Legislature(1995 - 1996)
03/02/1995 01:40 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SL&C 3/2/95 SB 53 OMNIBUS INSURANCE REFORM VICE CHAIRMAN TORGERSON called the Senate Labor and Commerce Committee meeting to order at 1:40 p.m. and announced SB 53 to be up for consideration. JOAN BROWN, Administrative Officer, Division of Insurance, gave the Committee a brief overview of SB 53. She said SB 53 was the successor bill to SB 362 and HB 534 which were introduced at the request of the Division last year, but they both failed to pass. She said SB 53 includes language to address new areas of insurance regulation, adopt new accreditation standards added by the National Association of Insurance Commissioners(NAIC), and make needed corrections to the insurance statutes. These changes will bring the statutes up-to-date with the insurance market and allow the division to maintain its NAIC accreditation which was granted in December 1992. A zero fiscal note has been submitted. She then reviewed the minor changes to the bill from last years version. They are as follows: Numerous language cleanups to reflect the 1992 change in license classes from agent and broker to producer and general agent to managing general agent; Rivision of language pertaining to the standard valuation law (Sec. 22 - 25). Replacing a reference to the Federal Savings and Loan Ins. Corp. (which no longer exists) with the Federal Deposit Ins. Corp. Clarifying that a reciprocal insurer insuring municipalities or nonprofit utilities or providing marine insurance does not have to participate in the assigned risk plan for motor vehicle coverages (Sec. 105). and Including the division's actuary and assistant actuary as exempt employees (Sec. 106). The bill includes 22 sections related to continuance of our NAIC accreditation such as: regulation of risk retention groups and purchasing groups as allowed by federal law (Sec. 3, 15, 102); modifying the examination hearing provision t allow for closing it to the public under certain circumstances (Sec. 6); requiring insurer financial statement filings to the NAIC on electronic media (Sec. 11 and 12); requiring disclosure by an insurer of material transactions of purchase or disposal of assets or reinsurance (Sec. 15); credit for reinsurance (Sec. 16 and 17) risk based capital provisions (Sec. 15 and 18) reserve calculations (Sec. 19, 20 and 21) actuarial opinions (Sec. 23, 24, and 25) holding company reporting requirements (Sec. 30, 31, and 33) allowing the director to file civil actions for damages caused by violations of statute by Managing General Agents, Reinsurance Intermediary Brokers, and Reinsurance Intermediary Managers (Sec. 46, 48, and 49); and cleanup of the definition of member insurer of the life and disability guaranty association (Sec. 97). Some other key provision included: authority to respond to catastrophic situations (Sec. 5) the ability to suspend the certificate of authority of an insurer for non-renewal (Sec.9); provide for voluntary surrender of an Alaska certificate of authority by an insurer domiciled in another state (Sec. 10); authority to refund or grant credits for overpayment of premium tax by an insurer due to error or misinterpretation (Sec. 13); provide requirements for licensing of U.S. branches of alien (non-U.S. domiciled) insurers to allow these insurers to use Alaska as a base of operations for business written throughout the United States (NAIC model law)(Sec. 15); provide authority to require continuing education for licensed insurance producers (agents/brokers)(Sec. 36); require that the insurance premium fiduciary accounts of resident insurance licensees be located in Alaska (Sec. 41); provide that a single fiduciary bond can cover multiple producer office locations (Sec. 44); add incorporated insurers to the definition of a group to reflect recent changes at Lloyd's of London (Sec. 16 and 50); clarify when rate changes may be made to outstanding policies (Sec. 57-60); provide that false statements made in regard to a claim may result in prosecution under Alaska law (Sec. 67); allow the director to specify the format and content of rate and policy form filings made to the division (Sec. 68-71); clarify health insurance coverage of newborn and adoptive children (Sec. 72); provide for updated regulation of consumer credit insurance (NAIC model law) (Sec. 1, 2, 75-89, and 108); provide for redomestication of insurers domiciled in Alaska and moving to another state or requesting to move their domicile from another state to Alaska (Sec. 90); provide the authority to request quarterly financial statements from all entities regulated by the division (Sec. 12, 91, 92, 99, and 100); allow insurers to pay claims by electronic funds transfer (Sec. 101); provide authority to the director to specify requirements for electronic data transfer (Sec. 102); and otherwise make corrections and clarify statute provisions. The Committee Substitute incorporates amendments suggested by the division as follows: A new bill section was added giving the director discretion to accept an insurer examination report from a non-accredited state and would give the director clear authority to require extra examination supervision if a state was performing substandard examinations. Revisions were made to the sections pertaining to risk retention groups to avoid conflict with federal law. The fraudulent insurance acts provisions were modified to reflect the recommendations of the Department of Law. Language was added to various health insurance contract statutes to make them applicable to health maintenance organizations. And the section "Appointment of Independent Counsel: Conflicts of Interest" was deleted. This independent counsel provision was not authored by the division. Legal counsel recently advised that this provision is neither necessary nor consistent with the Alaska Supreme Court decision (CHI of Alaska, Inc. v. Employers Reinsurance Corporation, 844P.2d 1113(Alaska 1993) it seeks to implement. Number 138 SENATOR MILLER moved to adopt the CS to SB 53 for discussion purposes. There were no objections and it was so ordered. MS. BROWN said she has a proposed amendment on continuing education provisions. It contains language worked out between them and the Agents and Brokers Association. She clarified for Senator Kelly that it does still require continuing education. SENATOR KELLY asked why lawyers were not required to have continuing education when almost all other professionals required it. SENATOR MILLER moved to adopt the proposed amendment. There were no objections and it was so ordered. SENATOR MILLER moved to adopt the Title amendment. There were no objections and it was so ordered. SENATOR KELLY asked if there was any opposition to the bill. SHERMAN ERNOUF, Legislative Aide to Senator Kelly, said there was no opposition. Number 190 SENATOR DUNCAN asked what was the Alaska Rule of Civil Procedure 45. SENATOR KELLY said that it passed last year. GLORIA GLOVER said it was based on a request by the Department of Law. One of provisions in the law affects that Rule and they, therefore, recommended to include it in this bill. BRUCE HEATH, Seward resident, said he had a problem with Section 30. MS. GLOVER clarified that Section 30 refers to Chapter 22 of the Insurance statutes. This is the Holding Company Act requiring that a person who is going to acquire an insurance company must file documents with them to review and approve that acquisition. This Section allows the director to get experts to review that filing in order to advise them on the approval or disapproval. LINDA HALL said she was the past President of Alaska Agents Association and supported this bill. Accreditation is very important for the Alaskan Insurance market place and is protection for the consumer. Number 288 KEITH SILVER, President-elect of the Alaska Agents Association, supported SB 53. SENATOR MILLER moved to pass CSSB 53 (L&C) from committee with individual recommendations. There were no objections and it was so ordered.