Legislature(1993 - 1994)
04/13/1993 03:00 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
Number 415
SB 149 REVISION OF BANKING CODE
WILLIS KIRKPATRICK, DIRECTOR, DIVISION OF BANKING, testified
in support of SB 149. Mr. Kirkpatrick stated that the
current Alaska Banking Code was critically obsolete. The
existing code was taken from Oregon law at the time of
Alaska statehood and has had only minor revisions since
then. The Division of Banking, Securities, and Corporations
has for the past few years been working to identify areas
where changes in the code are needed. These changes fall
into three basic categories:
1) obsolescence concerning today's financial institution
marketplace;
2) obsolescence in addressing problems or failing banks; and
3) the need for a banking law that could provide additional
economic development opportunities.
MR. KIRKPATRICK went on to explain these changes in detail.
(the details are in a position paper in the committee files)
Number 560
MICHAEL BURNS, PRESIDENT, KEY BANK, testified in support of
SB 149. Mr. Burns spoke specifically on the section of the
bill which would allow the banking industry to sell
insurance. Mr. Burns stated that this section would allow
the banking industry to compete much the same as Allstate,
the insurance company, competes with the banks in providing
loans. Mr. Burns stated that he didn't see any reason that
banks should be prohibited from competing in the insurance
market.
MR. BURNS stated that the committee would hear the argument
that banks could be in the position of exerting undue
influence on loan applicants to purchase insurance from
them, but Mr. Burns believes this argument is wrong as the
bill contains anti-tie-in clauses that would prohibit this.
REP. MACKIE questioned how the banking industry expected
small independent insurers to stay in business with the
banking industry competing.
TAPE 93-38, SIDE A
Number 001
MR. BURNS replied that the market place would take care of
itself. If the banking industry doesn't provide a better
product, then the insurance agency will get the business.
Number 005
RICHARD HARDCASTLE, PRESIDENT, HARDCASTLE/DAVIES INSURERS OF
KETCHIKAN, testified against the section of SB 149 that
would allow banks to sell insurance. Mr. Hardcastle said he
believes allowing banks to sell insurance was unfair
competition and pointed out two of the more important
reasons:
1) large capitalized institutions have a tremendous number
of captive prospects in their existing files can use their
influence to sell them insurance; and
2) loan applicants would feel obligated to buy insurance
from banks in order to get the loan.
Number 020
MR. HARDCASTLE stated that the banking industry suggests
that the anti-tie-in provisions in law would prevent any
problems, but as a practical matter they just don't work.
Number 025
MR. HARDCASTLE suggested the committee delete the section of
the bill allowing banks in the insurance business and pass
the bill out.
Number 050
ALAN SHATTUCK, PRESIDENT, SHATTUCK AND GRUMMET INSURANCE,
spoke against sections 2, 4 and 5. Mr. Shattuck said he
believes these sections take too much of the legislative
oversight away and put it into regulations.
MR. SHATTUCK dittoed Mr. Hardcastle's remark that anti-tie-
in laws do not work well.
Number 073
HOWARD JAEGAR, VICE PRESIDENT, SHATTUCK AND GRUMMETT, AND
PRESIDENT OF ALASKA INDEPENDENT INSURANCE AGENTS AND
BROKERS, stated that his group was against allowing banks to
sell insurance. Mr. Jaegar added that allowing banks to
sell insurance was in direct conflict to the very businesses
they hold deposits for or lend money to.
MR. JAEGAR stated that allowing large banking organizations
to compete with local merchants. Because banks control the
extension of needed credit, they have unlimited access and
there would be a temptation to exert coercion to sell other
products.
Number 158
REP. MACKIE stated that it was his belief that small
insurers would be hurt and he therefore moved to delete page
24, line 18, of section 47.
Number 230
REP. PORTER objected and expressed his concern that he
didn't have enough information yet and he would like to hear
from the other persons waiting on teleconference.
Number 257
REP. GREEN added that he wanted further information of
sections 4 and 5 of the bill.
Number 280
KAREN HOFSTAD, INDEPENDENT INSURER, testified from
Petersburg and noted that she had sold insurance in another
state that allowed banks to sell insurance and she saw that
it caused a lot of conflict and abuse. Ms. Hofstad stated
that when banks loan money and provide insurance, there is a
subtle indication that the person or business should buy
from the bank.
MS. HOFSTAD suggested the committee delete sections 2, 4 and
5 from the bill.
Number 305
SUSAN ERICKSON testified from Petersburg and echoed Ms.
Hofstad's comments.
Number 310
JIM SARVELA, CHIEF FINANCIAL OFFICER, 1ST BANK, testified
from Ketchikan that his concern was that banks be on an
equal playing field with other institutions. Mr. Sarvella
pointed out that the other institutions that primarily sell
insurance also make loans. This bill would give all the
participants equal opportunities in the marketplace.
Number 330
JACK DAVIES, HARDCASTLE AND DAVIES INSURANCE, stated the
impact of section 2 is anti-consumer. Mr. Davies added that
as far as he knew there was never a consumer coming before
asking that banks be allowed to sell insurance.
Number 343
CRAIG INGHAM, PRESIDENT OF MT. MCKINLEY BANK, noted that
currently Allstate, State Farm, etc., are involved in the
credit side of the equation in offering loans. Mr. Ingham
further stated that the banks would create a separate
corporation or subsidiary to sell this insurance, which
would alleviate any undue pressure a borrower might feel.
Number 368
GORDON DEPUE urged deletion of section 2 of the bill. Mr.
Depue said he does not believe that anti-tie-in provisions
would prohibit the banks from pressuring customers to buy
insurance on property they are borrowing from them for.
Number 374
GARY ROTH, PRESIDENT, DENALI STATE BANK, testified that SB
149 should pass as is. Mr. Roth said he believed that this
was a turf war and that compromise was not possible.
Number 416
JOHN SWEENEY echoed comments above against section 2 of the
bill.
Number 431
DAVID STRATTON, PRESIDENT, ALASKA LIFE UNDERWRITER, stated
that section 2 must be deleted. Mr. Stratton quoted Senator
Murkowski as being against banks getting into the insurance
industry.
Number 451
KEITH SILVER stated that he supports the removal of section
2 of SB 149. Mr. Silver dittoed the remarks of Mr. Stratton
and the others.
Number 460
JOHN GEORGE, REPRESENTING THE AMERICAN COUNCIL OF LIFE
INSURANCE, testified that an asset that the independent
insurance agent has is his expiration dates. Mr. George
explained that this is a list of all the policy holders and
the dates their policies expire. Mr. George pointed out
that if section 2 passes it would in effect give the
independent insurance agencies' most tightly guarded secret
away to their competitor. Mr. George suggested that this
would give an unfair advantage to the competitors.
MR. GEORGE pointed out that sections 4 and 5 should be
deleted also to eliminate the possibility of a back door
opening for banks to get into the insurance business.
Number 485
REP. MACKIE responded that according to Mr. Kirkpatrick
deleting section 2 would be sufficient since federal law
specifically requires that insurance sales be specifically
allowed in state statute.
REP. PORTER removed his earlier objection to Rep. Mackie's
amendment to delete section 2 from the SB 149.
REP. SITTON moved SB 149 with individual recommendations,
fiscal note and unanimous consent.
No objections were heard; it was so ordered.
CHAIRMAN HUDSON adjourned the committee at 5:15 p.m.
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