Legislature(1993 - 1994)

04/13/1993 03:00 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  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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