  of  the  securities                                                                    
     valuation office,  the valuation of  securities manual,                                                                    
     the  accounting practices  and  procedures manual,  and                                                                    
     the   annual   statement  instructions   or   valuation                                                                    
     procedures   officially   adopted   by   the   National                                                                    
     Association of Insurance Commissioners.                                                                                    
     *Sec.  X  AS 21.21.010  is  repealed  and reenacted  to                                                                    
          Sec. 21.21.010.  Scope.  This chapter applies                                                                         
     only  to an  investment  and investment  practice of  a                                                                    
     domestic  insurer  and a  United  States  branch of  an                                                                    
     alien insurer  entered through this  state.   Except as                                                                    
     provided  in AS  21.42.370(c),  this  chapter does  not                                                                    
     apply to separate accounts of a life insurer.                                                                              
     *Sec. X AS 21.21.020 (d) is amended to read:                                                                               
          (d) An investment limitation based upon the                                                                           
     amount  of the  insurer's  assets  or particular  funds                                                                    
     shall  relate  to the  assets  or  funds shown  by  the                                                                    
     insurer's  annual statement  most recently  required to                                                                  
     be  [AS   OF  THE   PRECEDING  DECEMBER  31,   DATE  OF                                                                  
     ACQUISITION OF THE INVESTMENT BY  THE INSURER, OR SHOWN                                                                    
     BY  A CURRENT  FINANICAL (stet)  STATEMENT] filed  with                                                                    
     the director.                                                                                                              
     *Sec.  X  AS  21.21.020  is amended  by  adding  a  new                                                                    
     section to read:                                                                                                           
          (e) Determination of compliance with limitations                                                                      
     under this chapter shall use admitted asset values.                                                                        
     *Sec. X AS 21.21.255 is amended to read:                                                                                   
     As provided under 15  U.S.C. 77r-1(b) and (c)(Secondary                                                                    
     Mortgage  Market Enhancement  Act of  1984), securities                                                                    
     that are purchased,  held or invested in  by an insurer                                                                    
     shall be  regulated under AS 21.18.160  [AS 21.18.150],                                                                  
     AS  21.21  [AS  21.21.050, 21.21.260,  21.21.270],  and                                                                  
     other applicable provisions of this title.                                                                                 
     *Sec. X AS 21.21 is amended  by adding a new section to                                                                    
          Sec. 21.21.420.  Regulations.  The director shall                                                                     
     adopt    regulations   regarding    insurance   company                                                                    
     investments  that  are   consistent  with  the  defined                                                                    
     limits  standards  for   investments  of  the  National                                                                    
     Association  of  Insurance  Commissioners,  as  amended                                                                    
     from time to time."                                                                                                        
     *Sec. XX. AS 21.24.030(a) is amended to read:                                                                              
          (a) All deposits required under AS 21.09.090 for                                                                      
     authority  to transact  insurance in  this state  shall                                                                    
     consist  of   certificates  of   deposit  [,]   or  any                                                                    
     combination of  rated credit instruments of  the United                                                                  
     States,  Canada,   or  state   of  the   United  States                                                                  
     [SECURITIES  OF THE  KINDS DESCRIBED  IN AS  21.21.060,                                                                    
     21.21.080, AND 21.21.090].                                                                                                 
     *Sec. XX AS 21.87.220(b) is amended to read:                                                                               
          (b) AS 21.21 shall [THE FOLLOWING SECTIONS] apply                                                                   
     to  the investments  of  service  corporations, to  the                                                                    
     extent  applicable,  and,  for   the  purposes  of  the                                                                    
     application, a service  corporation shall be considered                                                                    
     to be an  insurer.[: AS 21.21.020-21.21.050, 21.21.290,                                                                  
     AND 21.21.300].                                                                                                            
     *Sec.   XX   AS    21.18.120,   21.18.130,   21.18.140,                                                                    
     21.18.150; 21.21.030,  21.21.040, 21.21.050, 21.21.060,                                                                    
     21.21.070, 21.21.080,  21.21.090, 21.21.100, 21.21.110,                                                                    
     21.21.120, 21.21.130,  21.21.140, 21.21.150, 21.21.160,                                                                    
     21.21.170, 21.21.180,  21.21.190, 21.21.200, 21.21.210,                                                                    
     21.21.220, 21.21.225,  21.21.230, 21.21.240, 21.21.245,                                                                    
     21.21.250, 21.21.260,  21.21.270, 21.21.280, 21.21.290,                                                                    
     21.21.300, 21.21.310,  21.21.321, 21.21.330, 21.21.350,                                                                    
     21.21.355, 21.21.360,  21.21.370, 21.21.380, 21.21.390,                                                                    
     21.21.400,    21.21.600;     AS    21.87.340(7),    and                                                                    
     21.87.340(8) are repealed.                                                                                                 
     *Sec. XX The  uncodified law of the State  of Alaska is                                                                    
     amended by adding a new section to read:                                                                                   
          TRANSITION:  REGULATIONS.  The director of                                                                            
     insurance may immediately  proceed to adopt regulations                                                                    
     necessary to  implement the changes  made by  this Act.                                                                    
     The   regulations   take    effect   under   AS   44.62                                                                    
       (Administrative Procedure Act), but not before the                                                                       
     effective date of the statutory change.                                                                                    
        *Sec. XX Sections XX-XX of this Act take effect                                                                         
     January 1, 2002.                                                                                                           
Number 0239                                                                                                                     
CHARLIE MILLER,  Lobbyist for  Alaska National  Insurance Company                                                               
(ANIC), explained  that ANIC  is one  of three  locally domiciled                                                               
insurance companies  in Alaska and  as such  is one of  the three                                                               
companies whose investments are  regulated under the authority of                                                               
Alaska's  Division  of  Insurance.     All  the  other  insurance                                                               
companies that  underwrite and practice  in Alaska  are domiciled                                                               
elsewhere  and  so  their  investments  are  regulated  by  other                                                               
states.   The companies domiciled  in Alaska have  been operating                                                               
under  some pretty  old  statutes that  haven't  been updated  in                                                               
quite some  time.  To  update those statute would  be cumbersome;                                                               
they are lengthy  and difficult to deal with.   At the suggestion                                                               
of the director  of the Division of Insurance, he  spoke with his                                                               
client about supporting an amendment  authorizing the director to                                                               
promulgate  regulations  that  would address  the  regulation  of                                                               
investments.  He  said his client doesn't feel that  there is any                                                               
conflict between what  is good for the industry and  what is good                                                               
for the  regulators.  Primarily, the  consumers' investments need                                                               
to  be protected;  if  there is  a  claim, the  money  has to  be                                                               
available to  pay the claim.   Companies should not  be investing                                                               
the money  in risky  instruments that would  put claims  at risk,                                                               
which,   unfortunately,  takes   a  lot   of  [statutory   and/or                                                               
regulatory] verbiage to ensure.                                                                                                 
MR.  MILLER said  that Amendment  2  is drafted  so as  to put  a                                                               
constraint on  the director:   he/she can  promulgate regulations                                                               
but  they  have  to  be  consistent  with  the  current  National                                                               
Association of  Insurance Commissioners'  (NAIC) Model Acts.   He                                                               
added that the ANIC feels  that this authority is appropriate and                                                               
that  there are  several steps  in the  process during  which the                                                               
industry can  provide input.   The industry also has  recourse in                                                               
court if  it feels that  the standards of consistency  within the                                                               
NAIC model are  not met, as well as the  recourse of returning to                                                               
the legislature for statutory assistance.   He said that the ANIC                                                               
does  not feel  that the  director will  be given  any unfettered                                                               
authority via Amendment  2, rather, that it is to  the benefit of                                                               
both the  industry and  the director to  have the  flexibility to                                                               
change current  statute via  regulation in  order to  ensure that                                                               
the investment possibilities are current, safe, and appropriate.                                                                
REPRESENTATIVE OGAN said  he does not share  Mr. Millers' comfort                                                               
level with  the bureaucracy.   He added that he  views [Amendment                                                               
2]  as  a  major  delegation  of  legislative  authority  to  the                                                               
administration.   He  noted that  he would  feel better  if there                                                               
were an independent administrative hearing process.                                                                             
Number 0550                                                                                                                     
MR. MILLER  said that he and  his client have given  a great deal                                                               
of thought  about this particular  process, and they do  not feel                                                               
that they are  putting themselves at the mercy  of a bureaucratic                                                               
body that  won't respond to their  needs.  This will  merely be a                                                               
promulgation  of regulations  that  have  very clear  guidelines;                                                               
since the regulations have to  be consistent with the NAIC model,                                                               
the  director and  his staff  won't  have much  flexibility.   He                                                               
added that he feels [Amendment  2] constitutes an appropriate use                                                               
of the regulatory process.                                                                                                      
MR. LOHR added that if Amendment  2 is adopted and HB 184 becomes                                                               
law,  he  intends to  promulgate  as  a proposed  regulation  the                                                               
defined  limits version  of the  NAIC's model  law on  investment                                                               
regulation.  This  is an established law, which,  if the Division                                                               
of Insurance were to propose  updating Alaska statute, is exactly                                                               
what would  be proposed.   This would  be the starting  point for                                                               
public  comment  on  a  proposed regulation;  it  would  then  go                                                               
through the  full Administrative  Procedure Act's  public hearing                                                               
process in which the division  would receive public comments, and                                                               
then based  on that  input, a  regulation would  be adopted.   He                                                               
opined that  the final  product of this  process would  look very                                                               
similar to the NAIC's "investment regulation bill."                                                                             
MR.  LOHR added  that there  is broad  public interest  in making                                                               
sure  that  insurance companies  meet  their  obligations to  pay                                                               
claims well  into the  future, and  if the money  that is  now in                                                               
reserve is  not invested wisely, it  may not be available  to pay                                                               
future claims.   He added  that the regulation that  would result                                                               
from  the   aforementioned  process   would  allow   for  updated                                                               
investment  vehicles.     Investment  products  that   have  been                                                               
invented  in the  last 25  years may  currently be  classified as                                                               
suspect  investments simply  because they  were not  available at                                                               
the time the  original statute was developed,  but the regulatory                                                               
process   would  allow   them   to  be   treated  as   legitimate                                                               
investments.   He said  that the  Division of  Insurance supports                                                               
Amendment  2.   He also  remarked that  he has  not heard  of any                                                               
opposition  to  the concept  of  Amendment  2,  and that  at  the                                                               
national level there  have been extensive public  hearings on the                                                               
model during its development.                                                                                                   
CHAIR ROKEBERG called an at-ease from 3:35 p.m. to 3:37 p.m.                                                                    
Number 0825                                                                                                                     
CHAIR  ROKEBERG  asked  whether  there  were  any  objections  to                                                               
Amendment 2.  There being no objection, Amendment 2 was adopted.                                                                
Number 0842                                                                                                                     
CHAIR ROKEBERG  made a  motion to  adopt Conceptual  Amendment 3,                                                               
"which would be a three-year  basic sunset of the privacy rights.                                                               
The conceptual amendment would read  something to the effect that                                                               
'Those provisions  under AS  21.36.162 would  sunset on  the 90th                                                               
day  of   the  next   regular  session,   two  years   after  the                                                               
promulgation or  adoption of the regulations  authorized for that                                                               
Number 0874                                                                                                                     
REPRESENTATIVE MEYER  objected.  He  asked why the  sunset should                                                               
be three years instead of two years.                                                                                            
CHAIR ROKEBERG  explained that  it would be  two years  after the                                                               
regulations were  promulgated, and it  will take about a  year to                                                               
establish the regulations.                                                                                                      
MR. LOHR added that a three-year  sunset would be preferable to a                                                               
two-year sunset  because the division  would experience  a couple                                                               
of   years  of   operating   under  the   regulations  that   are                                                               
REPRESENTATIVE MEYER withdrew his objection.                                                                                    
Number 0967                                                                                                                     
CHAIR ROKEBERG  asked whether there  were any  further objections                                                               
to Conceptual Amendment 3.   There being no objection, Conceptual                                                               
Amendment 3 was adopted.                                                                                                        
[HB 184 was  held over; the hearing  on HB 184 was  recessed to a                                                               
call of  the chair,  tentatively scheduled  for the  afternoon of                                                               

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