Legislature(1995 - 1996)
03/14/1996 03:31 PM Senate STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 231 TITLE INSURANCE Number 385 CHAIRMAN SHARP brought up SB 231 as the next item of business before the Senate State Affairs Committee. He called Senator Rieger to testify. Number 377 SENATOR STEVE RIEGER, prime sponsor of SB 231, stated that during the first hearing on the legislation, some good points were raised. His office has done further research since then, and he described the philosophy behind the proposed committee substitute. First, it was pointed out that the general arguments he was making were in the nature of deregulation of title insurance, but that the scheduling of a $75.00 fee and the placement of a ceiling could be construed as further regulation, at the same time other aspects were being deregulated. The proposed committee substitute removes the ceiling on rates and the fixed $75.00 fee on refinancing. He also researched regulations in other states, and found that generally, there has been a tendency to continue the regulation of the 12% that represents insurance. That is to ensure the adequacy of the rates in order to maintain the ability to pay future claims. In a 1992 Supreme Court opinion, the other part of the premium was ruled to be not the business of insurance. The majority of other states appear to be either already in or moving towards continuing regulation of the insurance portion and not regulating the portion unrelated to insurance. The proposed committee substitute follows that trend: it maintains regulation of the insurance portion of the rate paid for title insurance, but deregulates the other portion. Most of the rest of the bill has been deleted. CHAIRMAN SHARP asked if there were questions of the sponsor. Hearing none, he asked for a motion to adopt the committee substitute. The chairman stated it is the intent of the committee to adopt the committee substitute, and then distribute it for comment. Number 335 SENATOR RANDY PHILLIPS made a motion to adopt the State Affairs committee substitute for SB 231. CHAIRMAN SHARP, hearing no objection, stated the committee substitute was adopted. He asked if there were questions from committee members. SENATOR DUNCAN asked the chairman if it was his intention to take testimony from the administration and other interested parties at a future date, after there has been time for people to review the committee substitute. CHAIRMAN SHARP stated that is his intent. It is his understanding that Senator Rieger has already distributed the committee substitute to the Division of Insurance. SENATOR RIEGER stated that when deregulation occurs, the amount that goes in title insurance premiums is also reduced. CHAIRMAN SHARP stated there are people signed up to testify on SB 231 via teleconference. Number 315 BRYAN MERRELL, State Underwriter - First American Title Insurance Co., Chief Title Officer - First American Title Co., testifying from Anchorage, stated he testified on the previous version of SB 231. He received a copy of the committee substitute late yesterday, and hasn't had much time to review it. It is encouraging to him that the provisions of the former draft attempting to directly legislate the price of insurance have been deleted. He thanked Senator Rieger for considering the testimony on that subject. As he understands it, the new version attempts to deregulate the so-called "non-insurance portion" of the title premium rate. However, the bill as written may be interpreted to deregulate all aspects of title premiums, because any portion of the premium based on determination of insurability would also not be regulated. That is what underwriting title insurance is all about. MR. MERRELL stated that, in short, the bill is written much more broadly than may have been intended. Even if this is corrected, there are still some problems: title insurance agents face not only issues related to contract liability based on the policies they issue, but also negligence liability under the minority position taken by the supreme court in the case mentioned by Senator Rieger, which occurred in 1992. That liability is not covered by underwriting and the bill does not account for the state's need to be concerned, not only with the solvency of underwriters, but also agents. Agents bear risks as insurers as well, because agents are liable for the first portion of a loss, based on claim deductibles. Agents are also responsible for the maintenance of title plans and standards and review of title. This bill would require agents to cut costs and compete. Rates in other states where this sort of deregulation has occurred have actually risen. Finally, it cannot be discounted that Alaska has not been a particularly friendly state in which to write title insurance. SB 231 would make the state even less friendly. He thinks the government should be looking for ways to encourage the industry, rather than to discourage it. He thinks there is no evidence that the title insurance industry is making too much money. You can be assured that if the title insurance industry was making too much money, there would be more than two underwriters in the state. MR. MERRELL contended there is a house bill pending that would essentially make it impossible to issue extended lenders coverage. That is just another example of the problems with trying to write insurance in this state. He hopes the committee will consider the total impact of what SB 231 proposes. He thinks the result will be loss of agents and competition in the state, and perhaps even the loss of an underwriter. Number 250 MARK TOMLINSON, President - Alaska Land Title Association, testifying from Fairbanks, stated Mr. Merrell is more articulate than him, and already stated what Mr. Tomlinson intended to communicate. So on behalf of the Alaska Land Title Association and Fairbanks Title, he supports Mr. Merrell's testimony. He hopes to have some positive feedback from Senator Rieger at the meeting scheduled for April 11 with the state insurance commissioner. CHAIRMAN SHARP asked Mr. Tomlinson if he's received a copy of the committee substitute for SB 231. MR. TOMLINSON replied he had. CHAIRMAN SHARP asked Mr. Tomlinson to submit any comments he might have to the chairman's office. The chairman stated SB 231 would be set aside.
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