Legislature(2001 - 2002)
05/07/2002 01:50 PM Senate L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 320-MOTOR VEHICLE INSURANCE & REPAIRS
CHAIRMAN BEN STEVENS called the Senate Labor & Commerce Committee
meeting to order at 1:50 p.m. and announced SB 320, version x,
to be up for consideration.
MS. ANNETTE DEAL, Staff to Senator Cowdery, sponsor of SB 320,
explained the changes. Section 1(c) says that an insurer may not
use credit to cancel a policy. Section 1(g) - The Fair Credit
Reporting Act - under adverse action - those actions are spelled
out. Section 2(a) - the insurer when filing their credit model
only has to file it if requested by the director of the Division
of Insurance. Section 2(c) has items added to a credit report
that cannot be included as part of the scoring formula including
a number of marketing, promotional or insurance inquiries, any
collection account identified with the medical industry and the
consumer's total available line of credit. She added that the
debt ratio is acceptable.
Section 3 was added that deletes the repeal date and it was
changed to a report being due one time, one year after the
effective date and includes information on how insurance scoring
has affected consumers in Alaska, who receives the benefit, how
credit rating is affecting rates and other issues as determined
by the director.
SENATOR TORGERSON asked if section 2 is confidential and if it is
not required to be filed with the department, how would they know
if a company is using credit scoring or not.
MS. DEAL noted that language says "if requested" and that's
language the sponsor would prefer to not have in there. She says
the information is confidential within the Division of Insurance
and the onus is on them to not have unfair discrimination.
SENATOR TORGESON asked how they would know.
MS. DEAL said the Division of Insurance cannot not disclose
information about why a person's policy was cancelled. However,
when adverse action is taken, they have to report that to the
person. This is included in the letter they send out; it doesn't
have to be requested at a later time. The provision to cancel has
been deleted. They can charge you a higher premium and non-renew
you under their particular company, but they would have to place
you with an affiliate company that they have, so basically you
would stay within the particular insurance company.
SENATOR TORGERSON said that didn't answer his question, but he
didn't think that anyone could say what's going on unless it's
requested by the director.
The idea is to have some public awareness of what's
going on and it's all confidential. We have the same
thing right now. The Division of Insurance has already
testified that the people file their credit score with
them to get their rates approved. Now we're saying they
don't even need to file it with them. I don't
understand that.
PORTIONS OF THE FOLLOWING TESTIMONY ON SB 320 ARE VERBATIM
SARAH MCNAIR GROVE: PROPERTY-CASUAL ACTUARY, DIVISION OF
INSURANCE, THE DIVISION HAS SUPPORTED THE LEGISLATURE'S ATTEMPTS
TO PLACE PARAMETERS ON THE USE OF CREDIT INFORMATION IN INSURANCE
RATES, HOWEVER BELIEVE THE PROPOSED LEGISLATION FAILS TO ADDRESS
ISSUES THAT ARE OF CONCERN TO CONSUMERS AND, IN PARTICULAR, WE'D
LIKE TO POINT OUT A COUPLE OF AREAS THAT WE THINK ARE SIGNIFICANT
OMISSIONS.
FIRST ON THE UNDERWRITING SIDE, THE LEGISLATION SHOULD INCLUDE A
PROHIBITION THAT AN INSURER MAY NOT FAIL TO RENEW A PERSONAL
INSURANCE POLICY BASED IN WHOLE OR IN PART ON CONSUMERS' CREDIT
HISTORY.
SECOND, WE BELIEVE THAT THE LEGISLATION SHOULD ALSO INCLUDE THE
SAME LIMITATIONS ON THE USE OF PARTICULAR TYPES OF CREDIT
INFORMATION ON THE UNDERWRITING SIDE AS IT DOES ON THE RATING AND
THAT PIECE IS MISSING FROM THIS.
STEVENS: COULD YOU REPEAT THE SECOND ONE AGAIN?
GROVE: PROHIBITIONS ON THE TYPES OF CREDIT INFORMATION THAT CAN
BE USED THAT ARE INCLUDED ON THE RATE MAKING SIDE SHOULD ALSO BE
INCLUDED ON THE UNDERWRITING SIDE. FOR EXAMPLE, THIS BILL
CURRENTLY PROHIBITS THE USE OF MEDICAL INFORMATION FROM A CREDIT
REPORT IF IT'S USED IN RATE MAKING BUT DOES NOT INCLUDE THAT SAME
PROHIBITION IF IT'S USED IN UNDERWRITING. SO AN INSURANCE COMPANY
COULD USE YOUR MEDICAL INFORMATION IN THEIR CREDIT REPORT TO DENY
YOU COVERAGE, TO SAY WE WON'T ISSUE YOU A POLICY.
WE ALSO BELIEVE THAT SOME OF THE PROHIBITIONS THAT ARE USED IN
THE RATE MAKING SHOULD BE STRENGTHENED AND THEN THOSE SAME THINGS
CARRIED OVER TO THE UNDERWRITING SIDE. FOR AN EXAMPLE, THE
INSURER SHOULD BE PROHIBITED FROM USING A PARTICULAR TYPE OF
CREDIT CARD - A PENNY'S CARD VERSUS A NORDSTROM CARD OR
MASTERCARD KIND OF THING, AND THE TOTAL NUMBER OF INQUIRIES, NOT
JUST MARKETING, PROMOTIONAL OR INSURANCE INQUIRIES, WHICH THEY
SAY THEY ALREADY DO NOT USE.
UNLESS THE BILL PROVIDES SUBSTANTIAL AUTHORITY TO REGULATE AND
ENFORCE THE MANNER IN WHICH A CONTROVERSIAL PRACTICE IS USED,
GRANTING CONFIDENTIALITY TO THAT PRACTICE IS INAPPROPRIATE.
CONSUMERS SHOULD KNOW THAT THE PRACTICE IS FAIR AND THAT IT IS
BEING FAIRLY REGULATED. WE BELIEVE THAT THIS LEGISLATION DOES NOT
PROVIDE ADEQUATE CONSUMER PROTECTIONS TO JUSTIFY GRANTING
CONFIDENTIALITY TO THE MODELS THAT ARE USED IN UNDERWRITING AND
IN RATING.
THE PROPOSED LEGISLATION LACKS A BALANCE BETWEEN CONSUMER
CONCERNS AND INDUSTRY CONCERNS AND SOME OF THE ISSUES THAT WE'VE
RAISED WE BELIEVE COULD STRENGTHEN THE CONSUMER PROTECTIONS OF
THIS LEGISLATION.
AND THEN I WOULD LIKE TO ADDRESS THE ISSUE THAT SENATOR TORGERSON
RAISED OF HOW WE WOULD KNOW. THIS BILL DOES NOT ELIMINATE THE
CURRENT REQUIREMENT THAT INSURERS FILE THEIR RATE FILINGS WITH
US. SO THAT WOULD NOT CHANGE AND BASED ON OUR CURRENT PRACTICE,
WE DO ASK INFORMATION ABOUT HOW INSURERS ARE USING CREDIT,
REPORTS OF CREDIT INFORMATION IN THEIR RATE MAKING PRACTICE. THE
ONE THING THAT HAS BEEN AN ISSUE WITH SOME INSURERS AND THAT WE
HAVE DISAPPROVED FILINGS FOR IS BECAUSE THEY HAVE NOT BEEN
WILLING TO GIVE US THE ACTUAL MODELS OF HOW THEY ARE CALCULATING
THE SCORES AND SO THIS WOULD ALLOW THEM TO GIVE IT TO US SO WE
WOULD NOT BE ABLE TO DIVULGE THE CONTENTS OF THAT MODEL.
STEVENS: QUESTIONS? DID YOU WORK WITH THE SPONSOR IN THE
DEVELOPMENT OF [version] \F?
GROVE: WE DID DISCUSS THINGS WITH HER, YES, AND WE RAISED THESE
SAME ISSUES, ALTHOUGH THESE ARE NOT NEW ISSUES.
STEVENS: I MUST BE SORT OF SLIPPING HERE, BUT WASN'T YOUR FIRST
TESTIMONY THE FIRST TIME WE HEARD THIS BILL? NOW HAVE YOU GOTTEN
MORE RESTRICTIVE IN YOUR TESTIMONY SINCE THE FIRST TIME WE HEARD
THIS BILL? THE FIRST TIME I BELIEVE YOU GUYS TESTIFIED YOU WERE
NEUTRAL ON THE BILL.
GROVE: WE SAID THAT WE SUPPORTED SOME KIND OF PARAMETERS ON THE
USE OF CREDIT INFORMATION AND THE FIRST TIME WE HEARD IT WAS A
PROHIBITION AND AT THAT POINT WE FELT THAT THAT WAS A POLICY CALL
SO WE DID NOT WEIGH IN WHETHER IT SHOULD BE A PROHIBITION OR
WHETHER IT SHOULD BE PARAMETERS LIKE THIS. NOW THAT WE'RE
DISCUSSING WHAT THE PARAMETERS ARE ...
STEVENS: THIS IS GETTING A LITTLE FRUSTRATING. WE'VE HAD THREE
COMMITTEE HEARINGS BETWEEN THE SPONSOR AND ALL THE PEOPLE AND NOW
EVERY TIME WE COME TOGETHER IT GETS FURTHER AND FURTHER APART. I
THOUGHT WE WERE GOING TO HAVE A CONSENSUS ON THIS FROM THE
DIVISION AND NOW YOU COME IN AND SAY THAT YOU DON'T SUPPORT THE
BILL. IS THAT WHAT YOU'RE TELLING US?
GROVE: WE DO NOT SUPPORT THE WAY THAT IT IS CURRENTLY WRITTEN AND
IT RAISED SOME ISSUES THAT WE THINK NEED TO BE ADDRESSED.
STEVENS: THANK YOU.
GROVE: BUT WHATEVER YOU PASS WE WILL ENFORCE AS WE NEED TO.
STEVENS: THANK YOU. COMMENTS FROM COMMITTEE MEMBERS? LET'S GO TO
JOHN GEORGE.
JOHN GEORGE: THANK YOU MR. CHAIRMAN. MY NAME IS JOHN GEORGE. I'M
HERE TODAY ON BEHALF OF THE NATIONAL ASSOCIATION OF INDEPENDENT
INSURERS, A PROPERTY CASUALTY TRADE ASSOCIATION REPRESENTING
ABOUT 690 INSURANCE COMPANIES THROUGHOUT THE COUNTRY, MANY OF
WHOM DO WRITE INSURANCE IN THE STATE OF ALASKA, ALTHOUGH
CERTAINLY NOT ALL 690 OF THEM, BUT WE DO ACCOUNT FOR FAR GREATER
THAN 50 PERCENT OF ALL THE AUTO AND HOMEOWNERS' INSURANCE WRITTEN
IN THE STATE OF ALASKA.
THERE'S BEEN A LOT OF WORK DONE ON THIS BILL AND THE VARIOUS
DIFFERENT DRAFTS OF IT. I'LL THROW OUR TWO CENTS IN - WE'RE NOT
REAL HAPPY WITH THE BILL EITHER FOR THE OPPOSITE REASONS THAT THE
DIVISION OF INSURANCE IS NOT HAPPY. BUT LET ME GIVE YOU SOME
RD
NATIONAL PERSPECTIVE AS WELL. SO FAR, AND THIS IS AS OF THE 3 OF
MAY, TWO STATES HAVE PASSED BILLS THAT WOULD BE MORE RESTRICTIVE
THAN WHAT YOU'RE TALKING ABOUT AND THAT'S WASHINGTON AND
MARYLAND. THREE STATES HAVE PASSED BILLS THAT ARE LESS
RESTRICTIVE - THAT WOULD BE IDAHO, UTAH AND MINNESOTA. THREE
STATES HAVE BILLS PENDING THAT ARE NOT AS RESTRICTIVE AND MAY OR
MAY NOT PASS - THAT'S ARIZONA, MISSOURI AND KANSAS. ELEVEN STATES
HAVE ELECTED NOT TO PASS LEGISLATION.
STEVENS: CAN I INTERRUPT YOU FOR A MINUTE? THIS HAS BEEN
BOTHERING ME - EVERYBODY'S BEEN BRINGING THIS UP. WHY IS IT THAT
ALL OF A SUDDEN THIS YEAR EVERYBODY IN EVERYBODY'S STATE HAS
INITIATED THIS LEGISLATION? WHERE DID THIS COME FROM? JUST FILL
ME IN ON THAT. DID IT COME OUT OF A GOVERNOR'S CONFERENCE OR DID
IT COME OUT OF A - YOU KNOW...
GEORGE: I THINK THERE ARE PROBABLY - THERE ARE SEVERAL INSURANCE
COMPANIES THAT HAVE BEEN AGGRESSIVELY USING IT AND ...
STEVENS: BUT IT'S BEEN BEING USED FOR UP TO SIX YEARS EVEN HERE
IN ALASKA. THE QUESTION I HAVE IS WHY IS IT ALL OF A SUDDEN IN
ONE YEAR 28 STATES ARE INTRODUCING LEGISLATION TO GET RID OF IT
WHEN IT'S BEEN USED FOR SIX YEARS? I'M NOT ASKING YOU TO HAVE THE
ANSWER TO THAT BUT THAT'S A QUESTION THAT'S JUST SORT OF POPPED
INTO MY HEAD. YOU KNOW, EVERYONE SAYS OH, THEY'RE DOING THIS
HERE, THEY'RE DOING THIS THERE. WHY ALL OF A SUDDEN?
GEORGE: I DON'T HAVE A PRECISE ANSWER ALTHOUGH I THINK PROBABLY
IT DID COME UP AT A NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS MEETING OR AN [INDISC] MEETING OR ONE OF THOSE.
STEVENS: IT COULDN'T HAVE BEEN - WAS IT INDUSTRY DRIVEN OR WAS IT
POLITICALLY DRIVEN? THAT'S THE QUESTION. OR WAS IT PUBLIC
INTEREST RESEARCH GROUP DRIVEN?
GEORGE: I CAN'T ANSWER THAT. I DON'T HAVE A PRECISE ANSWER TO
THAT. MOST STATES, THE MAJORITY OF STATES HAVE EITHER TAKEN UP
BILLS AND NOT GONE FORWARD WITH THEM. I SAID 11 STATES HAVE
CONSIDERED BILLS AND FAILED TO PASS THEM. THERE'S ANOTHER FIVE
STATES - CALIFORNIA, NEW YORK, OHIO, SOUTH CAROLINA, TENNESSEE
AND VERMONT - THAT ARE NOT EXPECTED TO ADVANCE LAWS THIS YEAR.
STEVENS: HOW MANY STATES TOTAL DO YOU HAVE THERE THAT HAVE
ADDRESSED THE ISSUE THIS YEAR?
GEORGE: INCLUDING ALASKA THAT WOULD BE 25 - SO HALF OF THE
STATES. BUT TWO HAVE PASSED MORE RESTRICTIVE LAWS AND THREE HAVE
PASSED LESS RESTRICTIVE LAWS AND THE REST HAVE DONE NOTHING.
STEVENS: SO 25 STATES IN ONE YEAR ALL OF A SUDDEN DECIDED THAT
IT'S TIME TO STOP THIS PRACTICE. I'M JUST TOO SUSPECT TO KNOW
THAT IT'S NOT BEING INITIATED FROM SOMETHING. I DON'T KNOW WHAT
IT IS - I DON'T KNOW THAT ANSWER TO THAT, BUT ANYWAY I'M SORRY, I
JUST HAD TO ASK THAT QUESTION BECAUSE IT'S BEEN BOTHERING ME FOR
SEVERAL WEEKS ON THIS BILL.
GEORGE: FINE. AND MAYBE I HAVE THE SOLOMON SOLUTION. SINCE NO ONE
SEEMS TO BE REALLY HAPPY WITH THE COMPROMISE THAT'S COME UP,
SENATOR ELTON OF THE TRANSPORTATION COMMITTEE, WHERE THIS BILL
HAD ITS FIRST HEARING, HAS COME OUT WITH A PRESS RELEASE ASKING
FOR A PROBE OF CREDIT SCORING WITH THE ATTORNEY GENERAL'S OFFICE
AND THE DIVISION OF INSURANCE. AND FRANKLY, WE THINK THAT IS NOT
A BAD IDEA. IT'S ONE OF THOSE, IF YOU KNEW WHAT WE KNEW WE THINK
YOU'D AGREE WITH US AND WE HEAR LOTS OF ANECDOTAL STORIES AND WE
THINK THIS MIGHT DISCRIMINATE AGAINST PEOPLE IN THESE CERTAIN
CATEGORIES AND ALL, BUT I DON'T THINK ANYBODY'S REALLY STUDIED IT
OTHER THAN THE INSURANCE INDUSTRY AND COME UP WITH REAL HARD FACT
FINDING. SO WE'RE TRYING TO LEGISLATE BASED ON INNUENDOES AND WE
THINK THIS MIGHT AND SO MAY A PROBE ...
STEVENS: A PROBE INTO THE DIVISION OF INSURANCE OR A PROBE INTO
THE INSURANCE COMPANIES?
GEORGE: A STUDY OF CREDIT SCORING, RATING, THE OPEN COMPETITION,
PRIOR [INDISC.], FILE USE, THE WHOLE SCENARIO AND GET OUT ON THE
TABLE ALL OF THE FACTS SO THAT THE LEGISLATURE CAN LOOK AT IT
WITH ...
STEVENS: WELL THIS IS THE THIRD HEARING WE'VE HAD ON THIS BILL. I
MEAN WE'VE TURNED FACTS OVER BEFORE AND THE ONE FACT THAT STILL
GETS IN MY MIND IS THE FACT THAT IF WE TAKE THIS TOOL AWAY, 51
PERCENT OF THE RATE PAYERS IN THE STATE INSURANCE RATES ARE GOING
TO GO UP, NINE PERCENT ARE GOING TO GO DOWN AND 40 PERCENT ARE
GOING TO STAY THE SAME. ISN'T THAT THE NUMBER THAT WAS TESTIFIED
IN FRONT OF THE TRANSPORTATION COMMITTEE?
GEORGE: I DON'T BELIEVE THAT THAT IS THE NUMBER SENATOR.
STEVENS: THAT'S THE NUMBER I READ IN THE TESTIMONY FROM MICHAEL
HAROLD. ARE YOU ON LINE MR. HAROLD? IS THAT THE NUMBER THAT YOU
TESTIFIED IN FRONT OF THE TRANSPORTATION COMMITTEE?
HAROLD: I DID TESTIFY AND I DID MAKE THE STATEMENT THAT OUR
COMPANIES TELL US THAT THE MAJORITY OF THEIR POLICYHOLDERS, WHEN
THEY USE CREDIT SCORING AS A FACTOR IN RATE MAKING, RECEIVE
DISCOUNTS. SO CONSEQUENTLY, IF THEY WERE NOT ALLOWED TO USE THE
TOOL, THEN EITHER CURRENT OR FUTURE POLICYHOLDERS WILL HAVE TO
PAY MORE - THE MAJORITY OF THEM.
GEORGE: I BELIEVE WHAT HE'S SAYING THEN IS THAT THE MAJORITY OF
PEOPLE WILL SEE ...
STEVENS: I GOT TESTIMONY FROM MR. HAROLD RIGHT HERE ON FEBRUARY
28 - IT SAYS 51 PERCENT OF THE POLICYHOLDERS WOULD RECEIVE RATE
INCREASES THAT WOULD AVERAGE $180 A YEAR, 40 PERCENT OF THE
POLICIES WOULD STAY THE SAME, NINE PERCENT OF THE POLICYHOLDERS
ARE MOST LIKELY TO SUFFER LOSSES AND WOULD GET DISCOUNTS ON THEIR
PREMIUM. ARE YOU BACK-PEDALING ON US ON YOUR TESTIMONY MR.
HAROLD?
MICHAEL HAROLD: NO SIR, I AM NOT. I THINK THAT THE TESTIMONY I
GAVE IN THE TRANSPORTATION COMMITTEE WAS FROM ONE OF OUR MEMBER
COMPANIES THAT I'D ASKED TO GIVE ME AN ASSESSMENT OF HOW IT WOULD
IMPACT AND AT THAT TIME [INDISC] WHAT WE WERE DISCUSSING AND HOW
THAT WOULD IMPACT THE RATING STRUCTURE ON THEIR POLICYHOLDERS.
STEVENS: OKAY, THANK YOU MR. HAROLD. WE HAD TESTIMONY FROM THE
INDIVIDUAL - FROM PROGRESSIVE WHO TOLD ME THAT TWO-THIRDS OF HIS
POLICYHOLDERS' INSURANCE RATES WERE GOING TO GO UP IF WE TOOK
THIS AWAY. I CAN'T REMEMBER THE INDIVIDUAL'S NAME, BUT HE SAT IN
YOUR CHAIR AND SAID THAT.
GEORGE: AND PART OF THE CONFUSION, AND MAYBE I'M MISTAKEN ON THIS
...
STEVENS: THE PART OF THE CONFUSION IS THAT EVERY TIME THAT WE
COME TO THIS POINT TO WHERE IT SOUNDS LIKE WE HAVE AN AGREEMENT,
I GET EVERYBODY IN THE SAME ROOM TOGETHER AND THERE'S NO
AGREEMENT. WHY ARE WE WASTING THE TIME TO DO THIS?
GEORGE: I UNDERSTAND THAT. I THINK THE CONFUSION MAY BE - IT'S MY
CONFUSION BECAUSE IF CREDIT SCORING IS ALLOWED, AND LET'S SAY WE
HAVE NO CREDIT SCORING ALLOWED NOW, IF YOU ALLOW IT, PEOPLE WILL
GET A DISCOUNT. IF, AS THEY ARE USING IT NOW FOR UNDERWRITING BUT
NOT RATING, SOME PEOPLE IF THEY CAN'T USE IT FOR UNDERWRITING,
THEN THEY WILL HAVE TO INCREASE PREMIUMS AND IF THEY CAN USE IT
FOR UNDERWRITING AND RATING, PEOPLE WILL GET A DISCOUNT. IF THEY
CAN'T USE IT FOR EITHER, THEN SOME PEOPLE WILL PAY [INDISC]
STEVENS: THE DIVISION OF INSURANCE TOLD US THE LAST TIME THAT
THERE'S RATES THAT ARE APPROVED BY THE DIVISION. RIGHT? FIVE
RATES IF I'M CORRECT. IS THAT RIGHT? THERE'S FIVE RATES FOR AUTO
INSURANCE?
GROVE: FIVE TIERS.
STEVENS: AND SO THE INSURER USES THE CREDIT SCORING AS ONE OF THE
TOOLS IN THE PROCESS TO DETERMINE WHERE THAT INDIVIDUAL FALLS IN
WHAT TIER. EXPLAIN TO ME, BECAUSE I'M NOT IN THE INSURANCE
BUSINESS, WHAT THE DIFFERENCE BETWEEN UNDERWRITING AND RATE
SCORING IS.
GEORGE: UNDERWRITING IS DECIDING WHETHER OR NOT YOU WILL INSURE
SOMEONE AND WHICH COMPANY YOU'RE GOING TO PLACE THEM IN OR WHICH
TIER. RATING IS HOW YOU JUSTIFY WHAT YOU CHARGED THE PERSON ONCE
YOU DECIDED TO WRITE THEM IN THAT PARTICULAR CLASS.
STEVENS: BUT THE RATES ARE APPROVED BY THE DIVISION?
GEORGE: ABSOLUTELY THEY ARE.
STEVENS: BUT WHERE YOU PUT THAT INDIVIDUAL - THE DIVISION HAS NO
INPUT INTO THAT? IT'S ALL UP TO THE INDIVIDUAL COMPANY THAT
DECIDES TO TAKE THAT CONSUMER ON AS A RISK.
GEORGE: I BELIEVE THAT THAT'S ACCURATE ALTHOUGH PROBABLY THE
DIVISION OF INSURANCE WOULD BETTER BE ABLE TO ANSWER THAT.
GROVE: MR. CHAIR, WHEN AN INSURER USES IT AS A TIER CRITERIA
WITHIN ONE COMPANY, THEN THAT IS PART OF THEIR RATING PLAN AND
THAT'S WHAT THEY FILE WITH US AND TELL US HERE'S THE CRITERIA
THAT WE'RE GOING TO USE, HERE'S THE SCORE THAT THEY HAVE TO HAVE
TO BE ELIGIBLE FOR EACH INDIVIDUAL TIER. SOME COMPANIES USE PRIOR
INSURANCE, THEY USE CREDIT INFORMATION, WHATEVER CRITERIA THEY
WANT TO USE TO PLACE AN INDIVIDUAL INTO A TIER. THAT IS FILED
WITH US AS PART OF THE RATE FILING. WHEN IT IS USED TO DECIDE
WHICH COMPANY AN INDIVIDUAL IS GOING TO, THAT IS AN UNDERWRITING
AND THAT IS NOT FILED WITH US.
STEVENS: THANK YOU.
TORGERSON: AND YOU DON'T GET THEIR MODEL ON HOW THEY DID THAT -
IS THAT RIGHT?
GROVE: WHAT WE HAVE DONE IS WE HAVE ASKED FOR INFORMATION ABOUT
THE MODEL. WE'VE ASKED FOR THE FACTORS THAT THEY USE OFF OF THE
CREDIT REPORTS. BECAUSE OF THE CONFIDENTIALITY ISSUES, WE HAVE
ACTUALLY NOT ASKED COMPANIES, ALTHOUGH WE HAVE RESERVED THE RIGHT
TO DO SO IF WE HAVEN'T GOTTEN ENOUGH ADDITIONAL INFORMATION TO
GIVE US THE SPECIFIC WEIGHTINGS THAT THEY PUT ON EACH PARTICULAR
FACTOR, BUT WE'VE ASKED FOR STATISTICAL SUPPORT AND
JUSTIFICATION.
TORGERSON: SOUNDS LIKE THE PRISON BILL.
STEVENS: CAN I SWITCH GEARS BACK TO A QUESTION TO THE DIVISION?
WHAT SORT OF - I'M SURE THERE'S STATUTES AND REGULATIONS THAT ARE
IN PLACE NOW THAT PREVENT DISCRIMINATORY PRACTICES IN
UNDERWRITING AND IN RATE PAYING. IS THAT CORRECT?
GROVE: THAT'S CORRECT.
STEVENS: ARE THE PRACTICES THAT ARE OUTLINED IN THIS BILL ANY
DIFFERENT THAN THE ONES THAT ARE ALREADY IN STATUTE? I'M TALKING
ABOUT IN UNDERWRITING NOW.
GROVE: IN UNDERWRITING THEY ARE NO DIFFERENT.
STEVENS: THEY ARE NO DIFFERENT.
TORGERSON: DO YOU HAVE THE AMENDMENTS THAT YOU WANT IN HERE? DO
YOU HAVE THEM WRITTEN UP?
GROVE: NOT WITH ME BUT WE DID HAVE SOME AMENDMENTS, YES.
STEVENS: I'M SORRY, WE SHOT YOUR TESTIMONY TO SHREDS HERE.
GEORGE: AND BASICALLY WHAT I WAS ABOUT TO CONCLUDE WITH IS THAT A
FULL BLOWN STUDY TO DETERMINE REALLY WHAT THE FACTS ARE, WHETHER
OR NOT A PARTICULAR CREDIT FACTOR DISCRIMINATES AGAINST SOMEONE
BECAUSE OF RACE OR RELIGION OR MEDICAL BILLS OR EMPLOYMENT, YOU
KNOW WE HEAR THESE ANECDOTAL STORIES THAT IT MIGHT BUT WE DON'T
BELIEVE THAT IT DOES AND WE THINK THAT IF YOU REALLY LOOKED AT
IT, SPENT SOME TIME TO COME UP WITH A REAL SOLUTION THAT
EVERYBODY COULD AGREE ON THE FACTS ON THAT WOULD BE FAR AND AWAY
BETTER AND AS I SAY MOST STATES HAVE ELECTED NOT TO JUMP OUT ON
THE [INDISC] OF THIS BUT TO THINK ABOUT IT A LITTLE BIT SO THEY
CAN COME UP WITH THE PROPER SOLUTION. I WOULD HATE TO THINK THAT
ALASKA WOULD HAVE THE THIRD MOST RESTRICTIVE BILL IN THE UNITED
STATES BECAUSE WE'RE JUST NOT A MAJOR INSURANCE MARKET AND IT'S
HARD TO INDUCE COMPANIES TO WRITE INSURANCE HERE AS IT IS BECAUSE
LARGER STATES HAVE THE VOLUME AND THEY HAVE A LITTLE MORE
LEVERAGE FOR THAT. SO, I THINK, RATHER THAN BEING ON THE
FOREFRONT OF THIS ISSUE THAT WE MIGHT BE BETTER OFF TO GET OUR
FACTS TOGETHER, SEE WHAT WORKS IN THE OTHER STATES AND COME BACK
AND DO IT AGAIN.
STEVENS: THANK YOU. SENATOR AUSTERMAN.
AUSTERMAN: HAVE YOU HEARD OF ANY COMPANIES THAT WILL PULL OUT OF
ALASKA BECAUSE OF THIS BILL?
GEORGE: NO, NOT IN SO MUCH AS THEY MIGHT PULL OUT, ALTHOUGH IT'S
POSSIBLE. IT WOULD PROBABLY DISCOURAGE NEW COMPANIES FROM COMING
IN BUT WE HAVE ALREADY SEEN SOME COMPANIES, FOR INSTANCE, TIGHTEN
THEIR UNDERWRITING RESTRICTIONS AND REALLY REDUCE THEIR BULK OF
BUSINESS BECAUSE THEY'RE NOT ALLOWED TO USE IT FOR RATING. THEY
ARE NOT AS CONFIDENT IN THE RATING METHODS THEY'RE USING NOW AS
THEY WOULD BE IN CREDIT SCORING AND THEREFORE THEY HAVE REALLY
RESTRICTED THE BULK OF BUSINESS THAT THEY HAVE SO IT DEFINITELY
HAS ALREADY AFFECTED COMPANIES AND THERE ARE COMPANIES THAT HAVE
FILED - TOLD THAT THEY HAD TO PROVIDE THEIR SECRET DATA AND THEY
COULDN'T BE KEPT CONFIDENTIAL AND THEY WITHDREW THEIR FILING
THEN, AT WHICH TIME THEY SAID OKAY, IF WE HAVE TO USE OUR OLD
METHOD THEN WE'RE GOING TO REALLY BE RESTRICTED AND NOT WRITE AS
MUCH BUSINESS AS WE CAN BECAUSE WE'RE NOT AS CONFIDENT THAT WE'RE
CHARGING AN ADEQUATE RATE FOR THOSE.
AUSTERMAN: I MEAN THIS IS A BUSINESS DECISION BY THE COMPANIES
AND THEY'LL BASE IT UPON WHAT THE LAWS ARE AND EITHER THEY'LL
WRITE IT AND CHARGE MORE OR THEY'LL LEAVE.
GEORGE: WHETHER THEY'RE ALLOWED TO CHARGE MORE OR NOT IS A
QUESTION WHETHER THE DIVISION OF INSURANCE WILL ALLOW THEM TO BUT
REALLY IT'S AN ALLOCATION ISSUE. IT'S NOT THAT INSURANCE
COMPANIES ARE GOING TO MAKE MORE MONEY, IT'S THAT THEY'RE GOING
TO BE CHARGING PEOPLE THAT ARE GOING TO HAVE MORE LOSSES - MORE
PREMIUM. THOSE THAT HAVE LESS LOSSES WILL PAY LESS PREMIUM AND
THAT'S REALLY A MORE ACCURATE PREDICTOR OF WHICH CLASSES OF
PEOPLE WILL HAVE BETTER LOSS HISTORY AND THEREFORE CAN PAY LESS
INSURANCE AND THOSE THAT ARE GOING TO HAVE A HIGHER PREDICTED
LOSS WILL PAY A HIGHER PREMIUM. SO IT'S AN ALLOCATION ISSUE, IT'S
NOT A PROFIT ISSUE.
TORGERSON: SOUNDS TO ME LIKE YOU HAVE THE RIGHT IN PUERTO RICO OR
OTHER THE STATES OR YOU'RE GOING TO ABANDON US. YOU MAY HAVE BEEN
SUCCESSFUL IN LOBBYING 28 STATES AND NOT HAD THEM PASS THIS BUT
IT'S GOING TO HAPPEN SO THIS IS AN INDUSTRY CHANGE THAT'S COMING
DOWN THE PIKE AND IT DOESN'T BOTHER ME IF ALASKA IS THE THIRD
MOST RESTRICTIVE. I MIGHT BE PROUD OF THAT TO TELL YOU THE TRUTH.
STEVENS: WE REALLY ARE ALL OVER THE MAP.
MR. STEVEN CONN, EXECUTIVE DIRECTOR, ALASKA PUBLIC INTEREST
RESEARCH GROUP (AKPIRG): I REALLY APPRECIATE THE WAY THE
CHAIRMAN HAS OPENED UP THIS DISCUSSION BY GETTING TO THE QUICK.
THE REASON THAT ALL THESE STATES HAVE MOVED OUR POTENTIAL
CONSUMER [INDISC] CONCERNED WHEN THEIR RATES CHANGE. WHEN THEY
HAVE A DIVORCE, A CATESTROPHIC MEDICAL OCCURANCE OR A HAPPENING
THAT HAD NOTHING TO DO WITH THEIR DRIVING RECORD AND NOTHING TO
DO WITH THEIR ABILITY TO PAY THEIR PREMIUMS. SO, WE'RE TALKING
ABOUT THESE RATE CHANGES AND RATE CHANGES THAT HAVE TO BE
APPROVED BY THE DIVISION OF INSURANCE.
BECAUSE OF STATEMENTS BY THE INSURANCE COMPANIES THAT IT'S A ZERO
SUM GAIN OR ACTUALLY AT FAULT BECAUSE UNFAIR DISCRIMINATION IS -
AS THE CHAIRMAN INDICATED - AND THE BURDEN IS ON THE INSURANCE
COMPANY TO INDICATE THAT IT IS NOT UNFAIR. THAT'S THE PROCESS IN
PLACE. WHAT THIS BILL WOULD DO IS PUSH IT ALL BEHIND THE
CURTAINS. WE WOULD NOT HAVE WHAT NOW ARE PUBLIC RECORDS. THEY
WOULD BE CONFIDENTIAL. THEY WOULD BE CONSIDERED TRADE SECRETS.
THEY WOULD ALL BE HIDDEN AWAY. THIS BILL DOES LITTLE OR NOTHING
FOR THE ISSUE THAT THE CONSUMERS, INCLUDING THE SPONSOR OF THIS
BILL, BROUGHT TO OUR ATTENTION. AND I BELIEVE THIS WAS NOT THE
MOTIVATIONAL MOVE. THIS WAS INITIATED AS A BAN ON CREDIT SCORING
BY ONE OF YOUR COLLEAGUES OVER AN INCIDENT THAT HE KNEW WELL WAS
TOTALLY UNGEARED TO THE PERSON WITH WHOM IT WAS INVOLVED. ONE
OTHER THING. THE INSURANCE COMPANIES CONSISTENTLY TELL US THAT
CREDIT SCORES IS SO STATISTICALLY ACCURATE THAT IT IS A WONDERFUL
SUBSTITUTE PREDICTOR FOR FUTURE LIABILITY. HOWEVER, WE KNOW THAT
ONE INSURANCE COMPANY IS BEFORE THE DIVISION OF INSURANCE ASKING
THAT THEIR CREDIT SCORE MECHANISM BE REMOVED FROM ITS RATE MAKING
IN THE AREA OF FIRE PREVENTION AND HEALTH. SO, APPARENTLY, IT
WASN'T [INDISC] LOOSE MONEY ON THE DEAL AND A GOOD ONE - THE
CONSUMERS ARE AFFECTED BY IT. I WOULD URGE YOU AT THIS JUNCTURE,
IF THIS IS THE BEST WE CAN DO, TO WALK AWAY FROM THIS BILL. THIS
BILL IS FRUSTRATING CONSUMERS WHO SEE THEIR PREMIUMS RAISED
EXPONENTIALLY [INDISC]. WE'RE NOT TALKING ABOUT UNDERWRITING;
WE'RE TALKING ABOUT THE RATES AS YOU INDICATED. [INDISC] OUR
INSURANCE DIVISION PUT IN A POSITION WHERE THEY HAVE TO JUSTIFY A
RATE OVER A CREDIT SCORE THAT CAN'T BE ANALYZED BY ANYBODY ELSE
WHICH ESSENTIALLY GIVES THEM AN ALLIANCE BY NATURE WITH THE
INSURANCE COMPANY. THIS BILL HAS LOST WHAT IT'S INTENDED TO DO
AND I WOULD URGE YOU AT THIS LATE DATE TO LET IT DIE IN THIS
COMMITTEE. THANK YOU FOR GIVING ME THIS OPPORTUNITY.
STEVENS: THANK YOU FOR YOUR TESTIMONY, MR. CONN. ARE THERE ANY
COMMENTS FROM COMMITTEE MEMBERS. MR. LOHR, DO YOU HAVE TESTIMONY
OR ARE YOU JUST AVAILBABLE FOR QUESTIONS OR ARE YOU EVEN ON LINE
STILL?
MR. LOHR: THANK YOU MR. CHAIRMAN, I'M AVAILABLE TO ANSWER ANY
QUESTIONS, I COULD VENTURE AND ANSWER SOME OF THE ONES YOU POSED
EARLIER, BUT THAT'S YOUR CHOICE.
STEVENS: THANKS YOU. MR. HAROLD, I'M SORRY WE INTERRUPTED YOU
PRIOR. DO YOU HAVE TESTIMONY FOR TODAY.
HAROLD: I ACTUALLY WILL NOT, SENATOR. I'LL LET OUR LOCAL COUNSEL,
JOHN GEORGE'S TESTIMONY STAND AT THIS POINT.
STEVENS: MR. KIBBY, ARE YOU ON LINE? IF YOU ARE, PLEASE STATE
YOUR AFFILIATION AND GO AHEAD WITH TESTIMONY.
MR. LARRY KIBBY, REGIONAL VICE PRESIDENT, ALLIANCE OF AMERICAN
INSURERS: MY COMMENTS ARE PROBABLY SIMILAR TO MR. GEORGE WITH
NEII AND OTHERS THAT I HAVE HEARD. WE HAVE SOME CONCERNS ABOUT
THE DRAFT X OF THE BILL AS IT EXISTS RIGHT NOW. A LOT OF THEM
HAVE BEEN ADDRESSED. I HAVE A COUPLE OF OTHERS THAT I HAVE
BROUGHT UP FOR PURPOSES OF DISCUSSION. NUMBER ONE HAS TO DO WITH
THE VERY FIRST SECTION OF THE BILL, SUB (A) WHERE AN INSURER HAS
TO OBTAIN ORAL OR WRITTEN PERMISSION OF AN APPLICANT IN ORDER TO
USE CREDIT AND CREDIT HISTORY. WE BELIEVE THAT IS QUITE
RESTRICTIVE IN TERMS OF ALLOWING OUR COMPANIES TO OPERATE BOTH IN
THE UNDERWRITING AND RATING SIDE OF THE EQUATION. IN OTHER STATES
WHERE THE CREDIT BILLS HAVE BEEN TAKEN UP, THERE IS A CONCERN
EXPRESSED IN A NUMBER OF THEM AND IN A RULE THAT'S PENDING IN
OREGON THAT INSURERS MAKE AVAILABLE THE INFORMATION TO CONSUMERS
ON THE APPLICATIONS OR HOWEVER THAT THEY ARE IN FACT GOING TO USE
CREDIT. THEN THE CONSUMER IS NOTIFIED UP FRONT AND IT IS UP TO
THAT CONSUMER TO GO FORWARD WITH THAT COMPANY OR NOT ONE WAY OR
THE OTHER.
WE WOULD MUCH PREFER THE FACT THAT THE INSURER BE OBLIGATED TO
MAKE THAT DECISION KNOWN IF THEY ARE GOING TO USE CREDIT UP FRONT
AS OPPOSED TO HAVING TO RECEIVE A WRITTEN OR ORAL PERMISSION OF
THE CONSUMER IN ORDER TO USE THE CREDIT VARIABLE.
ON THE OTHER CONCERN THAT I HAVE AND IT'S PROBABLY MORE A
QUESTION THAN A CONCERN, BUT IN SECTION 2 ON LINE 30, PAGE 4, THE
SUB (3) WHERE WE ARE NOT ALLOWED TO USE THE CREDIT HISTORY OR
CREDIT SCORE THAT RESULTS IN UNFAIR DISCRIMINATION. I GUESS I'M
REALLY NOT SURE EXACTLY WHAT THAT MEANS. IT'S SOMEWHAT BROAD. SUB
(2) ABOVE IT SAYS THAT WE CAN'T USE METHODOLOGIES THAT
INCORPORATE GENDER, RACE, NATIONALITY OR RELIGION. THAT IS
SPECIFICALLY A PROVISION THAT IS IN THE FAIR CREDIT REPORTING
ACT. WE RESPECT THAT AND BELIEVE THAT IS WELL STATED IN TERMS OF
THE DISCRIMINATORY ACTIVITY AND WE WOULD CERTAINLY SUPPORT
SOMETHING LIKE THAT. I'M JUST NOT QUITE SURE WHAT THE AUTHOR IS
GETTING AT WITH SUB(3) THAT WOULD BE ANY ADDITION TO WHAT IS IN
SUB (2). THOSE ARE THE TWO SPECIFIC CONCERNS THAT I HAVE ABOUT
LOOKING AT THE DRAFT OVER AND ABOVE THE OTHER CONCERNS THAT HAVE
BEEN STATED BY THE OTHER PEOPLE WHO HAVE TESTIFIED. I
SPECIFICALLY THINK THAT IT'S PROBABLY NOT A BAD IDEA IF IT IS THE
DECISION IN ALASKA TO TAKE A LONGER LOOK AT THIS WHOLE ISSUE - DO
A STUDY OF ALL THE FACTORS THAT LEAD TO UNDERWRITING AND RATING
SPECIFICALLY TO WHERE CREDIT IS GOING. WE CERTAINLY WOULD SUPPORT
SOMETHING LIKE THAT. THAT'S MY INITIAL LOOK AT THE BILL TODAY.
MR. MARK NIEHAUS, PROGRESSIVE INSURANCE: I TESTIFIED BEFORE THIS
COMMITTEE PREVIOUSLY. I'M NOT HERE TO REPEAT MY TESTIMONY, JUST
BY WAY OF BACKGROUND, PROGRESSIVE HAS USED CREDIT IN ALASKA FOR
FOUR YEARS APPROXIMATELY AND I WAS THE ONE WHO TESTIFIED THAT THE
ORIGINAL BILL, WHICH WAS AN OUTRIGHT BAN, WOULD HAVE CAUSED ABOUT
TWO-THIRDS OF OUR EXISTING CUSTOMERS TO GET RATE INCREASES. I'M
VERY PLEASED WITH ALL THE WORK THAT HAS BEEN DONE ON THIS VERSION
OF THE BILL. I THINK IT'S WORTH NOTING, IF PASSED, THIS [INDISC]
SIGNIFICANT RESTRICTIONS AND NEW REQUIREMENTS INCLUDING FILING OF
DETAILED CREDIT MODEL WITH THE DIVISION OF INSURANCE, WHICH WE'RE
PREPARED TO DO BECAUSE WE HAVE DATA THAT JUSTIFIES WHAT WE'RE
DOING AND WE'RE HAPPY TO FILE THAT. THAT ALSO PRECLUDES THE
DENIAL OF COVERAGE SOLELY BASED ON CREDIT. AGAIN, THAT'S NOT
SOMETHING MY COMPANY DOES, BUT THAT'S AN IMPORTANT CHANGE AND
LASTLY, IT LIMITS WHAT CAN BE USED - SOME OF THE SPECIFIC LIMITS
ON CREDIT ITEMS THAT CAN BE USED. I DO NOTE THAT THIS VERSION IS
A LOT BETTER THAN THE PREVIOUS VERSION, BUT HAVING SAID THAT,
THERE ARE STILL SOME ISSUES THAT WE'RE NOT THRILLED WITH BECAUSE
THERE ARE LIMITS HERE IN TERMS OF WHAT CAN BE USED AND THAT WILL
REDUCE THE PREDICTIVE POWER OF OUR CREDIT MODEL.
HAVING SAID THAT, WE CAN LIVE WITH THIS VERSION OF THE BILL AND
THIS VERSION WOULD PRECLUDE WHAT MY EARLIER TESTIMONY WAS THAT WE
WOULD BE LOOKING AT RATE INCREASES ON TWO-THIRDS OF OUR BUSINESS.
THAT WOULD NOT BE THE CASE WITH THIS VERSION OF THE BILL IN MY
OPINION. THERE ARE OTHER CHANGES, THOUGH, THE ADVERSE ACTION OF
THIS. I REQUESTED THAT BE ALLOWED TO HAVE REASON CODES AS A
SEPARATE NOTICE AND THAT CHANGE WAS NOT INCLUDED IN THE BILL,
WHICH IS DISAPPOINTING AND IT WILL INCREASE OUT COST, BUT AGAIN,
CAN I LIVE WITH THIS? YES. I CAN CONTINUE TO DO BUSINESS WITHOUT
SIGINFICANT RATE INCREASES. SO I AM PLEASED WITH THAT
DEVELOPMENT. THAT CONCLUDES MY TESTIMONY UNLESS THERE'S ANY
QUESTIONS.
STEVENS: IN THE SENSE THAT YOU SAY YOU CAN LIVE WIHTIN THE BOUNDS
OF THIS BILL AND IT WON'T HAVE SIGINFICANT INCREASES INTO YOUR
CUSTOMERS THAT HAVE GOOD CREDIT, WHAT ABOUT THE CUSTOMERS THAT
HAVE POOR CREDIT SCORING. WHAT WILL THIS BILL DO FOR THEM?
NIEHAUS: THERE ARE LIMITS IN HERE - SUCH AS YOU CAN NO LONGER USE
ANYTHING IDENTIFIED WITH THE MEDICAL INDUSTRY CODE, FOR EXAMPLE.
IF SOMEONE WERE IN THAT CATEGORY, PRESUMABLY THEIR CREDIT WOULD
APPEAR OTHER THAN IT WOULD HAVE BEFORE THIS BILL. WE CAN NO
LONGER - WE HAVE TO AGGREGATE ALL INQUIRIES IN A 30-DAY PERIOD
AND COUNT THEM AS ONE. SO, ALL OF THOSE THINGS WILL TEND TO MAKE
OUR CREDIT MODEL A LITTLE LESS PREDICTIVE, BUT HAVING SAID THAT,
IT'S STILL GOING TO BE USEFUL TO US AND IT WILL ALLOW US TO
CONTINUE TO GIVE LOW RATES TO TWO-THIRDS OF THE CUSTOMERS WHO
DESERVE IT BASED ON THEIR [INDISC] BEHAVRIOR.
SENATOR AUSTERMAN: HAVE YOU GOT THE X VERSION IN FRONT OF YOU?
MR. NIEHAUS: YES, I DO.
SENATOR AUSTERMAN: ON PAGE 4 WHEN IT TALKS ABOUT THE INSURER MAY
NOT USE THE FOLLOWING TYPE OF CREDIT HISTORY AND IT TALKS ABOUT
THE ABSENCE IN NUMBER (1), LINE 25 OF THE CREDIT HISTORY. THEN ON
LINE 26 WITH THE NEW X VERSION, THEY HAVE ADDED THE LINES:
"UNLESS THE INSURER HAS FILED ACTUARIAL…" WHAT DOES THAT REALLY
DO TO THAT SECTION?
MR. NIEHAUS: WELL, MY READING OF THAT SECTION IS THAT INSURERS IF
THEY PROPOSE TO TREAT WHAT WE WOULD CALL NO-HITS - THERE ARE
PEOPLE WITHOUT ANY VERIFIABLE CREDIT HISTORY - WE WOULD HAVE TO
FILE OUR ACTUARIAL DATA JUSTIFYING HOW WE ARE GOING TO TREAT
THOSE INDIVIDUALS. AND AGAIN, AS I STATED IN MY PREVIOUS
TESTIMONY, MY COMPANY HAS THE DATA THAT WILL JUSTIFY OUR
TREATMENT OF NO-HITS. SO WE ARE ACTUALLY OKAY WITH THAT LANGUAGE
AND ARE PREPARED TO JUSTIFY IT WITH THE DIVISION OF INSURANCE.
SENATOR AUSTERMAN: THANK YOU.
MR. MARK SECON: AMERICAN INSURANCE ASSOCIATION: I WON'T REPEAT
ANYTHING THAT HAS BEEN SAID BEFORE. I JUST WANT TO MENTION IN THE
FIRST SECTION - I THINK IT'S IMPORTANT. THIS IN ESSENCE ALLOWS A
CONSUMER TO OPT IN OR OUT OF WHETHER OR NOT A COMPANY USES CREDIT
INFORMATION WITH THEM AND IT'S UNCLEAR WHETHER OR NOT THEY WILL
CONTINUE TO HAVE A RELATIONSHIP WITH THAT COMPANY. IT IS PROBABLY
A BETTER FORMAT TO INSURE THAT THE CONSUMER IS PROPERLY INFORMED
THAT THE COMPANY PROVIDES APPROPRIATE DISCLOSURE OF THE
INFORMATION THAT CREDIT SCORING IS BEING USED.
EARLIER THERE WAS TESTIMONY ABOUT THE IMPACT ON RATES AND I'LL
JUST GIVE YOU A COUPLE FIGURES WE HAVE FROM A COUPLE OF OUR
COMPANIES. ONE OF OUR COMPANEIS WHICH IS A NATIONAL CARRIER, BUT
DOESN'T DO A LOT OF WRITING IN ALASKA, SHOWS THE CREDIT SCORING,
BECAUSE MOST PEOPLE TEND TO HAVE GOOD CREDIT, RESULTS IN MORE
PEOPLE GETTING ABOUT 66% LOWER RATES. IN THE STATE OF UTAH WHERE
WE HAVE BEEN INVOLVED IN LEGISLATION THERE, THE FIGURE THAT WE
GAVE THE DEPARTMENT IS THAT 53% OF THE PEOPLE IN UTAH PEOPLE GOT
LOWER INSURANCE RATES DUE TO THE USE OF CREDIT.
THE KEY THING IN UTAH IS YOU HAVE TO REMEMBER IS THAT UTAH HAS
THE HIGHEST PERSONAL BANKRUPTCY RATE IN THE NATION. SO, PROBABLY
LESS PEOPLE IN UTAH HAVE GOOD CREDIT THAN ANYWHERE ELSE. THERE'S
BEEN DISCUSSIONS ABOUT IT BEING A PREDICTIVE AND I DON'T KNOW IF
ANY OF YOU HAVE HAD THE OPPORTUNITY TO SEE THE FAIR [INDISC]
PRESENTATION OF THE STATISTICAL SIGNIFICANCE OF CREDIT SCORING IS
FAIRLY SIGNIFICANT. I'LL ANSWER ANY QUESTIONS.
STEVENS: THAT CONCLUDES THE PUBLIC TESTIMONY PORTION OF YET OUR
THIRD ATTEMPT TO TRY TO GET SOMETHING….
SENATOR AUSTERMAN: ON PAGE 4 THE MAKING OF RATES, WE PUT IN THE
WORDS, "IF REQUESTED BY THE DIRECTOR". WOULD YOU EXPLAIN AGAIN
WHY THAT WAS PUT IN THERE.
GROVE: I BELIEVE I HAD A DISCUSSION WITH AN INDIVIDUAL WHO SAID
IF WE WOULD BE BOMBARDED BY TOO MUCH INFORMATION AND IF WE COULD
GET THIS INFORMATION ONLY IF WE NEEDED IT. I SAID, 'WELL, WE'RE
PROBABLY GOING TO ASK FOR IT, SO, IT DOESN'T HURT IT IF YOU PUT
IT IN THERE BY REQUEST. SO WE'RE GOING TO ASK FOR IT ANY WAY.'
STEVENS: DO YOU GET IT NOW?
GROVE: BEFORE WE APPROVE A FILING, THEY DON'T GIVE US INFORMATION
ABOUT THE FACTORS THAT THEY USE IN THE CREDIT MODEL ABOUT THE
STATISTICAL CORRELATIONS BETWEEN THOSE FACTORS IF IT HAS NOT BEEN
APPROVED. WHEN THEY HAVE GIVEN US THAT INFORMATION, THEN WE'VE
APPROVED THEIR FILINGS.
STEVENS: BUT THEY HAVE TO GIVE YOU THE ALGORITHM FORMULA IN ORDER
FOR YOU TO APPROVE THEIR FILING, RIGHT?
GROVE: WE HAVE NOT ACTUALLY REQUIRED THE SPECIFIC FORMULA THAT
SAYS I ADDED 2% FOR A BANKRUPTCY AND MINUS 5% FOR SOMETHING ELSE.
WE HAVE JUST ASKED WHAT INFORMATION DO YOU USE OFF A CREDIT
REPORT AND HOW DO YOU USE IT.
STEVENS: YOU HAVE NEVER ACTUALLY ANALYZED THE ACTUAL ALGORITHM
THEY USE WITH THEIR CREDIT SCORING.
GROVE: TWO INSURERS HAVE ACTUALLY GIVEN ME THE ALGORITHM ITSELF,
BUT WE HAVE NOT REQUIRED IT. IF THEY HAVE GIVEN US ADDITIONAL
SUFFICIENT INFORMATION, WE CAN GET SOME IDEA OF HOW IT WORKS.
STEVENS: SO SOME GIVE IT UP AND SOME DON'T JUST LIKE ANYBODY
ELSE…
TAPE 02-29, SIDE B
STEVENS: THERE'S SO MANY UNCERTAINTIES. I'M A FIRM BELIEVER THAT
WE DON'T HAVE AS A LEGISLATURE, AN OBLIGATION TO RESPOND TO THE
PERSONAL FINANCIAL SITUATIONS OF EVERY INDIVIDUALS' PEERSONAL
CREDIT HISTORY. IF SOME PEOPLE HAVE POOR CREDIT, THAT'S A
FUNCTION OF THEIR LIFE AND THEIR OBLIGATION TO GET IT STRAIGHT.
IN THE SAME BREATH, IF THOSE INDIVIDUALS ARE BEING PLACED IN
UNFAIR CIRCUMSTANCES IN HOW THEY FALL UNDER THEIR TIERS, THEN WE
SHOULD LOOK INTO IT. THAT'S THE PORTION OF THIS BILL I DO LIKE -
IS THE FACT THAT WE DO GET TO LOOK INTO IT - AND THAT THEY SHOULD
COME BACK. I HAVE NOT HEARD ABOUT SENATOR ELTON'S INQUIRY BY THE
A.G. WHEN WAS THAT RELEASED?
SOMEONE MADE AN INDISTINGUISHABLE ANSWER.
STEVENS: WE'RE AT A CRITICAL POINT WITH THE COMMITTEE. EITHER WE
MOVE IT ON. IN REALITY WE'VE WORKED ON THIS THING FOR SIX, SEVEN
WEEKS MINIMUM AND WE MOVE IT ON WITH THE PART THAT WE TRIED TO
STRENGTHEN AND EMPHASIZE THE FACT THAT WE WANT TO HAVE A REPORT
COME BACK OR ELSE WE LET IT DIE AND NOTHING GETS DONE….MAYBE IF
WE DO NOTHING, THE A.G. WILL GO IN THERE AND RIP THEM TO SHREDS.
WHO KNOWS.
SENATOR TORGERSON: THE AMENDMENTS I HANDED YOU ARE BY THE
DEPARTMENT AND I THINK THOSE ARE REASONABLE AMENDMENTS.
STEVENS: SOME OF THEM HAVE ALREADY BEEN INCORPORATED.
SENATOR TORGERSON: WE CAN PASS IT OUT AND I'LL HAVE FLOOR
AMENDMENTS. I DON'T HAVE TIME TO WORK ON IT.
DEAL: I BELIEVE THAT THE SPONSOR WOULD BE WILLING TO LET THE
A.G.'S REPORT TAKE A LOOK AT THIS IF YOU FEEL UNCOMFORATBLE
MOVING THIS OUT AND CONTINUE TO WORK ON THIS. THIS IS NOT AN
ISSUE HE WILL BE DROPPING, HE HAS ASSURED ME. IF THAT IS WHAT YOU
FEEL MOST COMFORTABLE WITH, I'M SURE THE SPONSOR WILL BE FINE
WITH THAT.
SENATOR TORGERSON: I WANT A BILL, NOT SOMETHING THAT HAS A BUNCH
OF HOLES IN IT. THIS DOESN'T DO ANYTHING… I'LL PUT KURT ON IT.
STEVENS: WE COULD TRY ONE MORE TIME. WE HAVE TIME TO GO ONE MORE
ROUND ON THIS, BUT IF WE DON'T COME WITH IT IN ONE MORE ROUND,
I'D SAY IT'S GOING TO BE GONE. [END OF PARTIAL VERBATIM]
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