Legislature(2011 - 2012)BELTZ 105 (TSBldg)

04/07/2011 02:00 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 115 PORTABLE ELECTRONICS INSURANCE TELECONFERENCED
Heard & Held
+= HB 24 EXTEND REGULATORY COMM. OF ALASKA SUNSET TELECONFERENCED
Heard & Held
+= HB 130 RESIDENTIAL SPRINKLER SYSTEMS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 103 WORKERS' COMPENSATION FOR FIREFIGHTERS
Moved CSSB 103(L&C) Out of Committee
             SB 115-PORTABLE ELECTRONICS INSURANCE                                                                          
                                                                                                                                
2:04:59 PM                                                                                                                    
CHAIR EGAN announced SB 115 to be up for consideration.                                                                         
                                                                                                                                
SENATOR  PASKVAN  moved  to  bring  CSSB  115(L&C),  labeled  27-                                                               
LS0609\I, sponsored  by the Senate Labor  and Commerce Committee,                                                               
before the committee for purposes of discussion.                                                                                
                                                                                                                                
CHAIR EGAN objected.                                                                                                            
                                                                                                                                
2:06:29 PM                                                                                                                    
DANA OWEN, staff  to Senator Egan, said the draft  before them is                                                               
an attempt to  bring some order into what is  "sort of a frontier                                                               
market"  for a  new  kind  of insurance  for  loss  or damage  to                                                               
equipment like cell  phones and IPads. He said  with expansion of                                                               
these  kinds  of machines  in  our  lives,  the market  has  been                                                               
explored  by  a  number  of companies.  The  committee  had  been                                                               
approached by  Asurian, one of  the major marketers of  this kind                                                               
of product,  in an effort to  stabilize this market and  to bring                                                               
some  kind of  order to  it so  that both  the consumer  has more                                                               
faith in  the product and the  people offering it will  know that                                                               
their  products are  both trusted  and  sought out.  That is  the                                                               
purpose of the bill.                                                                                                            
                                                                                                                                
He  said   Section  1   establishes  that   portable  electronics                                                               
insurance is not a service  contract. Section 2 adds an applicant                                                               
for  a license  under  AS 21.27.150(a)(8);  that  applies to  the                                                               
electronics limited  producer license. It  adds that to  the list                                                               
of persons to whom AS  21.27.060(d) which requires the successful                                                               
applicant for license to sell  insurance, to pass an examination.                                                               
It  means   that  the  person   selling  insurance   under  these                                                               
circumstances doesn't need to passing an examination.                                                                           
                                                                                                                                
Section  3   adds  a  vendor   that  sells  or   offers  portable                                                               
electronics  insurance  to  the  list  of  persons  to  whom  the                                                               
director of  the Division  of Insurance may  issue a  license, in                                                               
this case, a portable electronics  limited producer license. This                                                               
section also  allows an employee or  authorized representative of                                                               
the licensee  to transact portable  electronic insurance  at each                                                               
site that  the licensee does  business. Additionally,  under this                                                               
section, an  employee or  representative of  a licensee  need not                                                               
themselves be licensed provided certain criteria are met.                                                                       
                                                                                                                                
Section  4  establishes  the   conditions  under  which  portable                                                               
electronics insurance may be sold  and defines the term "portable                                                               
electronics  insurance" and  "vendor"  for the  purposes of  this                                                               
section of statute.                                                                                                             
                                                                                                                                
At ease from 2:09:11 PM to 2:09:38 PM.                                                                                          
                                                                                                                                
2:09:38 PM                                                                                                                    
STEVEN  MCDANIEL,  Asurian  Corporation,  said  are  the  leading                                                               
provider  of this  mobile device  protection in  the country  and                                                               
supported SB  115. He said  Asurian has been working  with states                                                               
across the country to implement  a framework for how this product                                                               
is offered  to consumers and they  feel SB 115 is  a good balance                                                               
between  consumer   protections.  It  requires   disclosures  and                                                               
specifically requires refunds to be  provided to consumers at any                                                               
time when they cancel with pro-rated  refunds to be paid. It also                                                               
requires training of employees that  are offering it. The gist of                                                               
the framework  is that it creates  a license that is  done at the                                                               
wireless  carrier level.  So,  the  AT&Ts of  the  world will  be                                                               
licensed to offer  the product in their stores.  It is consistent                                                               
with the national  trend because 12 - 14 states  currently have a                                                               
law  similar to  this  and bills  are pending  in  over 20  other                                                               
states.                                                                                                                         
                                                                                                                                
SENATOR  PASKVAN asked  what  types of  disclosures  he would  be                                                               
offering the consumer in Alaska.                                                                                                
                                                                                                                                
MR.  MCDANIEL replied  one  of  the disclosures  is  that it  may                                                               
provide duplicate coverage,  that you can cancel at  any time and                                                               
the  refund requirement,  the premium  to be  paid, the  benefits                                                               
that are offered  under the coverage and any  sorts of exclusions                                                               
that would apply to coverage under the policy.                                                                                  
                                                                                                                                
SENATOR  PASKVAN asked  since he  said  this is  a growing  trend                                                               
nationally,  are  there  greater  disclosure  requirements  under                                                               
other  state statutory  schemes than  under Alaska's  and if  so,                                                               
what is it that other jurisdictions have wanted to impose.                                                                      
                                                                                                                                
MR.  MCDANIEL  replied  that  this  is  model  language  that  is                                                               
consistent with  the disclosures that  are being required  in the                                                               
other states.                                                                                                                   
                                                                                                                                
SENATOR GIESSEL  asked if  this legislation  fixes a  problem and                                                               
what it would be.                                                                                                               
                                                                                                                                
MR.  MCDANIEL   replied  that  this  legislation   is  to  create                                                               
regulatory certainty around how the  product is offered to ensure                                                               
that  "fly-by-nighters"   stay  out  of  this   market  and  that                                                               
consumers know  when they purchase a  product that at the  end of                                                               
the day when they make a claim that someone is there to pay it.                                                                 
                                                                                                                                
SENATOR GIESSEL asked if there have been problems.                                                                              
                                                                                                                                
MR. MCDANIEL replied there have  been no complaints, but it's not                                                               
clear how these  products should be regulated. It  is an approach                                                               
that creates an  even playing field so that people  who come into                                                               
the field know the playing rules.                                                                                               
                                                                                                                                
SENATOR GIESSEL asked to have Ms. Hall come forward.                                                                            
                                                                                                                                
CHAIR EGAN replied certainly.                                                                                                   
                                                                                                                                
SENATOR  PASKVAN  said  he  still had  questions  and  asked  Mr.                                                               
McDaniel  if  he  sells his  products  to  all  telecommunication                                                               
companies.  Who  is the  market  and  how  do they  market  their                                                               
product?                                                                                                                        
                                                                                                                                
MR.  MCDANIEL  replied Asurian  has  relationships  with all  the                                                               
major  wireless  carriers:  AT&T,  Verizon  and  T-Mobile.  Their                                                               
product  is  a master  policy  that  is  issued to  the  wireless                                                               
carrier and the  consumer can choose to enroll  under that master                                                               
policy. The point of sale is at the wireless carrier.                                                                           
                                                                                                                                
SENATOR  PASKVAN  asked  if all  telecommunication  companies  in                                                               
Alaska are unified in working through Asurian.                                                                                  
                                                                                                                                
MR.  MCDANIEL answered  that ACS  and  AT&T are  both clients  of                                                               
Asurian's.                                                                                                                      
                                                                                                                                
CHAIR EGAN asked if there have been problems in other markets.                                                                  
                                                                                                                                
MR. MCDANIEL answered no, but  this legislation is to assure that                                                               
the fly-by-night  companies that are  pushing them out  know that                                                               
it's a regulated product.                                                                                                       
                                                                                                                                
SENATOR MENARD asked  if it's fair to say Asurian  is the largest                                                               
in the world.                                                                                                                   
                                                                                                                                
MR. MCDANEL replied yes.                                                                                                        
                                                                                                                                
SENATOR  MENARD  asked  if  he   felt  that  regulation  of  this                                                               
insurance would somehow lessen the cost of the device.                                                                          
                                                                                                                                
MR. MCDANIEL replied he didn't think  it lessened the cost of the                                                               
device,  since it  is  set  by the  wireless  carrier and  pretty                                                               
heavily subsidized in the carrier's contract.                                                                                   
                                                                                                                                
2:16:35 PM                                                                                                                    
SENATOR DAVIS  said this bill  was introduced by  this committee,                                                               
and asked the chair why he thought it was needed.                                                                               
                                                                                                                                
CHAIR  EGAN replied  that carriers  in the  state were  concerned                                                               
about people  entering the  market and  trying to  sell insurance                                                               
from different  cell phone providers  that aren't  affiliated and                                                               
the cell phone market is rapidly expanding.                                                                                     
                                                                                                                                
SENATOR  PASKVAN   asked  if   this  would   create  monopolistic                                                               
capacities for Asurian.                                                                                                         
                                                                                                                                
MR. MCDANEIL replied  no; they have worked  through language with                                                               
their  biggest  competitor  to create  certainty  about  how  the                                                               
product  is  offered.  The bill  doesn't  provide  any  financial                                                               
obstacles; it just ensures that  consumers are made aware of what                                                               
they are buying.                                                                                                                
                                                                                                                                
SENATOR PASKVAN asked  if the contracts Asurian  enters into with                                                               
the companies  are exclusive or  can others in the  industry also                                                               
enter into contracts with them.                                                                                                 
                                                                                                                                
MR. MCDANIEL replied when a contract  is in place he didn't think                                                               
that  another provider  could be  offered  in a  given state.  He                                                               
didn't know the exactly if it's state by state or national.                                                                     
                                                                                                                                
SENATOR GIESSEL said she didn't  see this is exclusively for cell                                                               
phones; it says "portable electronic devices."                                                                                  
                                                                                                                                
MR. MCDONEIL replied that is  right, but the product started with                                                               
cell phones.                                                                                                                    
                                                                                                                                
SENATOR MENARD asked if the cost is under $10.                                                                                  
                                                                                                                                
MR. MCDANIEL replied on average it's from $4 to $7.                                                                             
                                                                                                                                
SENATOR  PASKVAN  asked  if  premium   sharing  is  part  of  the                                                               
contractual relationship.                                                                                                       
                                                                                                                                
MR.  MCDANIEL replied  that  the premium  passes  through to  the                                                               
insurance company that is underwriting the program.                                                                             
                                                                                                                                
SENATOR  PASKVAN asked  if the  contractual relationship  has any                                                               
premium sharing components.                                                                                                     
                                                                                                                                
MR. MCDANIEL replied no.                                                                                                        
                                                                                                                                
2:21:09 PM                                                                                                                    
SENATOR GIESSEL asked Ms. Hall if she supported SB 115.                                                                         
                                                                                                                                
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce,  Community and  Economic  Development (DCCED),  replied                                                               
she supports  the bill. She  said she  worked with staff  and Mr.                                                               
McDaniel on it  and changed language to better  fit into Alaska's                                                               
regulatory  scheme.  The  bill's  two major  parts  outline  some                                                               
consumer protections; one is in  AS 21.27, the licensing chapter.                                                               
She  explained that  this licensing  pattern  kind of  replicates                                                               
what they  do with rental cars  where you have an  overall vender                                                               
who  gets a  license called  a  limited lines  license, but  each                                                               
counter person then  works under that license  rather than having                                                               
to go  through a continual  stream of licensees. So,  this vendor                                                               
becomes responsible for the behavior of those counter agents.                                                                   
                                                                                                                                
She said  under SB 115 the  vendor would have a  license with her                                                               
department  but  the  people  working under  that  would  not  be                                                               
required to have  a license while they  are transacting business;                                                               
it's an incidental to a  different product that they are selling.                                                               
But they do  have training requirements; they  require a register                                                               
of  all employees  working  under  a license  so  if  she gets  a                                                               
complaint they know where to go.                                                                                                
                                                                                                                                
MS. HALL said also that Alaska's  Trade Practices Act is under AS                                                               
21.36 and  this is where  fraud and misrepresentation  are found.                                                               
It outlines what  has to be disclosed in writing  to the consumer                                                               
when they  enroll in  the product. She  thinks it's  important to                                                               
know the premium,  what the product covers, how a  claim would be                                                               
handled, and things like that.                                                                                                  
                                                                                                                                
CHAIR  EGAN thanked  her for  testifying and  finding no  further                                                               
comments, he held SB 115 for another meeting.                                                                                   
                                                                                                                                

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