Legislature(2011 - 2012)BELTZ 105 (TSBldg)
04/07/2011 02:00 PM LABOR & COMMERCE
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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.