Legislature(1995 - 1996)

05/01/1995 03:08 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 SB 53 - OMNIBUS INSURANCE REFORM                                            
                                                                               
 Number 610                                                                    
                                                                               
 CHAIRMAN KOTT stated that SB 53 was introduced by the Senate                  
 Judiciary Committee.  Having no one present from that committee,              
 he asked Marianne Burke to give the committee an overview.                    
                                                                               
 MARIANNE BURKE, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF                
 COMMERCE AND ECONOMIC DEVELOPMENT, testified that CSSB 53(JUD)                
 was a successor bill to SB 362 and HB (indisc.--end of tape)                  
                                                                               
 TAPE 95-54, SIDE B                                                            
 Number 000                                                                    
                                                                               
 MS. BURKE continued that these were not passed.  SB 53 includes               
 language to address new areas of insurance regulation, it adopts              
 new accreditation standards added by the National Association of              
 Insurance Commissioners (NAIC) and makes needed corrections to                
 the insurance statutes.  These changes will bring statutes up to              
 date with the insurance market and allow the division to maintain             
 its NAIC accreditation, granted in  December of 1992.  A zero                 
 fiscal note was submitted.                                                    
                                                                               
 MS. BURKE explained that the changes to the bill made between                 
 legislative sessions were minor.  These include language cleanup              
 to include the 1992 change in license classes from agent and                  
 broker to producer, and general agent to managing general agent.              
 It contains the revision of language pertaining to the standard               
 valuation law.  The cleanup language replaces a reference to the              
 Federal Savings and Loan Insurance Corporation, which no longer               
 exists, with the Federal Deposit Insurance Corporation.  It adds              
 to acts considered fraudulent insurance acts.  The additions                  
 include:  Falsely altering an insurance document; knowingly                   
 possessing a forged insurance document; knowingly issuing a                   
 forged insurance document; and establishes penalties for these                
 acts.                                                                         
                                                                               
 Number 147                                                                    
                                                                               
 MS. BURKE stated that the bill clarifies that a reciprocal                    
 insurer, insuring municipalities or nonprofit utilities or                    
 providing marine insurance, do not have to participate in the                 
 assigned risk plan for motor risk coverage.  It includes the                  
 division's actuary and assistant actuary as exempt employees.                 
 The bill includes 22 sections related to the NAIC accreditation,              
 such as:  Regulation of risk retention groups and purchasing                  
 groups as allowed by federal law; modifying the examination                   
 hearing provision to allow for closing it to the public under                 
 certain circumstances; requiring insurer financial statement                  
 filing to the NAIC on electronic media; requiring disclosure by               
 an insurer of material transactions of purchase, disposal of                  
 assets or reinsurance; (Indisc). reinsurance; risk based capital              
 provisions; reserve calculations; actuarial opinions; and holding             
 company reporting requirements.  It allows the Director to file               
 civil actions for damages caused by violations of statutes by                 
 managing general agents, reinsurance and mediary brokers,  and                
 reinsurance and mediary managers.  It also cleans up the                      
 definition of "member insurer" of the Life and Disability                     
 Guarantee Association.                                                       
                                                                              
 MS. BURKE continued that some other key provisions include:                   
 Authority to respond to catastrophic situations; the ability to               
 suspend the certificate of authority of an insurer for                        
 non-renewal; providing for voluntary relinquishment of an Alaska              
 Certificate of Authority by an insurer domiciled in another                   
 state; authority to refund or grant credits for overpayment of                
 premium taxes by an insurer due to an error or misinterpretation;             
 provides requirements for licensing of U.S. branches of alien,                
 non U.S. domiciled insurers, to allow these insurers to use                   
 Alaska as a base of operation for business written within the                 
 United States.  It provides authority to require continuing                   
 education for licensed insurance (indisc.--coughing); it requires             
 the insurance premium fiduciary accounts of resident insurance                
 licensees to be located in Alaska; it provides that a single                  
 fiduciary bond can cover multiple producer office locations; it               
 adds incorporated insurers to the definition of a group to                    
 reflect the recent changes at Lloyd's of London; it clarifies                 
 when rate changes may be made to outstanding policies; it                     
 provides that false statements made in regard to a claim may                  
 result in prosecution under Alaska law; it allows the director to             
 specify the format and content of rate and policy form filings                
 made to the Division;   it clarifies health insurance coverage                
 for new born and adoptive children; it provides for re-                       
 domestication of insurers domiciled in Alaska and moving to                   
 another state or, requesting to move their domicile from another              
 state to Alaska; it provides for the voluntary surrender of an                
 Alaska Certificate of Authority by a domestic insurer; it                     
 provides the authority to request quarterly financial statements              
 from all entities regulated by the Division; it allows insurers               
 to pay claims by electronic wire transfer; it provides authority              
 to the director to specify requirements for the electronic data;              
 and, it otherwise makes corrections and clarifies statutory                   
 provisions.                                                                   
                                                                               
 MS. BURKE said the bill also incorporates amendments suggested by             
 the division.  A new section was added giving the director                    
 discretion to accept an insurers examination report from a                    
 nonaccredited state, and it gives the director clear authority to             
 require extra examination supervision if a state was performing               
 substandard examination.  She said revisions were made to the                 
 section pertaining to risk retention groups to avoid conflicts                
 with federal law.  Section 35, dealing with continuing education              
 requirements for insurance licensees, was amended to include                  
 language agreed to by the division and the Alaska Independent                 
 Agents and Brokers Association.  The fraudulent insurance acts                
 provision was modified to reflect recommendations by the DOL.                 
 Language was added to various health insurance contracts statutes             
 to make them applicable to health maintenance organizations.  The             
 section of (indisc.) independent counsel, conflicts of interest               
 counsel was deleted.  This provision was not authored by the                  
 division, and legal counsel advised them that it was neither                  
 necessary or consistent with the Alaska Supreme Court decision                
 Chi of Alaska, Incorporated versus Employers Reinsurance.  The                
 bill was also amended by the Senate Judiciary Committee to remove             
 the Consumer Credit provisions.  Senator Taylor agreed to sponsor             
 a separate piece of legislation on consumer credit which would                
 incorporate some of the amendments suggested during the Senate                
 Judiciary Committee hearing process.  That bill is currently                  
 being drafted.                                                                
                                                                               
 MS. BURKE continued that minor wording changes were made in                   
 Section 15, changing the reference to a Canadian or British                   
 chartered accountant, to make the reference more global.  Section             
 32 was amended to include the wording, "or the aggregate of a                 
 series of related transactions", to close a potential holding                 
 company reporting loop hole.  In Section 82 there was a typo                  
 correction, changing the word "and" to "or".                                  
                                                                               
 Number 191                                                                    
                                                                               
 REPRESENTATIVE ELTON referred to the Chi (indisc.) reference and              
 said the back-up material says page 63.  He asked what section                
 was it in?                                                                    
                                                                               
 MS. BURKE responded the section had been removed.                             
                                                                               
 Number 207                                                                    
                                                                               
 REPRESENTATIVE KUBINA asked Chairman Kott what his intentions for             
 the bill were.                                                                
                                                                               
 Number 209                                                                    
                                                                               
 CHAIRMAN KOTT commented that it was his intent, as always, to                 
 have a good understanding of the bill before taking action.                   
                                                                               
 Number 232                                                                    
                                                                               
 REPRESENTATIVE MASEK asked if there were other committee                      
 referrals.                                                                    
                                                                               
 Number 233                                                                    
                                                                               
 CHAIRMAN KOTT answered no.                                                    
                                                                               
 Number 237                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG observed this was a very complex bill                 
 that needed to be closely looked at.                                          
                                                                               
 Number 242                                                                    
                                                                               
 REPRESENTATIVE ELTON had a concern about slowing things down on               
 what is purported to be technical changes.  He referred to when               
 accreditation comes up and asked what happens if this gets                    
 stalled this session.                                                         
                                                                               
 Number 250                                                                    
                                                                               
 MS. BURKE said many of the 22 items listed must be in place by                
 January 1, 1996.                                                              
                                                                               
 Number 254                                                                    
                                                                               
 REPRESENTATIVE ELTON stated he had asked the question because he              
 was in the Department of Commerce at the time the program became              
 accredited.  It eased the ability of a state to work with other               
 states on cross jurisdictional matters.  It meant that a lot of               
 duplicative things did not need to be done because the program                
 was nationally accredited.  He pointed out if this was not done               
 prior to accreditation, it would complicate matters not only for              
 the division but also for insurers who want to do business in the             
 state.                                                                        
                                                                               
 REPRESENTATIVE BRIAN PORTER joined the meeting at 4:13 p.m.                   
                                                                               
 Number 268                                                                    
                                                                               
 CHAIRMAN KOTT asked Ms. Ward if the provisions were not                       
 implemented, was it her interpretation they would lose                        
 accreditation or was it that they "may" lose accreditation.                   
                                                                               
 MS. BURKE responded "may."                                                    
                                                                               
 CHAIRMAN KOTT stated that it should be on the record that there               
 is no guarantee we would lose accreditation.                                  
                                                                               
 Number 280                                                                    
                                                                               
 REPRESENTATIVE KUBINA stated he had never looked at a bill like               
 this on the insurance industry.  If they were to have a                       
 subcommittee on the bill, he would volunteer to be on it.  He                 
 said he wouldn't feel comfortable at this time to pass the bill               
 out of committee.                                                             
                                                                               
 Number 287                                                                    
                                                                               
 MS. BURKE pointed out SB 53 had also been referred to the House               
 Judiciary Committee; however, there is a memorandum with all                  
 members agreeing to waive it from committee.                                  
                                                                               
 Number 291                                                                    
                                                                               
 REPRESENTATIVE PORTER noted that this was the same bill that had              
 made it through the system last year; however, for some reason it             
 wasn't passed.  There is no one who doesn't like the bill.                    
                                                                               
 Number 301                                                                    
                                                                               
 CHAIRMAN KOTT said he did not want to send the bill to                        
 subcommittee but would hold the bill over to Wednesday's                      
 calendar.  He asked committee members to look at any important                
 sections and contact the Division of Insurance if they had                    
 questions.                                                                    

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