Legislature(2017 - 2018)SENATE FINANCE 532

02/21/2018 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed to 9:15 --
+ SB 155 REAL ESTATE APPRAISAL MNGMT. COMPANIES TELECONFERENCED
Heard & Held
+ HB 195 INSURER'S USE OF CREDIT HISTORY/SCORES TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 195                                                                                                            
                                                                                                                                
     "An  Act relating  to insurer  actions based  on credit                                                                    
     history  and  insurance   scores  at  insurance  policy                                                                    
     renewal;  and providing  for  insurer consideration  of                                                                    
     consumer requests  for exceptions of credit  history or                                                                    
     insurance scores."                                                                                                         
                                                                                                                                
9:50:55 AM                                                                                                                    
                                                                                                                                
LORI   WING-HEIER,   DIRECTOR,    DIVISION   OF   INSURANCE,                                                                    
DEPARTMENT OF COMMERCE,  COMMUNITY AND ECONOMIC DEVELOPMENT,                                                                    
discussed  HB  195 [from  the  Transmittal  Letter (copy  on                                                                    
file)]:                                                                                                                         
                                                                                                                                
     This bill  makes changes to  the Alaska  Insurance Code                                                                    
     to allow an insurer to  use a consumer's credit history                                                                    
     or  insurance  score  for policy  renewals.  Under  the                                                                    
     current law, an insurer  cannot use a consumer's credit                                                                    
     history  or insurance  score  when  renewing a  policy,                                                                    
     unless   the   consumer    affirmatively   waives   the                                                                    
     prohibition on the use of credit history at renewal.                                                                       
     If passed,  this legislation would give  an insurer the                                                                    
     ability to take into  consideration a consumer's credit                                                                    
     history  or insurance  score at  the  time of  renewal.                                                                    
     However, there are many  consumer protections that have                                                                    
     been added.                                                                                                                
                                                                                                                                
     The   bill  requires   insurers   to  provide   written                                                                    
     notification to consumers if  their insurance rate will                                                                    
     be negatively  affected due to  their credit  score. In                                                                    
     the  notification to  the  consumer,  the insurer  must                                                                    
     provide   information   regarding  extraordinary   life                                                                    
     circumstance  exceptions  and   instruct  the  consumer                                                                    
     regarding how  to request an exception.  In addition to                                                                    
     the  specific  circumstances listed,  this  legislation                                                                    
     adds language  allowing consumers  who feel  their life                                                                    
     circumstances  warrant  exception,  to request  one  in                                                                    
     writing, even if  it is not specifically  listen on the                                                                    
     insurer's list of expectations.                                                                                            
                                                                                                                                
     This   legislation   further  protects   consumers   by                                                                    
     establishing  an  appeal   process  for  consumers  who                                                                    
     believe  their  requests   for  an  extraordinary  life                                                                    
     circumstance exception  have been wrongfully  denied by                                                                    
     an insurer.  The appeal process designates  the State's                                                                    
     Division Director  of Insurance  as the  final decision                                                                    
     maker on consumer appeals  under the extraordinary life                                                                    
     circumstances   and  requires   a  decision   maker  on                                                                    
     consumer     appeals    under     extraordinary    life                                                                    
     circumstances and require a decision  be made within 30                                                                    
     days after  receipt of the  appeal. The  appeal process                                                                    
     included in this  legislation implements safeguards for                                                                    
     consumers by ensuring the final  decision does not rest                                                                    
     with the insurer  and requires timely action  so as not                                                                    
     to adversely affect the consumer.                                                                                          
                                                                                                                                
     Additionally,  this bill  adds provisions  stating that                                                                    
     an insurer  may not fail to  renew a policy based  on a                                                                    
     consumer's  lack of  credit history  and prohibits  the                                                                    
     use of  a credit score that  is more than 90  days old.                                                                    
     Furthermore, this bill would  require insurers that use                                                                    
     a  consumer's credit  history to  underwrite or  rate a                                                                    
     policy to  re-underwrite or re-rate  a policy  no later                                                                    
     than every  24 months,  allowing consumers to  reap the                                                                    
     benefits of an improved credit score.                                                                                      
                                                                                                                                
     This bill clarifies that the  definition of an "adverse                                                                    
     action"  is limited  to the  definition under  the Fair                                                                    
     Credit Reporting Act.                                                                                                      
                                                                                                                                
9:55:30 AM                                                                                                                    
                                                                                                                                
Senator Olson  asked how  the bill  would affect  people who                                                                    
did not have credit or credit scores.                                                                                           
                                                                                                                                
Ms.  Wing-Heier replied  that a  credit score  could not  be                                                                    
used if  credit did not  exist. The  lack of a  credit score                                                                    
could not be used in a detrimental manner.                                                                                      
                                                                                                                                
Senator   Micciche   requested   and  explanation   of   the                                                                    
correlation between credit scores and premiums.                                                                                 
                                                                                                                                
Ms.  Wing-Heier responded  that  statistics  had shown  that                                                                    
someone  who managed  their credit  was  a better  insurance                                                                    
risk.                                                                                                                           
                                                                                                                                
Senator Micciche  appreciated the explanation of  the direct                                                                    
relationship between credit scores and insurance risk.                                                                          
                                                                                                                                
Senator  Stevens   requested  an   example  that   showed  a                                                                    
correlation.                                                                                                                    
                                                                                                                                
Ms.  Wing-Herier agreed  to provide  the information  to the                                                                    
committee.                                                                                                                      
                                                                                                                                
9:58:22 AM                                                                                                                    
                                                                                                                                
Ms.  Wing-Heier addressed  the Sectional  Analysis (copy  on                                                                    
file):                                                                                                                          
                                                                                                                                
     Section  1: The  subsection  is amended  to require  an                                                                  
     insurer  writing personal  insurance  that uses  credit                                                                    
     information  in underwriting  or rating  a consumer  at                                                                    
     the time  of renewal to  disclose to the  consumer that                                                                    
     the   insurer  will   obtain   credit  information   in                                                                    
     connection with the renewal. It  also replaces the word                                                                    
     "applicant's"    with    "consumer's"    because    the                                                                    
     requirement  now applies  to  both  new applicants  and                                                                    
     existing policyholders.                                                                                                    
                                                                                                                                
     Section 2:  The subsection  amends the  notice required                                                                  
     when an adverse  action is taken and  to provide notice                                                                    
     informing   the   consumer    of   extraordinary   life                                                                    
     circumstance  exemptions,  the process  for  requesting                                                                    
     such  an  exemption,  and that  they  must  request  an                                                                    
     exemption within 60 days.  The amendment also clarifies                                                                    
     that the notice of adverse action must be in writing.                                                                      
                                                                                                                                
     Section  3: The  subsection is  amended to  clarify the                                                                  
     statute by adding  that an insurer may,  in addition to                                                                    
     credit  history, use  a consumer's  insurance score  to                                                                    
     cancel,  deny, nonrenew,  underwrite, or  rate personal                                                                    
     insurance  only in  combination with  other substantive                                                                    
     underwriting  factors. The  subsection is  also amended                                                                    
     to provide that if an  insurer uses a consumer's credit                                                                    
     history  or insurance  score, then  not  later than  24                                                                    
     months  after  the  insurer   most  recently  used  the                                                                    
     consumer's  credit   history  or  insurance   score  to                                                                    
     underwrite  or   rate  a  policy,  the   insurer  shall                                                                    
     reunderwrite  and  rerate  the   policy  based  on  the                                                                    
     consumer's  current  (1)  credit history  or  insurance                                                                    
     score  and current  risk characteristics;  or (2)  risk                                                                    
     characteristics  but  not  including, in  whole  or  in                                                                    
     part,  the  consumer's   credit  history  or  insurance                                                                    
     score.                                                                                                                     
                                                                                                                                
     Section  4:  This  section eliminates  the  requirement                                                                  
     that an insurer  first obtain a written  waiver at each                                                                    
     renewal  from  a  consumer  to  underwrite  or  rate  a                                                                    
     personal  insurance  policy  based  on  the  consumer's                                                                    
     credit  history  or   insurance  score.  The  remaining                                                                    
     paragraphs   in    the   subsection    are   renumbered                                                                    
     accordingly.is    amended   to    provide   that    the                                                                    
     prohibitions on  the use of  credit scores  by insurers                                                                    
     set forth  in the paragraph also  apply to nonrenewals.                                                                    
     This section  also establishes that an  insurer may not                                                                    
     use   credit  history   to   cancel,  deny,   nonrenew,                                                                    
     underwrite, or rate a personal  insurance policy if the                                                                    
     history  is  obtained  more than  90  days  before  the                                                                    
     policy is  canceled, denied,  nonrenewed, underwritten,                                                                    
     or rated. It further  clarifies that the paragraph does                                                                    
     not  require  an  insurer to  reevaluate  a  consumer's                                                                    
     credit history  more frequently than is  required under                                                                    
     AS 21.36.460(c).                                                                                                           
                                                                                                                                
     Section 5: is  a new section which  requires (except as                                                                  
     provided under AS 21.36.460(d))  an insurer that uses a                                                                    
     consumer's  credit   history  or  insurance   score  to                                                                    
     provide reasonable  exceptions to the  insurer's rates,                                                                    
     rating classifications,  company or tier  placement, or                                                                    
     underwriting  rules or  guidelines for  a consumer  who                                                                    
     has experienced, and whose  credit history or insurance                                                                    
     score  has  been  affected  by   one  or  more  of  the                                                                    
     following extraordinary life circumstances:                                                                                
          ?a catastrophe, as declared  by the director under                                                                    
          AS 21.06.080;                                                                                                         
          ?a  serious  illness  or   injury,  or  a  serious                                                                    
          illness  of  or  injury  to  an  immediate  family                                                                    
          member;                                                                                                               
         ?the death of a spouse, child, or parent;                                                                              
          ?divorce  or   the  involuntary   interruption  of                                                                    
         spousal support or maintenance payments;                                                                               
          ?identity theft;                                                                                                      
          ?loss of employment for three  months or more as a                                                                    
          result of involuntary termination;                                                                                    
          ?military overseas deployment; or                                                                                     
          ?other  extraordinary life  circumstances where  a                                                                    
          prudent person would consider  an exception to the                                                                    
          insurer's  rates, rating  classifications, company                                                                    
          or  tier  placement,   or  underwriting  rules  or                                                                    
          guidelines to be reasonable.                                                                                          
                                                                                                                                
     AS 21.36.461(b)                                                                                                          
     This  subsection   allows  an  insurer  to   require  a                                                                    
     consumer requesting an  exemption under 21.36.461(a) to                                                                    
     provide    reasonable    written   and    independently                                                                    
     verifiable  documentation  of  the  extraordinary  life                                                                    
     circumstances  and demonstrate  that the  circumstances                                                                    
     had a  direct and  meaningful effect on  the consumer's                                                                    
     credit information.                                                                                                        
                                                                                                                                
     AS 21.36.461(c)                                                                                                          
     This subsection  describes situations where  an insurer                                                                    
     may  grant an  exception  when a  consumer requests  an                                                                    
     exception under AS 21.36.460(b).                                                                                           
                                                                                                                                
     AS 21.36.461(d)                                                                                                          
     This  subsection provides  that an  insurer may  not be                                                                    
     considered  out  of  compliance  with  a  law  or  rule                                                                    
     relating to  underwriting, rating, or rate  filing as a                                                                    
     result  of granting  an exception  under this  section.                                                                    
     The subsection allows an insurer  to grant an exception                                                                    
     notwithstanding  its  approved  filings and  rates  and                                                                    
     does not require  the insurer to have  to submit filing                                                                    
     or  rate amendments  to the  division  for approval  in                                                                    
     order to grant the exception.                                                                                              
                                                                                                                                
     AS 21.36.461(e)                                                                                                          
     This subsection requires the  insurer to provide notice                                                                    
     to the consumer in writing  of its decision in granting                                                                    
     or not granting the request  for an exception not later                                                                    
     than  30 days  after  the  insurer receives  sufficient                                                                    
     documentation  of the  information  requested from  the                                                                    
     consumer under AS 21.36.461(b).                                                                                            
                                                                                                                                
     AS 21.36.461(f)                                                                                                            
     If an  exception is denied  and an adverse  action will                                                                    
     be maintained by the  insurer, this subsection requires                                                                    
     the insurer's  notice under AS 21.36.461(e)  to include                                                                    
     the  insurer's reason  for denying  the request  for an                                                                    
     exception and  for maintaining  the adverse  action and                                                                    
     notice of the consumer's right  to appeal the denial to                                                                    
     the director of the division of insurance.                                                                                 
                                                                                                                                
     AS 21.36.461(g)                                                                                                          
     This subsection  provides that the consumer  can appeal                                                                    
     the adverse  action to the  director not later  than 30                                                                    
     days after receiving the insurer's notice.                                                                                 
                                                                                                                                
     AS 21.36.461(h)                                                                                                          
     This subsection  requires the director of  the division                                                                    
     of  insurance  to make  a  decision  on the  consumer's                                                                    
     appeal  not  later than  30  days  after receiving  the                                                                    
     appeal  and  requires  the   director  to  provide  the                                                                    
     decision to  both the insurer  and to the  consumer and                                                                    
     outlines requirements for the basis of the decision.                                                                       
                                                                                                                                
     AS 21.36.461(i)                                                                                                          
     This subsection  provides that  the hearing  and appeal                                                                    
     procedures provided for in AS  21.06.180   21.06.230 do                                                                    
     not  apply   to  consumer  appeals  submitted   to  the                                                                    
     director under AS 21.36.461(g).                                                                                            
                                                                                                                                
     AS 21.36.461(j)                                                                                                          
     This  subsection   makes  clear  that  nothing   in  AS                                                                    
     21.36.461 may  be construed to provide  a consumer with                                                                    
     a cause  of action that  does not exist in  the absence                                                                    
     of this AS 21.36.461.                                                                                                      
                                                                                                                                
     AS 21.36.461(j)                                                                                                          
     This  subsection   provides  that  the   term  "adverse                                                                    
     action"  as  used in  AS  21.36.461  is limited  to  an                                                                    
     adverse action  defined under  AS 21.36.460(i)  that is                                                                    
     based  in whole  or  in part  on  the insured's  credit                                                                    
     history or insurance  score as affected by  one or more                                                                    
     extraordinary life circumstances.                                                                                          
     The subsection  also provides that the  term "consumer"                                                                    
     has  the meaning  given in  AS 21.36.460  and the  term                                                                    
     "director" has the meaning given in AS 21.97.900.                                                                          
                                                                                                                                
     AS 21.36.461(k)                                                                                                          
     The  subsection   is  amended   to  replace   the  term                                                                    
    "insured" with the term "consumer" for consistency.                                                                         
                                                                                                                                
     Section 6:                                                                                                               
     This  section  is  amended  to  exclude  the  exception                                                                    
     appeal   process   under    AS   21.36.461   from   the                                                                    
     jurisdiction of Department  of Administration Office of                                                                    
     Administrative Hearings (OAH).                                                                                             
                                                                                                                                
10:02:11 AM                                                                                                                   
                                                                                                                                
Senator  Stevens  wondered  when  the  60  days,  listed  in                                                                    
Section  2  on  the  Sectional  Analysis,  would  officially                                                                    
begin.                                                                                                                          
                                                                                                                                
10:02:45 AM                                                                                                                   
                                                                                                                                
Ms. Wing-Heier  replied that the timeframe  would begin once                                                                    
the  consumer   received  the  notice  from   the  insurance                                                                    
company.                                                                                                                        
                                                                                                                                
10:03:46 AM                                                                                                                   
                                                                                                                                
KRISTIE  BABCOCK,  AGENT,  STATE FARM  INSURANCE,  spoke  in                                                                    
support of the  legislation. She offered a  brief history of                                                                    
similar  legislation. She  highlighted the  difficulties she                                                                    
faced  working  under the  current  law.  She often  had  to                                                                    
explain current law to her  clientele, which she categorized                                                                    
as confusing and cumbersome. She  expressed gratitude to the                                                                    
committee for hearing the legislation.                                                                                          
                                                                                                                                
10:10:30 AM                                                                                                                   
                                                                                                                                
Senator Stevens asked  whether a similar bill  passed by the                                                                    
legislature 2 years ago had addressed the appeals process.                                                                      
                                                                                                                                
Ms. Babcock  replied that there  had been an  appeal process                                                                    
written into  the previous  legislation, this  bill differed                                                                    
in  that the  appeals  process  offered additional  consumer                                                                    
protections.                                                                                                                    
10:11:26 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:11:38 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
10:11:54 AM                                                                                                                   
                                                                                                                                
GEORGE   PIERCE,   SELF,   KASILOF   (via   teleconference),                                                                    
testified  against the  bill. He  felt that  the bill  would                                                                    
discriminate  against  those  who  experienced  medical  and                                                                    
financial hardship.                                                                                                             
                                                                                                                                
10:14:57 AM                                                                                                                   
                                                                                                                                
TED  MONINSKI, SELF,  ANCHORAGE (via  teleconference), spoke                                                                    
in support of  the legislation. He believed  that the intent                                                                    
language  in  the  legislation  about  the  renewal  process                                                                    
should be very clear.                                                                                                           
                                                                                                                                
10:18:30 AM                                                                                                                   
                                                                                                                                
Ms. Wing-Heier spoke to the  testifiers concerns. She shared                                                                    
that she read  nothing in the legislation  that implied that                                                                    
a  person would  have  to go  back  through the  application                                                                    
process;  the  word  "consumer"  had  been  substituted  for                                                                    
"applicant" so that  it applied to renewal  business as well                                                                    
as new business.                                                                                                                
                                                                                                                                
10:19:11 AM                                                                                                                   
                                                                                                                                
Co-Chair  MacKinnon assured  the  testifier  that under  the                                                                    
legislation all consumers would be considered equitably.                                                                        
                                                                                                                                
10:19:13 AM                                                                                                                   
                                                                                                                                
Senator  Micciche understood  that the  legislation provided                                                                    
the right to appeal in  the application process and that the                                                                    
standard had  been changed  to what  a prudent  person would                                                                    
consider to be "fair and reasonable."                                                                                           
                                                                                                                                
Ms. Wing-Heier agreed. She said  that the appeal process had                                                                    
been at the sole discretion  of the insurance company, which                                                                    
had led to the Governor's veto of the previous legislation.                                                                     
                                                                                                                                
Co-Chair Hoffman asked if there  had been other reasons that                                                                    
the Governor had vetoed the previous legislation.                                                                               
Ms.  Wing-Heier  responded  that   the  Governor  wanted  to                                                                    
ascertain that  people were given  the notice of  the appeal                                                                    
process, that  the appeal went  to the director if  it could                                                                    
not be  resolved with  the insurance  company, and  that the                                                                    
"prudent person" language be added.                                                                                             
                                                                                                                                
10:21:05 AM                                                                                                                   
                                                                                                                                
Senator Stevens  noted the changes  from the  previous bill.                                                                    
He  wondered  whether  the appeal  process  changes  in  the                                                                    
current legislation would be onerous to the department.                                                                         
                                                                                                                                
Ms.  Wing-Heier said  that the  department received  2 to  3                                                                    
calls  per  month  from consumers.  She  believed  that  her                                                                    
department  was  equipped  with  the  staff  to  handle  the                                                                    
workload.                                                                                                                       
                                                                                                                                
10:22:32 AM                                                                                                                   
                                                                                                                                
GARY STRANNIGAN,  LIBERTY MUTUAL INSURANCE  COMPANY, SEATTLE                                                                    
(via teleconference), spoke in support of the bill.                                                                             
                                                                                                                                
10:23:44 AM                                                                                                                   
                                                                                                                                
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
                                                                                                                                
10:23:55 AM                                                                                                                   
                                                                                                                                
Vice-Chair Bishop discussed the zero-fiscal note:                                                                               
                                                                                                                                
     This bill allows an insurer  to use a consumer's credit                                                                    
     history or  insurance score to  underwrite or  rate the                                                                    
     consumer's  policy at  renewal.  It  also provides  for                                                                    
     exemptions from using credit history.                                                                                      
     This bill modifies existing statute and is not                                                                             
     anticipated to have a fiscal impact on the Division of                                                                     
     Insurance.                                                                                                                 
                                                                                                                                
10:24:50 AM                                                                                                                   
                                                                                                                                
Vice-Chair  Bishop noted  Section 5  of the  bill. He  hoped                                                                    
that the  department would make  sure to keep the  people of                                                                    
Alaska's best interests at heart.                                                                                               
                                                                                                                                
Co-Chair   MacKinnon   stated   that   amendments   to   the                                                                    
legislation were due the following Friday at 5pm                                                                                
                                                                                                                                
HB 195 was HEARD and HELD in committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                

Document Name Date/Time Subjects
SB 155 AMC Framework - Lexology Article.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB 155 AMC Registry Fees - Lexology Article.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB 155 Enacted State AMC Laws.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB 155 Sponsor Statement.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB 155 Support Alaska Bankers Association.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB155 Sectional Summary - Sponsor.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB 155 Support Wells Fargo.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB 155 Support REVAA.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
SB 155 Support Alaska Chamber.pdf SFIN 2/21/2018 9:00:00 AM
SB 155
HB 195 Background Document.pdf SFIN 2/21/2018 9:00:00 AM
HB 195
HB 195 Sectional Analysis.pdf SFIN 2/21/2018 9:00:00 AM
HB 195
HB 195 Support Letters.pdf SFIN 2/21/2018 9:00:00 AM
HB 195
HB 195 Transmittal Letter.pdf SFIN 2/21/2018 9:00:00 AM
HB 195
HB 195 Opposition Lynch.pdf SFIN 2/21/2018 9:00:00 AM
HB 195
HB 195 Letter of Support McCue.pdf SFIN 2/21/2018 9:00:00 AM
HB 195
HB 195 Opposition Opheim.pdf SFIN 2/21/2018 9:00:00 AM
HB 195