Legislature(2001 - 2002)

04/25/2001 03:30 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 184-INSURANCE CODE AMENDMENTS                                                                                              
[Contains discussion of HB 211, HB 106, and SB 138]                                                                             
CHAIR MURKOWSKI announced  that the next 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 a                                                               
proposed  committee  (CS),  version 22-GH1025\f,  Ford,  4/19/01,                                                               
adopted as a work draft on 4/20/01]                                                                                             
CHAIR MURKOWSKI addressed Bob Lohr,  the Director of the Division                                                               
of  Insurance, and  stated that  during the  last hearing  on the                                                               
bill,  [the   committee]  wanted   to  make  sure   that  privacy                                                               
provisions  with regard  to financial  institutions and  what was                                                               
going on with the insurance were  somewhat similar.  She said she                                                               
assumed that the  proposed F.2 amendment is the  product of those                                                               
concerns.   Amendment F.2  [22-GH1025\F.2, Ford,  4/25/01], which                                                               
was later adopted as Amendment 1, read:                                                                                         
     Page 25, line 30, through page 26, line 9:                                                                                 
          Delete all material and insert:                                                                                       
               "Sec. 21.36.162.  Nondisclosure of an                                                                          
          individual's personal financial and personal                                                                        
          health information.  (a)  A person may not                                                                          
          disclose personal financial or personal health                                                                        
          information regarding an individual who seeks to                                                                      
          obtain, obtains, or has obtained an insurance                                                                         
          product or service, except when and only to the                                                                       
          extent that the disclosure is                                                                                         
                    (1)  authorized by the individual whose                                                                     
          personal financial or personal health information                                                                     
          is sought to be disclosed;                                                                                            
                    (2)  required by federal or state law                                                                       
          or federal or state regulation;                                                                                       
                    (3)  compelled by a subpoena, search                                                                        
          warrant, or other order issued by a court or                                                                          
          administrative agency of competent jurisdiction;                                                                      
                    (4)  for the performance of any of the                                                                      
          following     insurance      functions:     claims                                                                    
          administration; claims adjustment and management;                                                                     
          detection, investigation, or reporting of actual                                                                      
          or   potential    fraud,   misrepresentation,   or                                                                    
          criminal activity; underwriting; policy placement                                                                     
          or issuance; loss control; rate making and                                                                            
          guaranty fund functions; reinsurance and excess                                                                       
          loss insurance; risk management; case management;                                                                     
          disease management; quality assurance; quality                                                                        
          improvement; performance evaluation; provider                                                                         
          credentialing verification; utilization review;                                                                       
          peer review activities; actuarial, scientific,                                                                        
          medical, or public policy research; grievance                                                                         
          procedures;     internal     administration     of                                                                    
          compliance, managerial, and information systems;                                                                      
          policyholder    service    functions;    auditing;                                                                    
          reporting;     database security; administration                                                                      
          of disputes and inquiries; external accreditation                                                                     
          standards; the replacement of a group benefit                                                                         
          plan or workers' compensation policy or program;                                                                      
          activities in connection with a sale, merger,                                                                         
          transfer, or exchange of all or part of a                                                                             
          business or    operating unit; or other functions                                                                     
          that      the director may approve as necessary                                                                       
          for the performance of the above functions and                                                                        
          that are fair and reasonable to the interest of                                                                       
          the insurance consumer;                                                                                               
                    (5)      permitted   without   requiring                                                                    
          authorization under federal privacy rules adopted                                                                     
          under 42 U.S.C. 300gg - 92 (Health Insurance                                                                          
          Portability and Accountability Act of 1996) by                                                                        
          the United States Department of Health and Human                                                                      
          Services; or                                                                                                          
                    (6)  required to enforce the person's                                                                       
          rights or the rights of other persons engaged in                                                                      
          carrying   out   an   insurance   transaction   or                                                                    
          providing an insurance product or service that an                                                                     
          individual requests or authorizes.                                                                                    
               (b)  The director may adopt regulations to                                                                       
          implement this section that provide not less than                                                                     
          the protection of an individual's personal                                                                            
          financial   and    personal   health   information                                                                    
          provided under (a) of this section.                                                                                   
               (c)  This section does not restrict                                                                              
          disclosure of publicly available information.                                                                         
               (d)  This section does not prohibit a person                                                                     
          from disclosing personal financial information if                                                                     
                    (1)  the disclosure is necessary to                                                                         
          market a financial product or service of the                                                                          
          person, including a financial product or service                                                                      
          that is jointly offered, endorsed, or sponsored                                                                       
          by another person under a written contract;                                                                           
                    (2)      the    person   receiving   the                                                                    
          information agrees in writing not to disclose or                                                                      
          use the information other than to carry out the                                                                       
          purposes for which the person disclosed the                                                                           
          information; and                                                                                                      
                    (3)      the   person   disclosing   the                                                                    
          information provides written notice to the                                                                            
          individual who is the subject of the information                                                                      
          and the notice includes                                                                                               
                         (A)  the information that the                                                                          
          person collects;                                                                                                      
                         (B)  the information that will be                                                                      
          disclosed; and                                                                                                        
                         (C)  to whom the information will                                                                      
          be disclosed.                                                                                                         
               (e)  For purposes of this section,                                                                               
                    (1)  "personal financial information"                                                                       
          means any information or data about a person that                                                                     
          is not personal health information;                                                                                   
                    (2)  "personal health information"                                                                          
          means any information or data except age or                                                                           
          gender, whether oral or recorded in any form or                                                                       
          medium, created by or derived from a health care                                                                      
          provider or other person that relates to                                                                              
                         (A)  the past, present, or future                                                                      
          physical, mental, or behavioral health or                                                                             
          condition of an individual;                                                                                           
                         (B)  the provision of health care                                                                      
          to an individual; or                                                                                                  
                         (C)  payment for the provision of                                                                      
          health care to an individual;                                                                                         
                    (3)  "publicly available information"                                                                       
          means any information that a person has                                                                               
          reasonable basis to believe is lawfully made                                                                          
          available to the general public from                                                                                  
                         (A)  federal, state, or local                                                                          
          government records;                                                                                                   
                         (B)  widely distributed media; or                                                                      
                         (C)  disclosures to the general                                                                        
          public that are required to be made by federal,                                                                       
          state, or municipal law."                                                                                             
Number 0330                                                                                                                     
BOB  LOHR,   Director,  Division  of  Insurance,   Department  of                                                               
Community and  Economic Development,  came forth and  stated that                                                               
Chair Murkowski was correct.  He  stated that the Senate has been                                                               
considering a companion  bill [SB 138] to this one,  which is now                                                               
in the form of a Senate  Labor and Commerce Standing Committee CS                                                               
in  front  of the  Senate  Judiciary  Standing Committee.    Both                                                               
committees  have  taken  the  approach   of  mandating  that  the                                                               
Division  of   Insurance  come  up  with   regulations  that  are                                                               
consistent  with, but  no  less restrictive  of,  privacy in  the                                                               
Gramm-Leach-Bliley  Title  Five.   He  stated  that the  division                                                               
would  prefer the  duty of  adopting regulations  to make  all of                                                               
this consistent.   He emphasized that [the  division] still feels                                                               
that is the best approach to  getting a good privacy standard for                                                               
Alaskans  with respect  to  insurance  financial information  and                                                               
insurance health information.   This is what  the amendment would                                                               
MR. LOHR  explained that  subsection (d)(3)  of the  amendment is                                                               
the one  difference between the  banking marketing  exemption and                                                               
the insurance  approach.   It would  require notification  to the                                                               
individual that joint marketing  arrangements might occur.  Under                                                               
this approach, in  the bill, it would provide an  opt-out or opt-                                                               
in.   The  individuals are  simply qualifying  for an  exemption;                                                               
however, they would at least  receive notification that this type                                                               
of joint marketing could occur.   He noted that some reviewers of                                                               
the amendment  have asked why  that wouldn't give them  opt-in or                                                               
opt-out,  and why  a customer  couldn't be  allowed to  say, "You                                                               
tell me you want to do  joint marketing; I don't think you should                                                               
with my data."  He explained that that would be a kind of opt-                                                                  
out approach  imbedded in paragraph  (d)(3).  He  emphasized that                                                               
that is not  the way it is currently drafted,  but is an approach                                                               
the committee may wish to consider.                                                                                             
REPRESENTATIVE  ROKEBERG stated  that  he  is uncomfortable  with                                                               
joining  the health  insurance information  with other  financial                                                               
information.   He  said  he thought  [the  committee] had  talked                                                               
about  having very  stringent confidential  and/or opt-in  health                                                               
insurance, without exceptions.                                                                                                  
Number 0159                                                                                                                     
CHAIR  MURKOWSKI  stated  that  she understands  that  with  this                                                               
amendment,  personal   information  is   opt-in,  and   the  only                                                               
exception is to  financial information.  The  exceptions that are                                                               
in paragraph  (4) [on page  1 of the  amendment] are part  of the                                                               
NAIC  (National Association  of  Insurance Commissioners)  model;                                                               
therefore, they are not new.                                                                                                    
MR. LOHR  stated that Chair  Murkowski was  correct.  He  said he                                                               
doesn't believe that this marketing  exemption would be available                                                               
for health  information; as  a result,  the stricter  standard is                                                               
CHAIR MURKOWSKI  referred to page  2, line 16 [subsection  (d) of                                                               
the amendment], and said she read  that as being an exception for                                                               
the  financial  information,  and  that it  does  not  apply  for                                                               
personal health information.                                                                                                    
MR. LOHR responded that Chair Murkowsky was correct.                                                                            
REPRESENTATIVE ROKEBERG  remarked that the format  of commingling                                                               
both the health and the  financial information leaves it open for                                                               
interpretation.   He stated that  he is not comfortable  with the                                                               
drafting language, because it is not clear.                                                                                     
MR. LOHR  agreed with  Representative Rokeberg.   He  stated that                                                               
the division had prepared redundant  language for both the health                                                               
and financial information  to separate the notion  of health from                                                               
privacy.  He  said he was advised  by staff and by  the office of                                                               
the Attorney  General that that was  unnecessary; therefore, they                                                               
were  combined.   However, he  said the  division has  prepared a                                                               
version  that will  allow completely  separate  sections for  the                                                               
health information and the financial information.                                                                               
REPRESENTATIVE  ROKEBERG stated  that  he  is also  uncomfortable                                                               
with  the   "laundry  list"  of   activities  in   paragraph  (4)                                                               
[subsection (a), page 1 of the amendment].                                                                                      
TAPE 01-68, SIDE A                                                                                                              
Number 0076                                                                                                                     
MR.  LOHR  clarified that  the  language  [in paragraph  (4)]  is                                                               
analogous to  a bill title.   It is lengthy and  involved because                                                               
it is designed  to delimit what an insurance company  may do with                                                               
that exemption.  By being  so precise in each individual element,                                                               
it  covers  regulations  on  privacy  from  the  NAIC  that  were                                                               
determined to be appropriate to  allow insurance companies to do.                                                               
It  does not  have vague  language, which  could then  be broadly                                                               
interpreted in  such a way  as to fit  in some type  of exemption                                                               
under the guise of administrative  operations of the company.  He                                                               
stated that  the elements  of subsection  (a)(4) are  designed to                                                               
allow  an insurance  company to  do  the business  for which  the                                                               
financial or health information is gathered in the first place.                                                                 
REPRESENTATIVE  ROKEBERG  stated  that he  thinks  paragraph  (6)                                                               
[subsection  (a), page  2  of  the amendment]  is  broad; yet  it                                                               
provides the  protections without having  to list every one.   He                                                               
asked  whether the  intention of  paragraphs  (4) and  (6) is  to                                                               
allow the activities of health insurance to be conducted.                                                                       
MR. LOHR  responded that paragraph  (6) appears  to be more  of a                                                               
general statement.                                                                                                              
CHAIR  MURKOWSKI stated  that language  taken  directly from  the                                                               
NAIC regulations has the whole  "laundry list," as does paragraph                                                               
(6).  She asked where the list of regulations came from.                                                                        
MR. LOHR answered that the  list came from the model regulations.                                                               
He  explained that  once the  Gramm-Leach-Bliley  Act (GLBA)  was                                                               
adopted, the NAIC  began a process of forming a  working group of                                                               
commissioners from  various states and taking  detailed testimony                                                               
from  insurance  companies,   interested  parties,  and  consumer                                                               
groups.   The regulations  are consistent with  the GLBA,  but in                                                               
some respects  they go beyond it.   For example, with  respect to                                                               
health  information,  GLBA  does  not  restrict  uses  of  health                                                               
information; however,  the model regulations that  NAIC developed                                                               
address that.  He added that  [the list in paragraph (4)] is what                                                               
is appropriate for  a company to do, while not  allowing a lot of                                                               
"wiggle  room" in  terms  of defining  an  individual element  of                                                               
administrative practice by that company.                                                                                        
Number 0407                                                                                                                     
REPRESENTATIVE ROKEBERG  stated that with HB  106 [the committee]                                                               
was  trying to  look  at the  smaller  financial institutions  in                                                               
Alaska  and put  them on  equal footing  with national  insurance                                                               
companies.   He  asked how  many domestic  insurers there  are in                                                               
MR.  LOHR  answered  that  there   are  nine  domestic  insurance                                                               
REPRESENTATIVE  ROKEBERG  asked  Mr.  Lohr if  it  would  be  his                                                               
opinion  that  those  smaller, local  companies  could  use  some                                                               
assistance,  particularly   given  GLBA,   to  do   the  expanded                                                               
MR. LOHR  responded that there  has not been  substantial comment                                                               
to the division about the provisions of this bill.                                                                              
REPRESENTATIVE  ROKEBERG stated  that  this language  is not  the                                                               
same language in  [HB 106].  He  said this is more  of an opt-out                                                               
situation, without much in the way of sideboards.                                                                               
MR. LOHR responded  that it is neither opt-in nor  opt-out in the                                                               
sense that a company that wishes  to engage in joint marketing is                                                               
not  required  to  notify  customers of  its  plan  to  [disclose                                                               
personal information].   He added  that paragraph (d)(3)  [in the                                                               
amendment]  is an  exemption to  the requirement  for opt-in,  as                                                               
proposed in this amendment.                                                                                                     
CHAIR  MURKOWSKI asked  whether this  is an  expansion from  when                                                               
[the committee]  first started.   She said initially it  was opt-                                                               
out with regard  to financial information and  opt-in with regard                                                               
to  personal health  information.   Now, it  is still  opt-in for                                                               
personal health  information, but  neither "here nor  there" with                                                               
financial information.                                                                                                          
MR.  LOHR  agreed, and  stated  that  traditionally opt-in  is  a                                                               
tighter form of  privacy protection than opt-out.   However, that                                                               
is not  the case when  a sufficiently large exemption  is created                                                               
with opt-in that  doesn't require opt-in or  opt-out; opt-in then                                                               
looks more permissive.                                                                                                          
Number 0726                                                                                                                     
CHAIR MURKOWSKI asked:   In order to change this  so it is opt-in                                                               
for  everything,  with  an  exception  to  opt-in  for  financial                                                               
information,  would  paragraph  (d)(3) [of  the  amendment]  also                                                               
allow  the  consumer  to  say  he  or  she  does  not  want  that                                                               
information to be shared?                                                                                                       
MR. LOHR responded that [it could be fixed that way].                                                                           
CHAIR MURKOWSKI  stated that the  opt-in provision  in subsection                                                               
(a)(1) [of the  amendment] explains that it has  to be authorized                                                               
by  the individual  whose  information is  being  sought, but  it                                                               
doesn't require that the authorization  be in writing.  She asked                                                               
if written consent would be one of the overall requirements.                                                                    
MR. LOHR responded that it is hard  for him to see how this would                                                               
require written  consent.  He  recalled a debate  about switching                                                               
from  one long-distance  telephone  company to  another, and  the                                                               
level  of proof  that is  required from  the person  intending to                                                               
switch.   He  stated that  the regulatory  commission does  allow                                                               
voice-mail messages, which  is easier for the  customer, but puts                                                               
the customer  at some  risk.  [With  the referenced  section], he                                                               
said it is a policy call of  whether it is worth the extra burden                                                               
on the company  in terms of gathering [the written  consent].  He                                                               
noted that  the health information  is more restrictive  and does                                                               
require a written consent.                                                                                                      
Number 0887                                                                                                                     
KATIE CAMPBELL,  Life and Health Actuary,  Division of Insurance,                                                               
Department of Community & Economic  Development, stated that this                                                               
is an oversight;  it should actually be authorized  in writing or                                                               
in electronic form, which is consistent with the NAIC model.                                                                    
CHAIR MURKOWSKI asked if "electronic form" would be an e-mail.                                                                  
MS. CAMPBELL answered yes.  She  added that it may be unnecessary                                                               
to put  "electronic form" [in  the amendment], because  there may                                                               
be another provision that  would allow electronic [communication]                                                               
to count as written authorization.                                                                                              
CHAIR  MURKOWSKI stated  that the  model regulations  provide for                                                               
the administration  of consumer disputes and  inquiries; however,                                                               
page  1,  line 23,  paragraph  (a)(4)  [of the  amendment]  reads                                                               
"administration of  disputes and  inquiries".  She  asked whether                                                               
there was a reason to delete "consumer".                                                                                        
MR. LOHR  answered that  there was  no intent  to change  what it                                                               
said, and  [the division] would support  [the committee's] adding                                                               
Number 1026                                                                                                                     
REPRESENTATIVE  ROKEBERG referred  to  paragraph  (a)(5) [of  the                                                               
amendment],   which    states   "permitted    without   requiring                                                               
authorization" under  the HIPA (Health Insurance  Portability and                                                               
Accountability Act) rules.  He asked  whether that is going to be                                                               
a default whereby  the HIPA federal privacy rules  are the bottom                                                               
line and can be tightened up.                                                                                                   
MR.  LOHR responded  that under  the NAIC  model regulations  for                                                               
health, the approach  was to say that if an  insurance company is                                                               
complying with  the HIPA regulations,  then that is  good enough.                                                               
There  is no  attempt  to  go beyond  those  HIPA regulations  or                                                               
duplicate the health requirements in the NAIC model regulations.                                                                
REPRESENTATIVE ROKEBERG asked whether  they could be tightened up                                                               
through subsection (b) [of the  amendment], which reads "not less                                                               
than the protection" provided under subsection (a).                                                                             
MR. LOHR answered that they could.                                                                                              
REPRESENTATIVE ROKEBERG  asked whether  there is a  provision for                                                               
HB 211,  in which statutory  provisions are already  tighter than                                                               
the HIPA model.                                                                                                                 
Number 1114                                                                                                                     
MR.  LOHR  responded that  this  authority  would not  extend  to                                                               
addressing  the HB  211 provision.   He  said he  would encourage                                                               
[the committee] to consider the  possibility of conforming the HB                                                               
211 provisions to  be more like whatever the  decided approach is                                                               
for health privacy in this bill.                                                                                                
REPRESENTATIVE ROKEBERG  remarked that if Mr.  Lohr is suggesting                                                               
that  he  change  his  bill  to  meet  whatever  regulations  the                                                               
division writes, he does not agree with that.                                                                                   
MR. LOHR responded  that he thinks he was  indicating that having                                                               
substantive health  provisions in  this bill consistent  with the                                                               
HB 211 approach would make sense.                                                                                               
REPRESENTATIVE  ROKEBERG asked  whether the  Senate had  left the                                                               
NAIC language in [its version].                                                                                                 
MR. LOHR answered  that the Senate version  said "consistent with                                                               
but  no less  than GLBA".    He said  the Senate  has adopted  an                                                               
amendment that  would drop  the NAIC  model and  put GLBA  in its                                                               
Number 1248                                                                                                                     
CHAIR  MURKOWSKI  made  a  motion   to  adopt  Amendment  1  922-                                                               
GH1025\F.2, Ford, 4/25/01, text provided previously].                                                                           
REPRESENTATIVE ROKEBERG objected for purposes of discussion.                                                                    
Number 1274                                                                                                                     
CHAIR MURKOWSKI made  a motion to adopt Amendment  1 to Amendment                                                               
1,  on page  1, line  8,  [subsection (a)(1)]  of the  amendment,                                                               
after  "authorized", to  insert  "in writing".    There being  no                                                               
objection, Amendment 1 to Amendment 1 was adopted.                                                                              
CHAIR MURKOWSKI made  a motion to adopt Amendment  2 to Amendment                                                               
1,  on page  1, line  23, [subsection  (1)(4)] of  the amendment,                                                               
after "administration of", to insert  "consumer".  There being no                                                               
objection, Amendment 2 to Amendment 1 was adopted.                                                                              
CHAIR MURKOWSKI  made a motion  to adopt conceptual  Amendment 3,                                                               
to Amendment  1, on page  2, subsection (d)(3) of  the amendment,                                                               
to create a  subparagraph (D) that would give  the individual the                                                               
opportunity to prohibit the sharing.                                                                                            
REPRESENTATIVE ROKEBERG asked whether that  would be prior to the                                                               
company's disclosing the information.                                                                                           
CHAIR MURKOWSKI explained  that in HB 106 there  were examples of                                                               
how banks provided the opt-out  information.  She said she thinks                                                               
if [the  committee] does not allow  for this, then it  is neither                                                               
opt-in nor opt-out when it comes to the financial information.                                                                  
MR.  LOHR remarked  that [the  division] would  be happy  to help                                                               
with the conceptual amendment.                                                                                                  
CHAIR  MURKOWSKI   announced  that  there  being   no  objection,                                                               
conceptual Amendment 3 to Amendment 1 was adopted.                                                                              
Number 1501                                                                                                                     
MR.  LOHR  made a  motion  to  adopt  conceptual Amendment  4  to                                                               
Amendment  1,  on  page  2,  line 14,  [subsection  (b)]  of  the                                                               
amendment, to  delete "under  (a) of"  and insert  "in".    There                                                               
being no  objection, conceptual  Amendment 4  to Amendment  1 was                                                               
REPRESENTATIVE  ROKEBERG stated  that  he is  not  sure what  the                                                               
chair would like  to do in regard to the  health insurance policy                                                               
CHAIR MURKOWSKI  responded that  Mr. Lohr  had mentioned  that he                                                               
thought the  financial and  the health  information needed  to be                                                               
separated or  set out more  clearly in  the amendment.   She said                                                               
she thinks  [the committee]  has gotten to  the point  of knowing                                                               
what the policy call is by opting in when it comes to privacy.                                                                  
REPRESENTATIVE ROKEBERG removed his objection to Amendment 1.                                                                   
CHAIR MURKOWSKI announced that there  being no further objection,                                                               
Amendment 1, as amended, was adopted.                                                                                           
Number 1738                                                                                                                     
MR.  LOHR  explained his  proposed  amendment,  later adopted  as                                                               
Amendment 2, which read  [original punctuation and capitalization                                                               
provided, except  that one line of  text had been crossed  out by                                                               
hand and is not included here]:                                                                                                 
     Page 18, after line 4, add a new section as follows                                                                        
     *Sec. 26, AS 21.27.360 is amended to read:                                                                               
               Sec. 21.27.360. Reporting and accounting for                                                                 
     premiums and premium  taxes and fees.    (a) A licensee                                                                  
     involved in  the procuring or issuance  of an insurance                                                                    
     contract shall  report to the insurer  the exact amount                                                                    
     of  consideration   charged  as   a  premium   for  the                                                                    
     contract.  The amount  charged shall  be  shown in  the                                                                    
     contract and in the records of the licensee.                                                                               
        (b)  All  money, except  that  made  payable to  the                                                                    
     insurer, representing premium  taxes and fees, premiums                                                                    
     or return  premiums received by the  licensee, shall be                                                                    
     received  by  the  licensee as  a  [IN  THE]  fiduciary                                                                
     [ACCOUNT  OF  THE  LICENSEE]   and  shall  be  promptly                                                                    
     accounted for  and paid to  the person entitled  to the                                                                    
     money.   [THE  FIDUCIARY  ACCOUNT SHALL  BE LOCATED  IN                                                                    
     THIS  STATE  UNLESS  THE  LICENSEE  IS  LICENSED  AS  A                                                                    
     NONRESIDENT UNDER  AS 21.27.270.  FOR PURPOSES  OF THIS                                                                    
     SECTION,  THE FIDUCIARY  ACCOUNT OF  THE FIRM  SHALL BE                                                                    
     CONSIDERED  THE  FIDUCIARY  ACCOUNT  OF  AN  INDIVIDUAL                                                                    
     LICENSEE ACTING ON BEHALF OF  THE FIRM AND SHALL BE THE                                                                    
     RESPONSIBILITY  OF   THE  FIRM.]  Money  held   by  the                                                                
     licensee  as a  fiduciary [DEPOSITED  INTO A  FIDUCIARY                                                                
     ACCOUNT] may  not be  commingled or  otherwise combined                                                                    
     with  other  money  not  held  by  the  licensee  as  a                                                                
     fiduciary[,  EXCEPT  AS  ALLOWED   UNDER  (d)  OF  THIS                                                                
     SECTION AND AS 21.27.365].                                                                                                 
        (c)  In addition  to any  other penalty  provided by                                                                    
     law,  a  person who  the  director  has determined  has                                                                    
     acted  to  divert  or  appropriate   money  held  as  a                                                                
     fiduciary  [ACCOUNT MONEY]  for personal  use shall  be                                                                    
     ordered  to make  restitution and  shall be  subject to                                                                    
     suspension   or  revocation   under   AS  21.27.420   -                                                                    
     21.27.430 of  all licenses and  a civil penalty  not to                                                                    
     exceed $50,000 for each violation.                                                                                         
        (d) A licensee may only  commingle premium taxes and                                                                    
     fees,  premiums, and  return  premiums with  additional                                                                    
     money   for   the   purpose  of   advancing   premiums,                                                                    
     establishing  reserves   for  the  payment   of  return                                                                    
     premiums,  or reserves  for receiving  and transmitting                                                                    
     premium or  return premium money. [MONEY  COLLECTED FOR                                                                    
     THE PAYMENT  OF PREMIUM  TAXES, POLICY OR  FILING FEES,                                                                    
     LATE  PAYMENT  CHARGES,  AND  INTEREST  FROM  FIDUCIARY                                                                    
     MONEY  ON DEPOSIT,  MAY BE  COMMINGLED  IN A  FIDUCIARY                                                                    
     ACCOUNT,  BUT SHALL  BE  SEPARATELY  ACCOUNTED FOR  AND                                                                    
     PERIODICALLY REMOVED FROM THE FIDUCIARY ACCOUNT].                                                                          
        (e) Money held by a  licensee as a fiduciary may not                                                                
     be treated,  [A LICENSEE  MAY NOT TREAT  MONEY REQUIRED                                                                
     TO BE IN  A FIDUCIARY ACCOUNT] as a  personal asset, as                                                                    
     collateral for  a personal  or business  loan, or  as a                                                                    
     personal  asset or  income  on  a financial  statement,                                                                    
     except  that money  held by  the licensee  as a  [IN A]                                                                
     fiduciary  [ACCOUNT] may  be  included  in a  financial                                                                    
     statement  of the  licensee  if  clearly identified  as                                                                    
     assets held  by the  licensee as a  fiduciary. [ACCOUNT                                                                
     ASSETS AND LIABILITIES].                                                                                                   
        (f) This section does not  apply to an individual in                                                                    
     the  firm who  acts solely  on  behalf of  a firm  that                                                                    
     maintains  compliance with  this section  [AND DEPOSITS                                                                    
     ALL MONEY INTO THE FIRM'S FIDUCIARY ACCOUNT].                                                                              
     Page 30, after line 12, add a new section as follows:                                                                      
     *Sec. 49. AS 21.36.350 is amended to read:                                                                               
          Sec. 21.36.350. Regulations relating to claim                                                                       
     settlement  and premium  accounting practices.  (a) The                                                                
     director of  insurance shall promulgate  regulations to                                                                    
     implement, define, and enforce AS 21.36.125.                                                                               
          (B) The director of insurance may promulgate                                                                      
     regulations  to  implement,   define,  and  enforce  AS                                                                
     21.36.360(b) and AS 21.27.360.                                                                                         
     Page 31, after line 23, add a new section to read                                                                          
     *Sec.   55.   AS   21.27.360(c),   AS   21.27.365,   AS                                                                  
     21.27.900(7) are repealed.                                                                                                 
     Page 32, after line 12, add a new section to read                                                                          
     *Sec 58.  Sections 26, 39, 49  and 55 of this  Act take                                                                  
     effect July 1, 2002.                                                                                                       
[Note:   The line of the  amendment that had been  crossed out by                                                               
hand   read:     "Page   30,  line   29,   after  'refusal"   add                                                               
MR. LOHR  stated that all of  page one through subsection  (b) on                                                               
page 2 of  his proposed amendment deals with trust  accounts.  He                                                               
stated that at  this time the Division of  Insurance does require                                                               
agents and  brokers to have a  trust account for premium  that is                                                               
received but not yet paid to  an insurance company.  He said this                                                               
is a good consumer-protection measure.   Unfortunately, under the                                                               
Gramm-Leach-Bliley  licensing provisions,  if  the trust  account                                                               
requirement is maintained as  an additional licensing requirement                                                               
on nonresident  applicants, the state  will be  nonreciprocal for                                                               
purposes of  helping to avoid  a national takeover  of licensing.                                                               
As  a  result,   [the  division]  has  proposed   to  delete  the                                                               
references to  "trust account"  in Chapter  27 and  to substitute                                                               
fiduciary  capacity.   He  stated  that as  a  legal matter  [the                                                               
division] has  been told that  this makes no difference  in terms                                                               
of what the responsibilities of the agent or broker would be.                                                                   
MR.  LOHR  further  explained  his  proposed  amendment.    Under                                                               
subsection  (b) of  Section  49 [of  the  amendment], this  would                                                               
specifically grant  the director  authority to  adopt regulations                                                               
that  would  require a  trust  account.    This would  solve  the                                                               
problem of being  nonreciprocal.  This would also  have a delayed                                                               
effective  date,  under   Section  58,  the  last   line  of  the                                                               
amendment, of July 1, 2002.                                                                                                     
CHAIR  MURKOWSKI  asked whether  it  legally  does not  make  any                                                               
difference using the  term "fiduciary", but that  for purposes of                                                               
complying with Gramm-Leach-Bliley, it makes a difference.                                                                       
MR. LOHR  stated that she  was correct.   He stated that  if this                                                               
were featured  permanently as  a part  of the  licensing chapter,                                                               
then calling it a trust account  looks to the national arbiter of                                                               
who is a "reciprocal" and who  isn't, as if it were an additional                                                               
requirement  on licensing.   At  that point,  there is  a savings                                                               
provision in the federal legislation  that states that this would                                                               
not qualify for the savings  clause.  Therefore, this would cause                                                               
the  state  to  become  nonreciprocal   for  purposes  of  what's                                                               
required under the licensing provisions of Gramm-Leach-Bliley.                                                                  
CHAIR MURKOWSKI  asked why this was  not included as part  of the                                                               
original bill.                                                                                                                  
MR.  LOHR responded  that [the  division] has  been watching  the                                                               
evolution of  what's reciprocal  and what's  not at  the national                                                               
level with  the NAIC.  At  a meeting in Nashville  last month, it                                                               
was  determined that  trust accounts,  surplus  lines bonds,  and                                                               
fingerprinting  were  areas that  could  cause  the state  to  be                                                               
Number 1955                                                                                                                     
REPRESENTATIVE ROKEBERG made a motion  to adopt Amendment 2 [text                                                               
provided previously].                                                                                                           
There being no objection, Amendment 2 was adopted.                                                                              
REPRESENTATIVE  ROKEBERG  asked if  Mr.  Elder,  Director of  the                                                               
Division of Banking,  Securities & Corporations, had  a chance to                                                               
look at the bill.                                                                                                               
Number 2013                                                                                                                     
FRANKLIN TERRY  ELDER, Director, Division of  Banking, Securities                                                               
and   Corporations,   Department   of  Community   and   Economic                                                               
Development,   came  forth   and  responded   that  he   has  had                                                               
discussions  with Mr.  Lohr about  the sections  [referred to  in                                                               
Amendment 2], but he has not reviewed the entire bill.                                                                          
REPRESENTATIVE ROKEBERG  stated that  he asked because  the trend                                                               
in the entire country is  the consolidation of financial services                                                               
and   primarily  including   insurance   companies  and   banking                                                               
institutions with other financial services.   He said it seems to                                                               
him  that  there  needs  to   be  some  commonality  between  the                                                               
regulatory  and   the  statutory  schemes  that   regulate  these                                                               
institutions in [Alaska].                                                                                                       
MR. ELDER remarked that  that is a valid point.   He said [he and                                                               
Mr. Lohr] have also had  discussions about increasing cooperation                                                               
between "two  pavilions" on examining more  complex institutions.                                                               
Certainly Gramm-Leach-Bliley also  emphasized the continuation of                                                               
functional  regulations;  in  other  words,  security  regulators                                                               
would look  at the securities aspect,  insurance regulators would                                                               
look at the  insurance aspect, and banking  regulators would look                                                               
at the banking  aspect.  However, in addition to  that, "we" have                                                               
to cooperate more and share more.                                                                                               
Number 2057                                                                                                                     
REPRESENTATIVE  MEYER  moved  to  report CSHB  184,  version  22-                                                               
GH1025\F,  Ford,  4/19/01,  as  amended, out  of  committee  with                                                               
individual  recommendations  and  the  accompanying  zero  fiscal                                                               
REPRESENTATIVE HAYES declared a  conflict because HB 184 concerns                                                               
an area he works in.                                                                                                            
CHAIR  MURKOWSKI announced  that there  being no  objection, CSHB                                                               
184(L&C) was  moved from  the House  Labor and  Commerce Standing                                                               

Document Name Date/Time Subjects