Legislature(1999 - 2000)
01/31/2000 01:12 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE January 31, 2000 1:12 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Joe Green Representative Norman Rokeberg Representative Jeannette James Representative Lisa Murkowski Representative Eric Croft Representative Beth Kerttula MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 190 "An Act relating to viatical settlement contracts." - HEARD AND HELD PREVIOUS ACTION BILL: HB 190 SHORT TITLE: VIATICAL SETTLEMENTS Jrn-Date Jrn-Page Action 4/13/99 794 (H) READ THE FIRST TIME - REFERRAL(S) 4/13/99 794 (H) L&C, JUD 4/19/99 (H) L&C AT 3:15 PM CAPITOL 17 4/19/99 (H) HEARD AND HELD 4/19/99 (H) MINUTE(L&C) 10/21/99 (H) L&C AT 1:30 PM ANCHORAGE LIO 10/21/99 (H) MINUTE(L&C) 1/14/00 (H) L&C AT 3:15 PM CAPITOL 17 1/14/00 (H) BILL HEARING POSTPONED 1/19/00 (H) L&C AT 3:15 PM CAPITOL 17 1/19/00 (H) HEARD AND HELD 1/19/00 (H) MINUTE(L&C) 1/24/00 (H) L&C AT 3:15 PM CAPITOL 17 1/24/00 (H) MOVED CSHB 190(L&C) OUT OF COMMITTEE 1/24/00 (H) MINUTE(L&C) 1/26/00 2005 (H) L&C RPT CS(L&C) NT 2DP 5NR 1/26/00 2005 (H) DP: HARRIS, ROKEBERG; NR: HALCRO, 1/26/00 2005 (H) SANDERS, BRICE, CISSNA, MURKOWSKI 1/26/00 2005 (H) 2 ZERO FISCAL NOTES (DCED, H.L&C/ DCED) 1/26/00 2005 (H) REFERRED TO JUDICIARY 1/31/00 (H) JUD AT 1:00 PM CAPITOL 120 WITNESS REGISTER VINCE USERA, Senior Securities Examiner Division of Banking, Securities & Corporations Department of Community & Economic Development P.O. Box 110807 Juneau, Alaska 99811-0807 POSITION STATEMENT: Testified on CSHB 190(L&C) and answered questions. KATY CAMPBELL, Life and Health Actuary Division of Insurance Department of Community & Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 POSITION STATEMENT: Answered questions on CSHB 190(L&C). BOB LOHR, Director Division of Insurance Department of Community & Economic Development P.O. Box 22085 Juneau, Alaska 99811-0805 POSITION STATEMENT: Answered questions on CSHB 190(L&C). TERRY ELDER, Director Division of Banking, Securities & Corporations Department of Community & Economic Development P.O. Box 110807 Juneau, Alaska 99811-0807 POSITION STATEMENT: Testified on CSHB 190(L&C) and answered questions. ACTION NARRATIVE TAPE 00-5, SIDE A Number 0001 CHAIRMAN PETE KOTT called the House Judiciary Standing Committee meeting to order at 1:12 p.m. Members present at the call to order were Representatives Kott, Green, Rokeberg and Kerttula. Representatives Croft, James and Murkowski arrived as the meeting was in progress. HB 190 - VIATICAL SETTLEMENTS CHAIRMAN KOTT announced that the committee would hear HOUSE BILL NO. 190, "An Act relating to viatical settlement contracts." Number 0084 REPRESENTATIVE ROKEBERG presented the bill. He pointed out that before the committee was CSHB 190(L&C), Version M, which had passed out of the House Labor and Commerce Standing Committee [which he chairs and which sponsored the legislation]. The issue was brought to that committee's attention the previous year by the Division of Banking, Securities & Corporations (DBSC), as well as by constituents and others primarily in the insurance business in Alaska. REPRESENTATIVE ROKEBERG introduced related terms. Viatical settlements are contracts that historically have involved a chronically ill person who has an insurance policy that he or she wishes to sell on a discounted basis before his or her death, thereby receiving the funds and being able to use them prior to death. He said these contracts are, in turn, sold to investors on a discounted basis. The viator is the person who is insured by the policy. The viatical settlement provider is the "middle man" who packages these arrangements. And finally, agents or brokers are those who sell either entire policies, or fractional shares thereof, into the marketplace. REPRESENTATIVE ROKEBERG mentioned what he called "cross- jurisdictional interpretation" and work with the National Association of Insurance Commissioners (NAIC) on establishing a statutory or regulatory scheme for this. He pointed out that case law is split in various states' jurisdictions about how to regulate this new phenomenon. There is controversy about whether it is a securities-type of contract, to be administered and regulated by a state's securities division, and/or an insurance contract, to be administered by a division of insurance. To his understanding, approximately 26 states now have dual jurisdiction in this regard. Number 0315 REPRESENTATIVE ROKEBERG noted that the original HB 190 had suggested the DBSC would administer regulations. However, a number of people in the insurance industry and the national association of viatical settlement providers had wanted insurance overview as a "turf area." There is an issue regarding whether to maintain state - rather than federal - jurisdiction over insurance matters, and these are areas of great sensitivity. REPRESENTATIVE ROKEBERG advised members that the system arrived at - after a year and a half of work and several hearings in the House Labor and Commerce Standing (HL&C) Committee - is relatively simple. The system stipulates jurisdiction on the sales of these contracts to the investor as securities or investments. This is an area where there has been substantial abuse. For example, on the Internet a person can find bogus "guaranteed" substantial rates of return for these. There is a real need for consumer protection. REPRESENTATIVE ROKEBERG pointed out that another element combines a viatical settlement, which relates to a chronically ill person, with a life settlement contract, which allows a basically healthy person to enter into the market and sell, at a discount, the face value in the policy. If a man has a paid-up whole life policy, for example, this provides the ability and the mechanism for that. A person with a $100,000 or $500,000 fully paid-up policy could sell it before death and use the money to put the children through college or buy a house, for which this legislation also provides. Number 0514 REPRESENTATIVE ROKEBERG explained that the HL&C Committee had decided to place Alaska in a situation where the consumer is protected from an investment standpoint and regulated by the DBSC. Furthermore, the relationship between the insured - the viator - and the provider who packages these would be regulated by the Division of Insurance, which historically has looked after the interests of the insured and insurance regulations. Noting that this is perhaps what generates some criticism, he said this sets up dual jurisdiction only because it makes sense; it also sets up, unfortunately, dual sets of regulations, which he believes will be relatively modest. REPRESENTATIVE ROKEBERG referred to the two zero fiscal notes. He pointed out that the one from the HL&C Committee is to be replaced by one dated 1/24/00 from the Division of Insurance. Referring to the analysis in the latter, he expressed the belief that the zero amount is justifiable because any dollars generated will be offset by income. He deferred to representatives from the Division of Insurance and the DBSC for further explanation. Number 0612 CHAIRMAN KOTT noted other committee members present: Representatives Croft, Green, Kerttula, James and Rokeberg. He suggested experts available in person and on teleconference could answer any questions that might arise. He then called on Vince Usera. Number 0673 VINCE USERA, Senior Securities Examiner, Division of Banking, Securities & Corporations (DBSC), Department of Community & Economic Development (DCED), said he had no prepared testimony but would answer questions. He then reported: Our approach to this was to ask simply for a change in the definition of "security," to add in viatical settlement interests, and ... to keep it as flexible as possible, because this is an evolving field, changing very quickly. And we can meet those changes with regulations a lot more quickly than with further legislation. ... Our regulations, for the most part, mirror the legislative provisions that were in the old HB 190, ... modified by some suggestions from the Viatical Association of America [VAA]. Number 0756 CHAIRMAN KOTT asked whether the VAA endorses this particular piece of legislation. He said he hadn't heard any reactions from them. MR. USERA answered: I don't know if I can say they're endorsing; they have no problems with it. ... We very carefully went over every bit of it with them, and they pretty much approved it. ... We've used all their definitions, definitions that are pretty well mirrored by the National Association of Insurance Commissioners. So, I think we can say that they're in favor of the bill, perhaps not going ... quite so far as to say they love it. Number 0813 REPRESENTATIVE GREEN asked, from the securities standpoint, whether Mr. Usera sees a potential here for fraud. MR. USERA replied that the potential lurks everywhere, and without this legislation, there would be a lot of room for fraud. The approach of the HL&C Committee, the Division of Insurance and the DBSC has been that the Division of Insurance should oversee the portion of the transaction covering the actual purchase of the policy, thereby protecting the insured and those associated with that side of the contract; the DBSC would take over the securities end of it. He emphasized the hope of minimizing fraud, noting that the DBSC's disclosure procedure requires quite a bit of information before granting an exemption. Number 0952 REPRESENTATIVE CROFT requested confirmation that the zero fiscal note is because the division will establish regulations to collect enough money to pay for the cost of administering these. MR. USERA responded, "It won't cost us very much at all to oversee these things, any more than what we're doing now." REPRESENTATIVE CROFT asked about the analysis in the Division of Insurance fiscal note, which stated: "It is unknown how many registrations will be received and processed. Fees collected will cover expenses. Zero fiscal impact." MR. USERA clarified that he works for the DBSC, not the Division of Insurance. He then stated: We actually will charge $250 for each person, each viatical settlement company coming in, and then $75 per agent. That goes to the general fund and doesn't ... offset any of our expenses at all. Number 1003 REPRESENTATIVE JAMES pointed out that it affects the budget process, then. If money comes in, it has to be appropriated, so there would be a fiscal note. CHAIRMAN KOTT added that it would be assuming someone does buy into it and apply for the license. Number 1021 REPRESENTATIVE ROKEBERG called CSHB 109(L&C) the "light version" of the bill. He said Section 4 gives the DBSC authority by adding "viatical settlement interest" in the definition of "securities." Then the bill defines "viatical settlement interest" and "viator." The DBSC has already drafted the regulations, he pointed out. Therefore, any cost from that has been absorbed by the DBSC in the general course of business. He requested confirmation that in 1998 more than $1 million in "viatical business" was written in Alaska. MR. USERA clarified that it was in 1998 and 1999. Until his division "kind of put a stop to it," the amount was $1.5 million in policies sold here. REPRESENTATIVE ROKEBERG said the division had stepped in and issued a number of "cease and desist" orders to practitioners who didn't have what the division believed was licensure. The HL&C Committee had then stepped in because an area of commerce in Alaska was stalled because of lack of regulation; it was their judgment that the legislature needed to ensure that the regulatory scheme was fair, proper and developed in a reasonable manner. REPRESENTATIVE ROKEBERG returned attention to the fiscal notes. He said he had requested zero fiscal notes "for the obvious reasons that befall all legislation that generates some kind of fiscal notes." He believes the fiscal notes would be "de minimis, if at all, and should be able to be handled through the normal appropriations within each division and/or the expectation that there would be some revenue generated." He suggested the foregoing offsets any need for a fiscal note. Number 1167 CHAIRMAN KOTT asked Mr. Usera to comment briefly on Securities & Exchange Commission v. Life Partners, Inc. [discussed in a document prepared by the DBSC titled "Policy Statement on Viatical Settlement Contracts," in committee packets] and the position that the state is taking. MR. USERA said he thinks it is a poorly reasoned decision. He believes the D.C. Circuit judges saw it as a way around the ravages of AIDS [acquired immunodeficiency syndrome] and were looking at the social utility, not the potential for harm. He suggested they therefore made it fit within their view, and they are the only ones who seem to think that way. He added that every other state, practically, has either issued an opinion or verbally stated the belief that it is a security. Number 1233 REPRESENTATIVE KERTTULA pointed out that the original HB 190 required that information be provided directly to the buyers, so they could make an informed investment decision. However, she doesn't find that same language in the committee substitute (CS). She inquired about protection. MR. USERA replied that it is found in regulations. He mentioned that he had copies of the disclosure forms which his division will use, with seven pages of disclosures that they believe, at a minimum, should be provided. If people read those, they will understand a fair amount about the transaction. Number 1267 REPRESENTATIVE ROKEBERG directed attention to page 2, line 20, of CSHB 190(L&C), noting that the Division of Insurance, in drafting regulations, is to address issues of privacy too. He suggested that because of Alaska's constitution and the esteem for privacy rights in the state, this is a touchy area as to how it can be put together. For an investor, there is a question of how much information can reasonably be expected about the viator in order to make a reasonable judgment as to whether it is a decent investment. Representative Rokeberg said the DBSC has already drafted basic privacy provisions, and the important thing is ensuring that the regulatory scheme is consistent. MR. USERA agreed that privacy is already addressed in his division's regulations. REPRESENTATIVE KERTTULA emphasized that it depends on the adoption of regulations, rather than being in the bill. MR. USERA indicated his division had checked with the NAIC, which has, on a national basis, come up with some definitions and is wrestling with others; those are evolving. He then explained: We might have to change the regulations quickly, but that can be done more easily than ... drafting legislation or pushing legislation through. And we're always subject to the legislature's oversight on regulations. I don't think it's any risk involved there. We can probably pay more rapid attention to changing demands. Number 1396 CHAIRMAN KOTT pointed out that before investing in any type of security, he himself generally asks for a prospectus and has a pretty thorough understanding of the risk involved. He asked whether Mr. Usera envisions circumstances under which the name of the insured would be released. MR. USERA replied: Their name would not be released, not in this state. ... As I view it, it would be against the constitution, a constitutional violation of privacy. We don't have a prospectus per se, but we have our seven- or eight-page disclosure, which does the same. We feel it educates the investing public sufficiently that they can know whether it's right for them or not. Number 1443 REPRESENTATIVE GREEN asking whether it is legal, for example, if he buys an insurance policy for himself, becomes ill, then negotiates with the insurance company to provide discounted money up-front. He also asked whether it is legal if another person, in the same scenario, buys the policy for a discounted fee. MR. USERA affirmed both. REPRESENTATIVE GREEN suggested this bill, then, ensures oversight so the viator, or someone representing him, hasn't duped the purchaser into thinking the viator is more ill than he really is. He requested confirmation that this bill doesn't change what is already legal but instead provides oversight. MR. USERA said this is already legal, then indicated the bill protects both sides: the investing public and the company that buys the policy and sells it to the investor. He expressed uncertainty as to whether it is possible for the division to make sure the insured isn't duped and given too little for the policy. Number 1535 REPRESENTATIVE GREEN inquired about the possibility of changing one's mind after a few days. He asked whether that is legal if an agreement has been reached specifying the time in which to do so. MR. USERA said he doesn't know about the legality of that now. Its legality depends on one's right to abrogate a contract. He indicated the DBSC's regulations from the investment standpoint would allow ten business days to recant. REPRESENTATIVE GREEN suggested that would be between the insured and the purchaser, not between the insured and the division. MR. USERA affirmed that. REPRESENTATIVE GREEN asked what would protect the purchaser if the insured either benefits from a miracle drug or decides to rescind this. He asked if that is where the DBSC comes in, because this is a securities deal, not an insurance deal. MR. USERA replied: If you suddenly find that there's a miracle drug comes along, and you're going to live forever, that makes it a bad investment for [the purchaser]. However, ... we're going to tell you to take a look at that. We can't tell you that it's happening or going to happen. We're going to tell you, "Think about it." The evolving medical situation is something to consider. It may be that the person has a life expectancy of five years. All of a sudden, we find a new drug comes along and it's ten years ... before you get a repayment on your money, plus you're going to have to be paying out on the premiums. ... It'd be a very bad investment. Our disclosure makes sure you know about such things. Number 1631 REPRESENTATIVE GREEN noted that this originally related to viatical settlements but has gone beyond that. He suggested there may be an expectation that the purchaser would have a chance to make some money. He asked if anything protects the purchaser. MR. USERA answered: We don't have anything in our packets that specifically says the life expectancy of a 35-year-old man is "X." But we will tell you that ... until the person dies, you're going to have to wait for a return on your money. And we'll tell you whether he's in good health or bad health, and things to consider in making your investment. I frankly don't see very many of the ... "life settlements" for the moment, because I understand that NAIC is changing that. ... It's too hard ... - they're the insurance side of things - to quantify and define. We've taken out any reference to terminal illness that used to be in the viatical definition, and we've put them all together; everything is a viatical now. But if you're buying the policy of a 35-year-old man and he's in excellent health, it may not be a good idea if you're expecting a speedy return. Number 1726 REPRESENTATIVE GREEN asked what protection exists once the process is begun. For example, is an escrow involved and all things must come to pass at the same time? He indicated he was talking about someone trying to be dishonest. MR. USERA explained: The way it happens in many cases is the viatical company will come to you, ... sell you not a policy but sell you on buying a policy. And they'll ask you such macabre questions as "What kind of policy do you want?" "I'm looking for an investment ... in a 35-year-old man with AIDS due to die in two years; those are my specifications." Then they go find somebody who is willing to part with his policy on those terms. We have, built in to our system, a 90-day rescission period: if they don't find somebody within 90 days, they have to offer you rescission from the entire deal. But the money doesn't actually change hands quite so fast as you can go off to Bermuda before [the purchaser] has had a good time to think about it. REPRESENTATIVE GREEN suggested it is like an escrow, then. Everything must come to pass at once, and the insured can't cheat anywhere along the line until it is a "done deal." He stated his understanding that the insured wouldn't get his or her money until the purchaser was finished with the transaction. MR. USERA pointed out that he has seen people cheated virtually everywhere, although the division would try to minimize it. "That's why we think it's a risky investment," he added. REPRESENTATIVE GREEN asked whether the insurance company can rescind this agreement as well as the insured can. MR. USERA clarified that generally an insurance company isn't the so-called provider. Generally, there is an insurance company and the insured; then a person comes along and offers to buy the policy and become the owner of the policy, for 25 percent, for example; that person then offers to sell an interest in that policy. The insurance company is separate, really not part of the transaction as it will normally occur. He reemphasized the desire to minimize cheating by having these regulations and disclosure requirements, then concluded, "As it goes now, they don't tell you a thing. They just tell you what a great deal this is, and you could make 40 percent on your money ...." Number 1877 CHAIRMAN KOTT voiced his understanding that the division's main responsibility is ensuring that the investor has every bit of information reasonably available to make a good decision. With viatical settlements, the risk is that the person will live longer than expected; the longer the person lives, the worse it becomes for the investor. Chairman Kott inquired about protection for the insured, provided by the DBSC or the bill, to ensure he or she receives fair market value. MR. USERA said that has been made the province of the Division of Insurance, which should probably address it. CHAIRMAN KOTT asked whether there have been any complaints in that area regarding viaticals in Alaska. MR. USERA replied: No. They complain about us looking at them, more than anything else. But we questioned most of the buyers, most of the investors, and asked them such questions as, "Was it explained to you that this was a sale of an insurance policy during the contestability period, or could be?" And they said, "What's 'contestability period?'" That's the kind of thing that people need to know, because at any time during that two-year period, the insurance company can just drop it; they can refuse to pay. So, contestability is one thing they need to know; whether it's a group policy, because that has some issues to it; what the premium is; how much [in] premiums ... the viatical provider is going to escrow ... to pay the premiums coming up. ... We can't tell them ... which way to go but what to think about, and consider whether medical science today is as hamstrung as it was 30 years ago - probably not. And if a quick return on your money is what you're looking for, then it may not be an investment for you. Protecting the insured, I think, is a worthy goal, but ... I'll leave that to [the Division of] Insurance to talk about. Number 2046 CHAIRMAN KOTT recalled a similar financial relationship in the banking arena, in which individuals can buy an elderly person's mortgage, for example, at a discount. He asked whether the DBSC oversees that as well. MR. USERA replied, "Not in 'securities,' we don't. I don't believe that the banking side does, but I couldn't say for certain." Number 2060 REPRESENTATIVE KERTTULA asked Mr. Usera to explain the contestability period. MR. USERA responded that the first two years of any policy are known as the contestability period, and the insurance company can decline to pay if the person commits suicide during that period or has lied on the application. For instance, if a person with AIDS has denied that, then turns around and sells the policy, the insurance company can refuse to pay if they discover that fact during the two-year period. REPRESENTATIVE KERTTULA asked whether this is illegal anywhere. MR. USERA said not that he knows of, although many people don't like it. "It's something that we pretty much have to permit," he added. Number 2104 REPRESENTATIVE CROFT expanded on Representative Green's analogy, suggesting the purchaser would approach a broker, not the insured, looking to buy the insurance policy of someone in a particular situation, for example. The broker has nothing to do with the original insurance agent of the insured, he noted. MR. USERA affirmed that. REPRESENTATIVE CROFT asked if there are limits on profits. MR. USERA said he doesn't think there are any limits, and he doesn't know whether the Division of Insurance plans to set any. He recounted how one Florida company had said they'd paid 45 percent of the face value of the death benefit to the viator. However, audits of their financial records - done, he believes, by Florida's division of insurance - showed the actual amount paid was 22 percent. The difference wasn't accounted for anywhere. On a $100,000 policy, they paid the person $22,000 but claimed they paid $45,000, which was reported to the investor. Mr. Usera surmised that it went "in the pocket," human nature being what it is. Number 2233 REPRESENTATIVE GREEN asked: Would the purchaser look to the broker to buy a policy on a person with a particular medical situation? Or might the purchaser look to the broker for several insured people? MR. USERA explained: He can go a couple of ... different ways. A salesman, let's say, for the viatical settlement provider, has already bought ... your insurance policy. He can then approach [the purchaser] and say, "Have I got a deal for you!" And [the purchaser] could then say, "I'll buy that policy, and I've got some more to invest, but I'd really like to invest in a 45-year-old guy with AIDS having two years to live; can you go out and find me one of those?" So, ... there's two permutations on the sales program. Number 2268 REPRESENTATIVE GREEN stated his understanding that purchases are made on individual policies, then, rather than on groups of people with particular medical conditions, for example. Like stock, a purchaser could buy part of it. MR. USERA responded: Right. Well, there's that, too. It may be that there's a $100,000 policy is going to be split up among ten investors, so they each have the right to receive $10,000. They may pay $5,000 for that privilege. So, there would be another permutation .... REPRESENTATIVE GREEN asked if a purchaser would buy into a pool of several insureds. He agreed with a suggestion that it would be sort of a "death mutual fund." MR. USERA said he didn't see why not, but they haven't been packaged that way, to his knowledge, because there would be different death dates and it would be too hard to determine. He clarified that the pooling that goes on is ten people getting together to buy one policy, for instance. Number 2320 REPRESENTATIVE JAMES said she had been envisioning that people buying these would become beneficiaries on the policies. However, that isn't necessarily the case. There is a contract that affects that, whether or not it is on the policy. She asked who is named as beneficiary on the policy. MR. USERA explained: The owner of the policy gets to name the beneficiary. And probably what happens most of the time is the provider becomes the owner, the technical owner, who then contracts to name you ... in exchange for your purchase price. ... The deal may be they sell you the entire policy and you become the owner - therefore, entitled to name the beneficiary. REPRESENTATIVE JAMES recounted how when her mother died, her two life insurance policies were made out to the funeral home; however, her mother had lived longer than she'd expected, and it wasn't all covered. Representative James suggested that would be a similar contract. MR. USERA agreed in some ways it is very similar. Number 2403 REPRESENTATIVE CROFT noted that with insurance, there can be a stable investment and return because it is spread so widely. However, in this case a purchaser is buying only one policy, and could either make out well or really lose money. The problem is the individual character of these. MR. USERA concurred. REPRESENTATIVE CROFT suggested that is why the lists of risks are necessary. MR. USERA said he envisions considerable administrative problems in putting together an investment in a pool of life insurance policies, whether it involves buying into a pool of investors in a policy or buying one policy alone. He explained: Normally what they'll do is they'll escrow an amount of money to pay the premiums expected to be due. If the person is projected to live three years, they'll put three years' premiums aside, and those don't come out of your pocket. Where the risk is, is that the person lives for five years and you've got to come up with two more years of premiums. That eats into your investment as well, and there's no way to predict that. If the person lives ten years, you're really getting hit, and you could lose the entire investment by the person living to a ripe old age. REPRESENTATIVE ROKEBERG emphasized that the people involved want to sell the policies. It provides a service so they can access their money. TAPE 00-5, SIDE B CHAIRMAN KOTT called upon Bob Lohr, director of the Division of Insurance, via teleconference; there was no response. He called on Katy Campbell, requested a brief at-ease at 2:01 p.m., then resumed the meeting immediately. REPRESENTATIVE CROFT asked Ms. Campbell why it isn't simplest and easiest to deal with one's own insurance carrier and just purchase the policy at a cash-out value. Number 0061 KATY CAMPBELL, Life and Health Actuary, Division of Insurance, Department of Community & Economic Development, answered that there is that option. Many insurance policies have an accelerated death benefit provision that would allow an insured, if terminally ill, to cash in, say, 50 percent - sometimes up to 100 percent - of the death benefit. REPRESENTATIVE CROFT said one problem, then, is some policies don't allow for it and some don't allow 100 percent. He asked, "Also, often, you don't get as good a deal out of that? It's set in the policy, and it's not what the market would give you?" MS. CAMPBELL explained: It's probably a better deal. ... If your insurance company has that provision, they basically just discount it for interest for the period of time that your life expectancy is, so they would discount it six months if you had a six-month life expectancy. It's just not in all of the life insurance policies; it's not a required provision. And in some cases, ... the restriction that they be terminally ill, with 12 months or less to live, is also a fairly strict requirement. Some people ... have a life expectancy, according to their doctor, for 36 months, and that provision can't be used. Number 0100 CHAIRMAN KOTT asked why more insurance companies don't build into the policy a mechanism to afford the insured some kind of cash buy-out. MS. CAMPBELL said she believes it is becoming increasingly common to endorse life insurance policies. CHAIRMAN KOTT asked if Ms. Campbell believes more and more insurance companies will put that in the form of an endorsement in these policies. MS. CAMPBELL affirmed that, then explained: We see more and more endorsements filed to life insurance policies ... as they are filed. They're not necessarily endorsing a lot of the ... older policies, but they're giving people that option in the newer policies. And there's a tax benefit if it's sold to someone if - a viatical settlement transaction and accelerated death benefit as well - if they're terminally ill, under the federal tax code that passed in 1997. So, if they're terminally ill and it meets those conditions, that death benefit that's paid out is actually considered "death benefit" for tax purposes; they're not taxed on it. REPRESENTATIVE JAMES remarked on what an incentive that is. CHAIRMAN KOTT asked whether that is dealing with the viatical service provider. MS. CAMPBELL answered yes, it can be, but it has to be very specific. She indicated that in the Internal Revenue Service (IRS) code, it is defined specifically as someone who is terminally ill or chronically ill by the federal definition. She agreed there is incentive to do that, then concluded by saying "the insurance companies' endorsements have stuck with that portion that still considers it a death benefit payout, basically." Number 0220 CHAIRMAN KOTT asked whether, for the insured, Ms. Campbell believes it would be more beneficial to deal with the viatical provider or that person's insurance company. MS. CAMPBELL suggested it is individual choice, depending on circumstances. Insurance companies sometimes have a provision to accelerate only, say, 50 percent of the death benefit. A person who feels he or she can get more through a viatical settlement provider certainly has that option; the market is there. Number 0256 REPRESENTATIVE GREEN asked whether those policies are just for viatical situations or are available for anyone, even if healthy. He further asked whether a person must suffer some sort of catastrophic illness before this sort of thing can happen. MS. CAMPBELL replied that a perfectly healthy insured who just wants to sell his or her policy certainly can do that. REPRESENTATIVE GREEN asked whether it can be a term policy as well as a whole life policy. MS. CAMPBELL said it can be, although it is certainly much riskier to take a term policy. "Sometimes there's term to 65, term to 95, you know, some of those that may be more likely," she explained. "But it is riskier, and the investors need to know that." Number 0301 REPRESENTATIVE GREEN put forward the following scenario: I bought a policy 30 years ago, and at that time, I was going to live 45 years or whatever it was. And so my cash value is growing through a whole life policy, but it's still going to be way below 50 percent at this time. And yet, if suddenly I become terminally ill, ... did I hear you say that the settlement could be well above that, which would put it above the cash value? MS. CAMPBELL said yes, it could potentially be quite a bit higher than the cash value, but it would depend on the state of the illness. "Certainly, if you're healthy and you're doing that, ... it's very unlikely that you'll get something higher than the cash value," she concluded. REPRESENTATIVE GREEN responded, "But now, instead of another 30 years to go, I'm down to three months; so, in that case, I should." He returned attention to the tax consequences and asked, "If I, or someone who buys this policy, gets the amount settled, that's not subject to tax? What about in a normal policy I die. Is the total not subject to tax?" MS. CAMPBELL answered that the death benefit paid under a life insurance policy is not taxable. Number 0386 REPRESENTATIVE GREEN continued, "I buy a policy for whole life. I take a discounted amount. It's purchased by someone else. ... Does that settlement that I've taken negate any future consequences of the policy?" REPRESENTATIVE ROKEBERG responded, "You aren't on the policy anymore." REPRESENTATIVE GREEN stated his understanding that the policy is gone, then, when the settlement is made, and it is not taxable. Number 0405 BOB LOHR, Director, Division of Insurance, Department of Community & Economic Development, spoke up via teleconference, offering a partial answer. He referred to a Federal Trade Commission (FTC) pamphlet on viaticals. He pointed out that it says, under financial implications, "If you sell your policy to a viatical settlement company, you may owe federal capital gains tax on the difference between the payment you receive and the amount you've paid in premiums. You may also owe state tax." REPRESENTATIVE GREEN said the insured is the one who is possibly subject to capital gains, then. MR. LOHR concurred. Number 0447 CHAIRMAN KOTT referred to page 2, subsection (b), of the bill, where it says the provider, representative or broker must, among other things, submit information required by the director. He asked Ms. Campbell what she foresees that information to entail. He noted that it is under AS 21.06, relating to the Division of Insurance. MS. CAMPBELL answered that the NAIC has fairly comprehensive model regulations and legislation on viatical settlements, and the intent was to follow their format for regulating these. Examples of reporting include the date of the contract, the amount of the death benefit, the amount paid for the policies, what the source was, whether the coverage was individual or group, whether it was within the contestability period, the diagnosis code, and funding. All of the information relating to the contract would have to be reported on a regular basis "so that you could monitor the market." CHAIRMAN KOTT referred to subsection (d), which read, in part: "The director may examine a licensed viatical settlement provider, representative, or broker, or an applicant for a viatical settlement provider, representative or broker license." Noting that the examination cost is being passed along to that individual, he asked, "What would prompt you to examine their books?" MS. CAMPBELL suggested an examination could possibly be generated based on the reports provided, for example, if there is any sign that unusual transactions are taking place, that too little is being paid for a contract, or that there are an unusual number of certain types of contracts that raise concerns. CHAIRMAN KOTT asked whether it would require a single complaint or several, to the DBSC, to prompt an audit of the books. MR. LOHR suggested Mr. Usera would be a better source on that. Referring to the bottom of page 1, he said he believes a so- called bright line sentence is designed to keep his own division on the side of looking at the viator and the viatical settlement provider; "securities" would take over thereafter, and he can't speak to their threshold with respect to a complaint. Mr. Lohr offered, however, to provide more information on the kind of examinations the Division of Insurance would do and what would trigger them. CHAIRMAN KOTT requested confirmation that the director in this section of the bill is the director of the Division of Insurance. AN UNIDENTIFIED SPEAKER affirmed that. Number 0515 MR. USERA explained that if a complaint came to the DBSC, they would investigate it. In addition, they would pass the information on to the Division of Insurance that the DBSC was investigating the complaint. MR. LOHR responded that likewise, his division would share all information with the DBSC. Typically, the Division of Insurance does two kinds of investigations of companies. First would be a financial examination if there is any question regarding the company's solvency or financial fitness. The other would be a market conduct examination where there is reason to believe, based on consumer complaints, that there is a problem; the division would look at the company's claims practices and analyze how they handle their business. It is quite typical of the insurance industry to conduct those types of examinations, Mr. Lohr pointed out. For companies located within Alaska, there is a regular cycle of examinations. For companies located elsewhere, the division coordinates activities with the states in which the companies are domesticated - where they are located - to avoid duplication. Number 0673 CHAIRMAN KOTT asked if there would be a circumstance in which both the DBSC and the Division of Insurance are looking at the same viatical provider. MR. LOHR replied: I believe that could be the case with - exactly your point - the viatical settlement provider in the middle, because when they're facing the insurance end of the transaction, we regulate them. When they're facing the investment side of the transaction, I believe it's regulated by "securities," and it could be one and the same person or the same firm. MR. USERA agreed there could be instances where both divisions would be concerned. He added, "As I told you before, this one outfit was not only cheating the investor but cheating the insureds. That would be a concern to both divisions." CHAIRMAN KOTT asked: If there are two entities reviewing this particular service provider, would that individual or provider be subject to two different penalties under the law? MR. USERA answered, "It's possible. I would think that if this comes up, we would put our heads together and not duplicate each other's efforts, for one." MR. LOHR added: Absolutely. One advantage of having both divisions in the same branch of government - the DCED - would be that we would coordinate very closely. And Mr. Elder and I have agreed on that already. Number 0745 REPRESENTATIVE GREEN pointed out that some insurance companies may require substantial investigation, plus there is a possibility of litigation. The fiscal note could get large in a hurry. MR. USERA agreed there is always the risk of litigation, but it would be no more than exists now for the division. As an example, when they took the company mentioned earlier to task, the company sued. Mr. Usera explained, "We negotiated out for a $10,000 payment to us, and it was no cost. Generally, we won't issue an order unless we've (indisc.--simult. speech) got the book on them." Number 0803 REPRESENTATIVE JAMES asked if this occurs over the Internet and if any provision in the division's regulations ensures that these kinds of activities aren't done improperly there as well. MR. USERA indicated he would expect there to be some improper dealings on the Internet; however, that is against the division's rules already, although they have nothing specific to viaticals on the Internet. Number 0873 REPRESENTATIVE ROKEBERG expressed his understanding that 12 or 13 viatical settlement providers operate in the country who are members of the National Viatical Association. MR. USERA said there are others. For example, some buy up insurance policies and sell them to their parent insurance company as the investor; those aren't as widely known. REPRESENTATIVE ROKEBERG suggested if someone is operating on the Internet and in Alaska, and is a member of the national association, that person would register to do business in Alaska. MR. USERA added, "We have several networks that we belong to. People that notice something on the Internet, they will tell us if it's aimed at Alaska." REPRESENTATIVE ROKEBERG said because of interstate commerce, one question is the state's ability to regulate that. Having a regulatory scheme in place forces legitimate providers to register with the state, meet the regulations and pay the licensure fees. Number 0940 CHAIRMAN KOTT noted the arrival of Representative Murkowski. CHAIRMAN GREEN asked whether, from the states that have adopted such a law, there is any idea of the numbers, volumes or values of the portfolios that would be subject to this type of arrangement. MR. USERA noted that in Alaska the total has been about $1.5 million. The company that sold that $1.5 million in face-amount policies to the investors told the DBSC they had sold something like $254 million. That is one company, he emphasized, which isn't even the biggest provider. Number 1030 REPRESENTATIVE CROFT asked whether there has been any circuit court case disagreeing with Life Partners. MR. USERA answered, "No. We would have gotten one up here if we'd continued with litigation." Asked the reason for that, he stated, "The SEC [Securities and Exchange Commission] just decided they didn't want to tackle it anymore. I don't know." REPRESENTATIVE CROFT asked whether there was ever a petition for certiorari. MR. USERA replied, "No, they dropped it." Number 1053 REPRESENTATIVE ROKEBERG noted that the NAIC and counsel for the viatical settlement association had testified at the HL&C Committee hearing two weeks before. This has been actively debated, including jurisdiction within state governments, privacy issues, and whether it should be statutory or regulatory; nationwide, one could flip a coin. He requested confirmation that the most recently adopted statutory scheme is in Maine, where they "went the security route." MR. USERA affirmed that, adding, "They practically put it out of business, but it's just very onerous legislation." REPRESENTATIVE ROKEBERG said this is a huge dilemma with no simple answer, and because of crossover, it is hard to know where jurisdiction begins and ends. He concluded, "That's why we try to be as clear as possible and as flexible as possible in the bill, rather than being specific. Give ... both those divisions the ability to come to grips with this issue so we can proceed here." Number 1147 REPRESENTATIVE GREEN asked if the divisions believe dual jurisdiction truly improves the ability to reduce the number of fraudulent claims. He also asked if they believe one division could do it for less cost, perhaps. MR. USERA indicated neither the DBSC nor the Division of Insurance could do the entire job alone, because neither is geared to do the other's job. "I think together we can do an adequate job of policing the situation," he added. MR. LOHR agreed neither could do it alone. He said the D.C. Circuit's answer, from a social perspective, was wrong, although he can't speak to legal aspects. The notion that no one would regulate viaticals is simply not the right answer because of significant potential for abuse without regulation by someone. He acknowledged that whenever more than one regulatory agency is involved, it is risky. However, the divisions should be held to their pledge to cooperate closely with each other, and to make sure there is neither overlap between jurisdictional schemes - in regulation or practice - nor a gap in the middle, where someone might be able to operate in some unregulated fashion. Number 1234 REPRESENTATIVE GREEN returned attention to the fiscal note, asking whether Mr. Lohr or Ms. Campbell believes passage of this would create more work and therefore would cost more, or whether the division could handle it within its existing budget. MR. LOHR answered: Representative Rokeberg has been most persuasive on this point, and I do believe that the zero fiscal note is accurate in the sense that it is a net zero for us. That is, we believe that we will be able to cover the cost of viatical regulation with the fees generated from it; so it would be a net zero for us. And normally when fees authority is granted, as it would be in this bill - and then to be further fleshed out by regulation - the statutory limit on those fees is the amount necessary to cover the actual related costs of regulation. And because of the existing authority with respect to specific examinations - whereas it was indicated earlier there might be significant costs - those would be subject to direct going to the companies involved. And on that basis, I believe a net zero is an accurate estimate of the fiscal impact on the division. Number 1307 REPRESENTATIVE GREEN pointed out the difference, when the legislature looks at fiscal notes, between those that are revenue-neutral and those that cost a lot but generate a lot of income; the latter would still be a zero amount, but would have a significant impact on the way the budget is handled. He asked whether either Mr. Lohr or Mr. Usera has a feel for how much income and expense would be involved. MR. LOHR answered: On the insurance end, I believe ... the gross revenue from viatical licensing would be de minimis. We'd probably be talking ten or less licensees, at least initially. And we'd be talking, initially, a part-time clerk, which we believe we could absorb from existing resources; it would not amount to anything approaching a full-time person. And whatever demand there was would taper off once the initial wave of applications was received. Concerning the authority for investigation, that is existing statutory authority. Therefore, I don't believe it's implicated by this particular bill. Number 1373 CHAIRMAN KOTT asked Mr. Lohr whether the provider, representative or broker would apply to the Division of Insurance for the license and then not be subject to occupational licensing. MR. LOHR said that is correct, to his understanding. The license would be just like what Linda Brunette, the chief of DCED's licensing section, issues to a life insurance sales person or anyone else engaged in the business of insurance. CHAIRMAN KOTT asked whether there were others waiting to testify; there was no response. Number 1425 REPRESENTATIVE ROKEBERG suggested that putting in statute that the name of the viator - the insured - should not be divulged may make some people rest easier on the privacy issue, particularly as the bill finds its way to the House floor. He believes that is one of the key issues here that would provide for consistency between the regulatory schemes. It isn't a settled issue in other states; however, it should be a settled issue here, because there are other methods by which the investor can check on the quality of the investment. Representative Rokeberg mentioned testimony in the HL&C Committee that the investor could call the insurance company and ask whether the company has a particular policy, assigned by number, but that the insurance company would be prohibited from telling the name of the insured to the investor. Although he believes those provisions will be part of the regulations, Representative Rokeberg said the question is whether, as a matter of public policy, the statement should be in the statute; that is a discussion he believes should happen. CHAIRMAN KOTT asked if Mr. Lohr or Mr. Usera wished to comment. MR. LOHR said he believes it is a legislative policy call. However, if they wished to make that call, he believes page 2 of the bill - beginning at line 16, where subsection (e) starts - is permissive language with respect to the regulations generally. And (e)(2) on line 20 could be fleshed out with a mandate about what regulations should include regarding privacy, rather than simply saying standards may be established. Guidance in that area, or a mandate in that area, is something the division would welcome. Number 1622 CHAIRMAN KOTT said that was basically the direction he himself was heading. He referred to page 2, line 16. [The beginning of subsection (e), lines 16 and 17, read: "The director may adopt regulations to implement this section, including standards for".] Chairman Kott asked whether changing "may" to "shall" interferes with any of the other provisions in paragraphs (1) through (9), or whether the division can live with "shall" in all those areas. MR. LOHR answered that the Office of the Attorney General had advised him that "may" is preferable to "shall" with respect to the regulations as a whole, based on a supreme court case, Amerada Hess Pipeline Corporation v. Alaska Public Utilities Commission. He said he cannot speak to the legal niceties of that case. He then indicated the division certainly doesn't object to a mandate with respect to privacy for viators or the insured. Number 1691 REPRESENTATIVE MURKOWSKI stated that the regulations of the DBSC address the privacy issue, except as may be required in the course of conduct of the responsibilities of the Division of Insurance. She indicated uncertainty to what would be required in the course of conduct of the responsibilities. She also wondered if even that could be problematic. MR. USERA indicated that he was compelled to put in an "easy out," because there may be, in the course of an investigation, the need to contact a viator, but the investigative files of the Division of Insurance are completely confidential. REPRESENTATIVE MURKOWSKI stated that she recognizes that there probably does have to be an escape clause. She recommended that maybe they say something about the confidential nature of those investigative reports. MR. USERA agreed to putting that in there. CHAIRMAN KOTT mentioned that his comfort would be eased by ensuring that the name of the individual would not be released to the public. MR. USERA assured the committee that it is absolutely protected by the Constitution of the State of Alaska. Number 1841 REPRESENTATIVE ROKEBERG emphasized that it would be a good idea to add a prohibition to divulging the name to an investor or a provider's broker or agent. He indicated that it is up to the DBSC to create a scheme where there is some ability of the investor to check the veracity of the actual existence of that, independent of the broker. CHAIRMAN KOTT asked if there was any more public testimony; seeing none, he closed public testimony. REPRESENTATIVE CROFT wondered if Representative Rokeberg wanted the committee to hold HB 190 and add the provision. REPRESENTATIVE ROKEBERG said that he doesn't think the committee needs to hold the bill, but they can do a conceptual amendment that adds the provision to the bill. REPRESENTATIVE JAMES asked how the Division of Insurance is informed of who the person is. Somebody has to know, she pointed out, and there is that chance, if investigating the case, of needing to contact the person who is insured. She indicated she doesn't really have any problem with what is in the regulations, and there is already a constitutional requirement for privacy. She pointed out that it seems there is no need for the provision unless they think it is politically correct and can, therefore, get more votes on the bill. REPRESENTATIVE ROKEBERG stated that it was not his intent. He informed the committee that the reason for the issue is that it is currently being debated by the NAIC subcommittee on viatical settlements, because there has been a tendency to protect the viator or the insured by prohibiting the release of his or her name. He explained that the issue has to do with allowing more disclosure of the name so the investor can make a better determination about the quality of the investment. REPRESENTATIVE JAMES referred to the scenario where there is a direct relationship between the insured and the "lender." She wondered, if the provision was added, if it would disallow the knowledge between the investor and the person who is insured. REPRESENTATIVE ROKEBERG referred to page 2, line 20, of CSHB 190(L&C), where it states, "viator and insured privacy protection," and he indicated it relates to the insurance company. He explained that the new provision should go in the security section, because that is where they want to prohibit public discourse about the name of the viator. The provision should be prohibiting the people regulated by securities, the investors. And those people authorized by the provider to do marketing should be prohibited from knowing the name of the viator. TAPE 00-6, SIDE A Number 0010 MR. USERA stated, "I would have no problem with that as long as you gave us some 'out,' so we don't violate our own regulation by doing our job; similar to the language that's in the regulations would be entirely reasonable." Number 0055 REPRESENTATIVE CROFT referred to the privacy issue and indicated that the provision added in 1972 in the Constitution of the State of Alaska states, "The right of the people to privacy is recognized and shall not be infringed. The legislature shall implement this section." He pointed out that the best reading of it probably is that the privacy clause requires that the items that have been discussed be kept confidential. He indicated it really has been the legislature's duty to flesh out the privacy clause, which they have very rarely done. He stressed that if the committee wants to give the message in CSHB 190(L&C) that certain items will not be disclosed, then they should say it. The privacy clause is a broad and powerful one, but it is not very well defined, and it seems to contemplate that the legislature will define it. MR. LOHR said the general state of the law, with respect to confidentiality and the insurance statute, is not very good. He explained that the general rule [in his division] is that documents are releasable unless he finds they need to be kept confidential, which implicitly requires a degree of findings on his part. Furthermore, it is only for as long as he declares that they need to be confidential. It is a weak overall confidentiality provision, and he suggests that they not delete reference to specific requirements for confidentiality on the side of the viator. REPRESENTATIVE GREEN agreed that if there is a question, they had better make sure it is perfectly clear. REPRESENTATIVE JAMES agreed that it certainly doesn't hurt to put it in with regard to the people who are involved in the business and for the investor. She expressed concern about the people who the insured might make a deal with outside of the group. She assumes those people can never let anybody know that they have purchased a life insurance policy from someone else, she said. Representative James indicated that even if it were carried as an investment, it could not have the name on it; and if it did, then they would be violating the privacy issue. She wondered if the language in CSHB 190(L&C) extends to people who are investors directly with the insured. REPRESENTATIVE ROKEBERG indicated people will not be permitted to sell their own life insurance policies. He agreed with Representative Croft's analysis of the legislature's constitutional authority. He pointed out that someone could make the case that it isn't unquestionably unconstitutional or that it is within the privy of the constitution, but he believes the legislature can define what they want done. He commented that Mr. Usera's point is well taken that they can prohibit the divulging of a name to the marketing security side, except as it relates to their confidential investigative requirements. REPRESENTATIVE KERTTULA agreed and offered the suggestion of adopting a provision that requires privacy protection. REPRESENTATIVE CROFT indicated he doesn't want to do it on the fly, but maybe they could write it up and do it in a day or two. Number 0587 CHAIRMAN KOTT wondered if it is the will of the committee not only to deal with the DBSC, to ensure that the privacy protection is adhered to, but also to address the viatical service provider, unless they are just after the state side of the equation. REPRESENTATIVE ROKEBERG said that it is the security side. CHAIRMAN KOTT pointed out that the provisions of 3 AAC 08.750, Chapter 08, Securities, for the DCED, state, "except as may be required in the course of conduct of the division's responsibility, a viatical settlement provider or issuer may not divulge to another person the name of either a viator or an insured of any insurance policy that is the subject of a viatical settlement interest." He suggested that would probably clearly identify the right-to-privacy issue, which seems to be the intent of the committee. REPRESENTATIVE MURKOWSKI agreed that they can include it on the security side, but suggested it would be advantageous to also include it on the Division of Insurance side. Number 0704 MR. LOHR concurred. He indicated covering it explicitly for insurance closes the door on any release of information absent a waiver by the holders of the confidentiality interest; if they want to waive the interest, they have the right to do that, and it should not be the government agencies that are divulging that information. CHAIRMAN KOTT wondered if it is all right if the language is included in the body of the bill. MR. USERA indicated he would have no problem with that. REPRESENTATIVE MURKOWSKI asked whether it would be necessary or recommended to include some language in that section that discusses the confidential nature of the investigation, or if it is assumed that such investigations within the DCED are confidential. MR. USERA explained that in other places in the regulations, the investigative files are confidential. There is some question as to whether, once an enforcement action has been taken, there isn't the cloak of confidentiality. The approach to this would be to black out any names present in the files. REPRESENTATIVE MURKOWSKI mentioned tightening it up. MR. USERA interjected that it wouldn't harm anything. REPRESENTATIVE KERTTULA recommended that it be tightened up, because the division's responsibilities could be interpreted broadly, and once an investigation file goes forward there is a legal issue as to whether at that point it is a public record. REPRESENTATIVE CROFT mentioned that it might not address the idea of waiver. He pointed out that it may be in the individual's interest to get his or her named published, and individuals should have that option. CHAIRMAN KOTT wondered if that would fall within the purview of the DBSC or the Division of Insurance. REPRESENTATIVE CROFT said he didn't know. Number 0913 TERRY ELDER, Director, Division of Banking, Securities & Corporations, Department of Commerce & Economic Development, commented that HB 83, passed in the last session, makes investigative files confidential, subject to administrative or judicial actions. He noted that in the past it was not clear whether the investigative files were confidential after an administrative order was issued. The administrative order itself is public, although it has always been their position that the investigation files themselves are confidential. REPRESENTATIVE KERTTULA wondered if the only way for the public to get the names is through an administrative or judicial order after the complaint has been filed. MR. ELDER said it is very possible that the investigation wouldn't require the names; therefore, they wouldn't be a part of the record, and it wouldn't be an issue. If somehow the information were part of their files and a member of the public wanted access to that, the person would have to go through some administrative or judicial procedure. REPRESENTATIVE KERTTULA wondered if that is after a complaint has been filed. MR. ELDER said that is correct. Those investigation files are confidential all the time. REPRESENTATIVE KERTTULA indicated concern about what kind of information the buyer is going to get. The original bill had language that she liked about the fact that the prospective buyer had to get information that was sufficient to make an informed investment decision. The new language says they may adopt regulations but doesn't have language that is quite as specific. She added that she would like to see a provision that requires that, not just allow it to be done by regulation. Number 1176 REPRESENTATIVE ROKEBERG noted that the approach of the legislation was basically to go to a regulatory scheme rather than a statutory scheme. CHAIRMAN KOTT asked whether the sponsor would object to reinserting that original language. REPRESENTATIVE ROKEBERG agreed with both points brought up by Representative Kerttula, saying he therefore does not object. He indicated if the committee did not want to pass out the bill but instead add the new language, he would not object to that either. CHAIRMAN KOTT emphasized that if they want to affirm something, they should place it in statute. He announced the committee's intent to direct staff to work with the DBSC and the Division of Insurance, and also to reinsert the language that Representative Kerttula had suggested. [HB 190 was held over.] ADJOURNMENT CHAIRMAN KOTT adjourned the House Judiciary Standing Committee meeting at 3:08 p.m.