Legislature(1999 - 2000)
04/19/1999 03:23 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 19, 1999
3:23 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative Jerry Sanders
Representative Lisa Murkowski
Representative John Harris
Representative Tom Brice
Representative Sharon Cissna
MEMBERS ABSENT
Representative Andrew Halcro, Vice Chairman
COMMITTEE CALENDAR
HOUSE BILL NO. 110
"An Act relating to the sale, offer to sell, and labeling of fluid
milk, meat, and meat products."
- HEARD AND HELD
* HOUSE BILL NO. 190
"An Act relating to viatical settlement contracts."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 110
SHORT TITLE: SALE/LABELING OF MEAT/MILK PRODUCTS
SPONSOR(S): REPRESENTATIVES(S) HARRIS, Dyson
Jrn-Date Jrn-Page Action
2/24/99 300 (H) READ THE FIRST TIME - REFERRAL(S)
2/24/99 300 (H) L&C, JUD
3/10/99 418 (H) COSPONSOR(S): DYSON
3/15/99 (H) L&C AT 3:15 PM CAPITOL 17
3/15/99 (H) HEARD AND HELD
3/15/99 (H) MINUTE(L&C)
4/19/99 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 190
SHORT TITLE: VIATICAL SETTLEMENTS
SPONSOR(S): LABOR & COMMERCE
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
WITNESS REGISTER
PETE FELLMAN, Researcher
for Representative John Harris
Alaska State Legislature
Capitol Building, Room 110
Juneau, Alaska 99801
Telephone: (907) 465-4859
POSITION STATEMENT: Explained changes in the proposed Version H
committee substitute for HB 110.
JANICE ADAIR, Director
Division of Environmental Health
Department of Environmental Conservation
555 Cordova Street
Anchorage, Alaska 99501
Telephone: (907) 269-7644
POSITION STATEMENT: Testified on HB 110.
BERT GORE, DVM, State Veterinarian
Animal Industries
Division of Environmental Health
Department of Environmental Conservation
500 South Alaska Street, Suite A
Palmer, Alaska 99645-6399
Telephone: (907) 745-3236
POSITION STATEMENT: Answered questions on HB 110.
DON LINTELMAN
Northern Lights Dairy
HC 60 Box 3300
Delta Junction, Alaska 99737
Telephone: (907) 895-4824
POSITION STATEMENT: Testified in support of HB 110.
ART GRISWOLD
Sleepy Hollow Farm
HC60 Box 4493
Delta Junction, Alaska 99737
Telephone: (907) 895-6248
POSITION STATEMENT: Testified in support of HB 110, provided
suggestions.
MARLA McPHERSON
Cook Inlet Keeper
P.O. Box 3269
Homer, Alaska 99603
Telephone: (907) 235-4068
POSITION STATEMENT: Testified in support of HB 110.
TERRY ELDER, Director
Division of Banking, Securities, & Corporations
Department of Commerce & Economic Development
PO Box 110807
Juneau, Alaska 99811-0907
Telephone: (907) 465-2521
POSITION STATEMENT: Presented CSHB 190.
DANA CASHEN
Accelerated Benefits Corporation;
Co-Chair, Legislative Committee,
National Viatical Association
1501 Broadway, Suite 312
New York, New York 10036
Telephone: (800) 894-3985
POSITION STATEMENT: Discussed Florida's viatical legislation.
DOUG HEAD, President
Viatical Association of America
1200 19th Street Northwest, Suite 300
Washington, D.C. 20036
Telephone: (907) (407) 898-4203
POSITION STATEMENT: Discussed concerns with HB 190.
JACK GWALTNEY, General Agent
Future First Financial Group
Gwaltney & Gwaltney, Incorporated
701 Sesame Street, Suite 200
Anchorage, Alaska 99503-6641
Telephone: (907) 561-7468
POSITION STATEMENT: Offered to work with the committee on this
issue.
ACTION NARRATIVE
TAPE 99-41, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 3:23 p.m. Members present
at the call to order were Representatives Rokeberg, Sanders,
Harris, Brice and Cissna. Representative Murkowski arrived at 3:26
p.m. Representative Halcro was not present.
HB 110 - SALE/LABELING OF MEAT/MILK PRODUCTS
Number 0099
CHAIRMAN ROKEBERG announced the committee's first order of business
would be HB 110, "An Act relating to the sale, offer to sell, and
labeling of fluid milk, meat, and meat products." The bill had
been heard previously by the committee. [Acronyms for the hormones
are those used by the Food and Drug Administration (FDA).]
REPRESENTATIVE HARRIS noted, as sponsor of HB 110, that there was
a proposed committee substitute (CS), Version H.
Number 0142
REPRESENTATIVE SANDERS made a motion to adopt Version H
[1-LS0408\H, Bannister, 3/26/99] as the work draft. There being no
objection, Version H was before the committee.
Number 0168
REPRESENTATIVE HARRIS informed members that much in the original
bill was removed, including shelf life and other items that were
fairly controversial for certain people. This bill provides dairy
farmers the ability to label their milk, cream or other byproducts
as being free from various hormones, and it provides for a penalty
for falsely labeling products in that regard. He asked Mr. Fellman
to give a more in-depth explanation.
Number 0298
PETE FELLMAN, Researcher for Representative John Harris, Alaska
State Legislature came forward. He indicated that in preparing
Version H, they looked at the 26 states with statutes dealing with
rbST [recombinant bovine somatotropin] and rBGH [recombinant bovine
growth hormone]. Noting that there are discussions of those
synthetic hormones in the packets, Mr. Fellman explained that BGH
is a naturally occurring hormone. The "r" in rBGH or rbST
indicates manufacture in a laboratory to inject into cattle.
MR. FELLMAN explained that Minnesota's and Wisconsin's laws
accomplished what the sponsor was trying to do in the original
bill. Therefore, HB 110 is patterned after Wisconsin's law for the
affidavit, which can be filled out to cover any concerns of the
milk processor, and after Minnesota's law for labeling that meets
the interim federal guideline. Mr. Fellman indicated that although
no federal law discusses labeling for bST or rbST, there is a
federal guideline, used by those 26 states to set forth regulations
for labeling a product as being free from rBGH or rbST, and used by
the sponsor for the clarifying changes to the bill.
Number 0538
REPRESENTATIVE MURKOWSKI referred to page 4, which sets out the
affidavit itself. She noted that subparagraph (A) of the affidavit
says "that no animals on the above farm are currently being
treated" and that no animals have received the treatments within
the past 30 days. She asked why it doesn't specify cows, and
whether other animals possibly would be treated with the hormone.
MR. FELLMAN replied that the BGH is bovine growth hormone, and
"bovine" are just cattle.
REPRESENTATIVE MURKOWSKI asked for confirmation that the hormone
couldn't be used in a goat to produce more milk, for example.
MR. FELLMAN confirmed that, saying it is species-specific and
therefore needs no further definition.
Number 0625
REPRESENTATIVE BRICE referred to the federal interim guidelines for
labeling. He pointed out that "interim" suggests there are other
guidelines or regulations that have not yet been adopted.
MR. FELLMAN said he had checked with the federal government, and
that is not so in this case. They had set up the guidelines in
1992, to his belief, and have just decided to let them stand as
they are.
Number 0670
REPRESENTATIVE SANDERS asked about enforcement.
MR. FELLMAN replied that the reason for the affidavit is so people
can be held accountable, to ensure honesty in labeling.
REPRESENTATIVE SANDERS referred to the zero fiscal notes from the
Department of Natural Resources' Division of Agriculture, and from
the Department of Environmental Conservation (DEC). He asked
whether there is no charge for the enforcement.
MR. FELLMAN noted that it is a misdemeanor. He suggested perhaps
enforcement for other labeling laws such as the "organic labeling
law" and the "Alaska-grown label" might also apply.
Number 0763
REPRESENTATIVE HARRIS said the Division of Agriculture doesn't
anticipate any fiscal impact, but the Department of Law, if they
have to, would receive some fiscal impact in enforcing this through
its normal enforcement of misdemeanor violations.
REPRESENTATIVE SANDERS indicated the bill may have to go to the
House Finance Standing Committee if there is a fiscal note.
Number 0825
REPRESENTATIVE HARRIS asked Mr. Fellman to explain what objections
might come from large dairies outside of Alaska, where the majority
of Alaska's milk comes from.
MR. FELLMAN answered, "We haven't had any objections to the CS.
Originally, the objections we were getting from out of state were
because of the 18-day labeling period and the high-temperature
pasteurization issue, which we removed. We haven't had any calls
that have objected to the labeling, as laid out by the interim
guidelines. The impact on the state will be such that we can
create niche markets, because we can go in with our milk and say,
... 'We don't have hormones,' and that will increase the return to
the state, through the lending programs and things that we already
have invested in, in Alaskan agriculture." Mr. Fellman said this
really is a consumer bill. It gives the consumer a choice, and it
also creates a niche market for the small farmer. He believed that
Alaska is the last stronghold of the family farm and needs the
state's backing in order to have these niche markets.
Number 0825
REPRESENTATIVE HARRIS asked if that will affect Matanuska Maid.
MR. FELLMAN said yes, it probably will. As known from the audit
and information that the legislature has obtained from Matanuska
Maid, the dairy imports about 60 percent of its milk. If it so
choses, however, it could separate the milk from any dairyman who
decided to sign the affidavit, and label that particular milk as
being rbGH-free.
Number 0975
REPRESENTATIVE MURKOWSKI asked if any affidavit process is required
to label meat or meat products as hormone-free.
MR. FELLMAN answered, "We do not have an affidavit process. We got
very little response from the industry on that. It wasn't an issue
that was taken up by the federal government, either." He noted
that the federal government is going to adopt some regulations on
organic meat, however.
Number 1025
REPRESENTATIVE MURKOWSKI asked why they are making such a fuss over
milk as a great niche product because it is hormone-free, yet
there is no similar standard for meat.
MR. FELLMAN answered that it is a consumer issue. The federal
government felt there was a need for the interim guideline because
of consumer interest in whether there are synthetic hormones in
their milk. In contrast, he is not aware of any guidelines
revolving around meat. He added, "I know that there is an organic
meat market there, and that they're working on regulations on a
federal standpoint, which we anticipate will be coming down pretty
soon."
Number 1122
REPRESENTATIVE MURKOWSKI expressed concern that anybody who
artificially injects a hormone, whether for milk or a meat product,
will be guilty of a Class A misdemeanor if he or she doesn't comply
with these regulations. However, the same accountability process
isn't set up for meat as for milk, and the reasons for the
inconsistencies aren't entirely clear. She said perhaps she is
missing something, or perhaps the meat needs to be addressed in a
separate bill.
MR. FELLMAN responded that he understands the concern. He himself
is not a beef-producer, and they had received no input on it. It
may be appropriate to pull meat out of the bill, he added.
REPRESENTATIVE MURKOWSKI suggested the alternative of having meat
subject to the same form of written affidavit as required for milk.
MR. FELLMAN said that is a good point.
Number 1210
REPRESENTATIVE BRICE asked why it is a Class A misdemeanor, rather
than a fine or violation.
MR. FELLMAN indicated that was a suggestion from legislative
counsel. He hadn't investigated Minnesota's laws to see what they
do, although he could find out, he added.
REPRESENTATIVE BRICE stated his understanding that a Class A
misdemeanor can be pretty stiff.
CHAIRMAN ROKEBERG suggested it puts this on the same plane as the
enforcement for occupational licensing.
Number 1265
REPRESENTATIVE HARRIS asked how many other states have laws similar
to, or identical to, this.
MR. FELLMAN replied that 26 other states have laws similar to this.
REPRESENTATIVE HARRIS asked whether research shows the penalties to
be misdemeanors.
MR. FELLMAN said he hadn't checked.
Number 1289
CHAIRMAN ROKEBERG noted that testimony by Catherine Reardon of the
Division of Occupational Licensing had been that she couldn't
recall, in her career, ever having been in an occupational
licensing enforcement procedure where there were criminal charges
brought forward.
Number 1321
REPRESENTATIVE MURKOWSKI asked whether the states with similar laws
combine the meat and the milk.
MR. FELLMAN said no.
Number 1329
CHAIRMAN ROKEBERG asked what the "milk versus meat state count" is.
MR. FELLMAN said he doesn't know, and that he hadn't done much
research about meat. One producer in Delta Junction, who also
raises elk, was interested in the [meat] label. But as far as any
real response otherwise, Mr. Fellman said he hadn't had any.
CHAIRMAN ROKEBERG asked whether Mr. Fellman had communicated with
the state-owned "McKinley Meat Packing Plant" in Palmer.
MR. FELLMAN said he had talked to the director of the Division of
Agriculture, but had no response or anything to point him in that
direction. "Everything really focused on milk," he added.
Number 1377
REPRESENTATIVE CISSNA expressed her understanding that no group is
pushing for labeling of meat products.
MR. FELLMAN replied that a man in Kodiak who has beef cattle had
called, as had a man in Delta Junction; both thought it was a good
issue. However, Mr. Fellman could find no model legislation or
guidelines by other states where meat was targeted as being
hormone-free. He suggested this may be new ground.
Number 1413
REPRESENTATIVE CISSNA asked why meat is included in the bill, then.
MR. FELLMAN indicated the response was that it is reasonable that,
if there is a concern about hormones in milk, perhaps a niche
market can be created for hormone-free meat.
Number 1457
JANICE ADAIR, Director, Division of Environmental Health,
Department of Environmental Conservation, came forward. She
informed members that it is her agency that would enforce this
labeling law. She expressed appreciation for the changes that were
made. The only thing she would want to check out with the FDA is
on page 3, she said, starting at the end of line 2, where it states
that milk products offered for wholesale or retail sale in the
state may not be required to contain any further label information.
MS. ADAIR pointed out that the federal guideline actually gives
other information that the FDA believes should be on the label,
although she isn't sure how tightly they hold to that. The
inference is that the label shouldn't be misleading, she told
members, and that it should be in proper context to avoid any
misleading implication. Proper context could be achieved in a
number of ways. For example, the statement, "From cows not treated
with rbST," could be accompanied by the statement, "No significant
difference has been shown between milk derived from rbST-treated
and non-rbST-treated cows." Ms. Adair noted, "If FDA requires a
qualifying statement like that, and we're not allowed to put that
on there, then we could preclude our two dairies from selling their
milk to the federal government and to schools who use federal funds
to buy milk, and I don't think we'd want to do that. So, I would
just want to run this by FDA, to make sure that the label - ...
because all you'll get on the label is what's in this bill - is
going to be satisfactory to them."
MS. ADAIR said she has the same concerns mentioned by
Representative Murkowski regarding the meat. She explained, "Since
we can't test the meat to determine whether or not it's been
treated, and we don't have the benefit of the affidavit, I don't
know how we would ever enforce or allow someone to -- you know, you
want them to be in best stead to protect themselves from a claim
that they have treated their meat, if they haven't. So, we would
recommend either something similar to the milk or that the meat be
deleted from the bill. I suspect that meat that hasn't been
treated gets sold as "organic" instead of "hormone-free" or "not
from rbST-treated cows" and would be handled under the organic
rules that USDA [United States Department of Agriculture] has been
working on for quite some time."
Number 1598
REPRESENTATIVE MURKOWSKI inquired as to what the difference is to
the consumer in the labels "organic" and "non-synthetic-hormone."
MS. ADAIR replied that the USDA has been working on organic
regulations for quite some time, grappling with that exact issue of
at what point something becomes non-organic. She pointed out that
synthetic hormones typically are considered outside the realm of
organic, and she would be surprised if they were included.
However, irradiation will be considered organic, as of their last
proposal, which has caused a lot of angst; that is one reason why
the USDA hasn't yet finalized those rules.
REPRESENTATIVE SANDERS asked whether there is no charge for
enforcement.
MS. ADAIR explained, "We did put a zero fiscal note on the prior
bill, because we couldn't figure out how to do any enforcement.
And in the testimony on the bill last time, Representative Rokeberg
did point out that we probably should have indicated that, when in
fact we didn't. I don't know how many farmers might be interested
in this, how many records we might find ourselves reviewing. And
I probably will talk with our state vet when he gets back in the
office tomorrow, to see if he's got some clue. I wouldn't imagine
it would be a huge amount, but certainly there'd be something
associated ... with doing some kind of record review, to ensure
that the labeling was accurate."
Number 1688
REPRESENTATIVE HARRIS asked how the other 26 states enforce it.
MS. ADAIR said she isn't certain, although she is sure that they do
it through some type of inspection and review of records.
REPRESENTATIVE HARRIS suggested the need to find out how the other
states do that.
CHAIRMAN ROKEBERG proposed that it should be done after the bill is
passed.
Number 1711
REPRESENTATIVE BRICE returned attention to labeling and asked
whether Ms. Adair recommends deleting the last sentence of the
first paragraph on page 3, lines 2 through 4.
MS. ADAIR clarified that she simply wants to check with the FDA.
She has no problem with it unless the FDA has a problem with it, in
which case she believes the consequences are too severe.
Number 1747
REPRESENTATIVE HARRIS asked if the DEC prefers to see Sec.
17.20.015, in Section 2, deleted from the bill, as well as
subparagraphs (2)(B) and (C) under Sec. 17.20.305, in Section 3,
regarding penalties relating to meat.
MS. ADAIR indicated either they need some way to verify that the
meat has not been subjected to the synthetic hormone or they would
want it deleted. All they are looking for is verification, but
there is no way for the DEC to verify that it is true now.
REPRESENTATIVE HARRIS asked whether, if that happened, this bill
would be much easier for the DEC to defend.
MS. ADAIR affirmed that.
Number 1796
CHAIRMAN ROKEBERG asked how the state presently grades or inspects
meat.
MS. ADAIR explained that grading of meat is a voluntary program
done by the Division of Agriculture, whereas safety inspections of
meat are done by the DEC, through the Division of Environmental
Health. "We do operate under the USDA rules for meat slaughter and
inspection," she added. "We have to do ... pre-slaughter
inspections, post-slaughter inspections of the carcass, to make
sure that there's no diseases on the carcass. An inspector is
required to be on-site at all times during the processing of the
carcass to the meat product. We've essentially just adopted the
federal rules by reference and follow those. We do send inspectors
to Texas A&M to get meat training, and we have three meat
inspectors in the state."
CHAIRMAN ROKEBERG asked whether those inspectors are in Palmer.
MS. ADAIR answered that two are in Anchorage at Anchorage Cold
Storage (ANCO), noting that federal rules require a meat house to
provide office space because the inspectors are to be on-site at
all times. There is a part-time inspector in Fairbanks, as well as
the state veterinarian in Palmer, who goes out in the field to do
inspections, as several inspections are required to be done by a
veterinarian.
Number 1880
CHAIRMAN ROKEBERG expressed his understanding that the only major
slaughterhouse is in Palmer.
MS. ADAIR replied, "Slaughter, but there is meat processing that
takes place elsewhere. Sausage is meat processing, and that's ...
Indian Valley Meats, Alaska Sausage; the meat packer that was
mentioned in Kodiak, he does meat processing. So, there's a
variety of things that take place that are meat processing that
don't involve slaughter."
Number 1899
CHAIRMAN ROKEBERG inquired whether there are USDA inspectors in
Alaska.
MS. ADAIR answered, "We have an 'equal to' program, and so, we
stand in for USDA."
CHAIRMAN ROKEBERG asked if most of the beef grown in Alaska would
qualify for the USDA's future "organic" designation and, therefore,
for the label under this bill.
Number 2004
BERT GORE, DVM, State Veterinarian, Animal Industries, Division of
Environmental Health, Department of Environmental Conservation,
answered via teleconference from the Matanuska-Susitna Legislative
Information Office (Mat-Su LIO). He explained that there is a
federal slaughterhouse on Umnak Island in the Aleutians, plus state
slaughterhouses at Kodiak, Palmer and Delta Junction, as well as a
state-operated slaughterhouse at Nunivak. Meat from Umnak Island
would certainly be labeled as organic, Dr. Gore stated, which was
the goal behind that organization, to get Aleutian beef that has no
synthetic hormones, antibiotics or feed additives. He added, "Most
of the animals that are beef animals up here, to my knowledge,
we're not using synthetic hormones on." Dr. Gore pointed out that
for dairy animals, in contrast, some non-rbST synthetic hormones
are still used. He referred to Sec. 17.20.015 of the legislation
and said, "Most of our dairy cattle that go to slaughter would not
qualify for that, because of the other synthetic hormones that are
used in those animals."
CHAIRMAN ROKEBERG requested that Ms. Adair check with the FDA,
indicating the bill would be held until her response was received.
MS. ADAIR agreed to that.
Number 2093
DON LINTELMAN, Northern Lights Dairy, testified next via
teleconference from Delta Junction in support of HB 110. He told
members he is in favor of the bill because he runs a
milk-processing plant and would like to be able to label his milk
as "no hormones being used." He believes that might provide him 5
percent more of the market.
CHAIRMAN ROKEBERG asked Mr. Lintelman whether he periodically sells
some stock for meat use and consumption.
MR. LINTELMAN replied, "Just the bull calves." He indicated most
customers for those are individuals from North Pole or youths who
are taking on beef projects, for example. Most of the milkers they
themselves use, selling very few to Palmer. "But they're not
injected with any hormones at all," he added.
Number 2169
ART GRISWOLD, Sleepy Hollow Farm, testified next via teleconference
from Delta Junction in support of HB 110. Mr. Griswold would like
to see a similar affidavit regarding beef, he told members. Noting
that the additives aren't allowed for kosher beef, he said it is
difficult to obtain beef that meets those requirements. He is
raising a small herd of cattle for that reason, and would like to
be able to send those animals to the slaughterhouse and have the
beef labeled accordingly. Mr. Griswold indicated the Canadian
government doesn't want these hormones used at all. He requested
that restrictions on beef be retained. In addition, he wants to
see the 18-day dating provision regarding milk put back into the
bill; he believes that will help Alaskan farmers because much milk
being shipped into Alaska is older than that.
Number 2240
CHAIRMAN ROKEBERG asked whether Mr. Griswold looks at his small
beef herd for organic meats as a growing area of business, provided
that there is proper labeling.
MR. GRISWOLD answered that he definitely believes it is a growing
area of business. Whereas Mr. Lintelman is looking at a 5 percent
increase in the market for his milk, he himself is looking at an
opening in the beef market, if there is labeling, that has not been
touched.
CHAIRMAN ROKEBERG asked Mr. Griswold if he is also a dairy farmer.
MR. GRISWOLD indicated he has dairy goats, but no dairy cows.
Number 2286
MARLA McPHERSON, Cook Inlet Keeper, testified next via
teleconference from Homer in support of HB 110. Ms. McPherson
noted that Cook Inlet Keeper is a nonprofit citizen organization
composed of over 500 members from Homer, Anchorage, Talkeetna and
throughout the Cook Inlet watershed who are working to protect the
environment and human health in Cook Inlet. She stated that Cook
Inlet Keeper supports HB 110 because the bill is in the best
interest of human health and the economic health of Alaska's meat
and dairy farmers. Ms. McPherson explained that the public has an
increased awareness and concern for human health because in the
past four years people have witnessed a sharp increase in human
health problems that may be directly linked to increased exposure
to harmful synthetics such as rBGH. Cancer has risen 49.3 percent
in the last four years and, today, 40 percent of Americans will
contract cancer sometime during their lifespan. In fact, cancer is
the leading cause of death among Americans between 36 to 64 years
old.
MS. McPHERSON said, although synthetic bovine growth hormone [rBGH]
hasn't been proven to cause cancer, it's just one more thing that
people are being exposed to that can contribute to human health
concerns. She indicated that, although the FDA claims that rBGH is
safe for human consumption, there still isn't conclusive evidence,
which causes concern. Studies on the synthetic hormone show that
the immune system detects and responds to the hormone, and, in
fact, cysts have reportedly developed on the thyroids of male rats
exposed to rBGH, and some of the rats suffered increased
infiltration of the prostate gland. She said these studies are
incomplete. Long-term toxicology studies have not been done to
determine the ultimate effects of the hormone on human health.
Number 2355
MS. McPHERSON believes they can't wait until there's substantial
proof. She feels some people who might oppose this bill may claim
that there's no proof that it causes cancer or human health
concerns, therefore, it doesn't matter whether these things are
labeled or not, but "we" can't wait until there's proof. She
thinks that the surgeon general set a really good example when he
said that smoking could cause cancer 30 years before there was
conclusive scientific proof that, in fact, chemicals of cigarette
smoke did cause cancer. She feels a precedent needs to be set by
putting labels that say that the milk products are hormone-free so
that people can be provided with the information they need to make
a choice whether to consume the product or not.
MS. McPHERSON believed the public has a right to know what
chemicals and hormones are put into the food they consume,
regardless if there's conclusive evidence those chemicals cause
cancer or other health defects. Some studies of rBGH have already
produced results of concern. She stated that it should ensure that
humans have the timely and accurate information on the products
they consume to make the choice on whether they want to consume it
or not. Ms. Mcpherson thinks many people are concerned about their
health and the health of their friends and family and children.
She feels passing HB 110 will give people the information they need
to make choices to protect their health. She agrees with the
things that have already been said that HB 110 will create niche
markets for meat and dairy farmers. These are the niche markets
that need to compete with the large corporate farms from outside.
Ms. Mcpherson urged the support of Alaskan farmers and human health
in Alaska by passing HB 110.
Number 2417
CHAIRMAN ROKEBERG asked Ms. McPherson to please fax her testimony
to the committee for the record. He also asked if she could
explain to the committee what Cook Inlet Keeper is and how it is
funded.
MS. McPHERSON stated that Cook Inlet Keeper was started three years
ago by a settlement against the oil industry for over 4,000
violations of the Clean Water Act on the offshore oil platforms in
the upper Cook Inlet. She explained that, instead of putting the
money into the general reserves, the industry, the courts, the EPA
[Environmental Protection Agency] and citizen organizations agreed
that the money should go to establishing a non-profit organization
that would essentially monitor environmental health in the Cook
Inlet watershed. She indicated that, since the court decree has
been fulfilled, the organization is now funded by citizen and
foundation support.
CHAIRMAN ROKEBERG asked Ms. McPherson if she is either a volunteer
or a staff member of Cook Inlet Keeper.
MS. McPHERSON replied that she is a staff member.
CHAIRMAN ROKEBERG confirmed there were no further witnesses on HB
110. He asked if Mr. Fellman wished to comment in follow-up.
Number 2471
MR. FELLMAN began, "I just wanted to take a second and point out
that the concerns with the language..." [TESTIMONY INTERRUPTED BY
AUTOMATIC TAPE CHANGE]
[From tape log notes: 'concerns w/ pg. 2-3' 'Minnesota state law'
'(language came directly from Minnesota law)']
TAPE 99-41, SIDE B
Number 0001
MR. FELLMAN continued, "...it's been accepted I should say by the
FDA, that is the exact language - there was a court case ... where
it was challenged, and that particular language did stand up in
that court case."
CHAIRMAN ROKEBERG asked Mr. Fellman to please work with the
department on that issue. The chairman mentioned he has a concern
with Section 3 of the bill pertaining to the exclusion of persons
from penalty for violation unless the person owns ten percent or
more of the business.
MR. FELLMAN indicated that some lines had to be drawn between how
much of the interest the person may have in any given business to
determine if they were going to be involved in the decision-making.
He explained that 10 percent was established as the starting point
with the hopes that it would cover the mean, again at the
recommendation of Legal Services [Legal Services, Legislative Legal
and Research Services, Legislative Affairs Agency].
CHAIRMAN ROKEBERG feels that this puts the focus on the small
operator and excludes all the competition from being penalized. He
suspects all major corporate dairies would not be included.
Number 0067
MR. FELLMAN indicated he would check with legislative counsel and
get more detail on that issue. He stated that in a lot of cases,
such as with a corporation like Darigold, all the dairymen hold a
small percentage of that corporation.
CHAIRMAN ROKEBERG wondered if it is similar to stocks.
MR. FELLMAN replied yes.
CHAIRMAN ROKEBERG said that it appears to him that any corporate
entity gets a stake here unless one goes directly to the chairman
of the board and "try to apply a misdemeanor offense (indisc.),
out-of-state foreign chairman of the board if you will, which may
be very difficult to enforce." He asked Mr. Fellman to examine
those concerns and provide a report to the committee. The chairman
indicated HB 110 would be held for further work.
Number 0137
CHAIRMAN ROKEBERG called an at-ease at 4:15 p.m. The committee
came back to order at 4:19 p.m.
HB 190 - VIATICAL SETTLEMENTS
Number 0139
CHAIRMAN ROKEBERG announced the committee's next order of business
would be HB 190, "An Act relating to viatical settlement
contracts."
REPRESENTATIVE HARRIS made a motion to adopt the proposed Version
G committee substitute (CS) for HB 190, labeled 1-LS0576\G,
Bannister, 4/14/99. There being no objection, it was so ordered.
CHAIRMAN ROKEBERG explained that HB 190 was introduced as a
committee bill when controversy arose regarding the nature of the
regulation of viatical settlements as part of the Securities Act of
1999. Therefore, those provisions were removed from that Act and
HB 190 was introduced. Chairman Rokeberg announced that he
intended to take public testimony today and familiarize the
committee with this area of the law, but not report the bill from
committee. There is controversy regarding the proper regulatory
home for viatical settlements; should it be located in the Division
of Insurance or the Division of Banking, Securities, &
Corporations in Alaska. He noted that he has had numerous
discussions with the Department of Commerce and there seems to be
the belief that the Division of Banking, Securities, &
Corporations should take primacy in this area. However, many in
the insurance industry disagree with that placement. Chairman
Rokeberg requested that Mr. Elder come forward to explain the CS.
Number 0238
TERRY ELDER, Director, Division of Banking, Securities, &
Corporations, Department of Commerce & Economic Development,
directed the committee to the committee packets which contain a six
page packet entitled, "Viatical Settlements HB 190." He referred
to page 2 of that packet regarding definitions. He explained that
to "viaticate is the process in which a person sells the death
benefit or ownership of a life insurance policy to a third party
for less than its face value." The insured person who sells the
policy is the "viator." Typically, there are many "viatical
settlement providers" who are in the business of buying these death
benefits and insurance policies from viators and then selling
interest in those to third party investors. The contract entered
into between the provider and the viator is called a "viatical
settlement contract."
MR. ELDER explained that HB 190 adds viatical settlement contracts
to the definition of a security in the Alaska Security Act, Title
45.55. He said his current position is that most all viatical
settlement contracts are investment contracts which are already
part of the definition of a security. There are those who do not
have knowledge of this position or disagree with this position.
Therefore, it would beneficial to clarify in the Alaska Security
Act that viatical settlement contracts are part of the definition
of a security. At the same time, the bill would provide an
exemption from registration making it fairly easy for the viatical
settlement providers to comply with the law. The exemption would
only require the filing of a notice and certain disclosures to
investors.
Number 0479
MR. ELDER stated that the primary objective of the bill is to
protect Alaskan investors from sales abuses that have occurred
across the country. He noted that the committee packet contained
an article regarding viatical contracts from the March 1999
Kiplinger's Personal Finance Magazine. This legislation attempts
to avoid such problems discussed in the article. He acknowledged
that no one has yet come forward with problems as discussed in the
article. He hoped that the next article in a major press group
would not utilize Alaskans as the examples. Mr. Elder explained
that avoiding this is accomplished primarily through disclosure,
proper risk disclosure, to the public. This legislation would
provide the department with a mechanism, if complaints or abuses
are found, to take quick action. Most of the problems reported in
the press revolve around abusive sales practices. He discussed
some of the abuses cited in the aforementioned article. Mr. Elder
stressed that he was not opposed to this business on any
philosophical ground. However, if this is to be sold it is a
security and there should be adequate disclosure to protect
investors. He offered to walk through the CS by section.
CHAIRMAN ROKEBERG agreed that would be helpful.
MR. ELDER began with Section 1 of the CS which adds a reference to
the new exemption, new subsection (g). That reference provides the
division the ability to revoke or deny an exemption. Section 2 is
the new exemption, subsection (g), which requires the filing of a
notice and consent to service to the division before any sales are
made. Included in Section 2 is also some basic information
regarding the company doing the sales.
CHAIRMAN ROKEBERG asked if this referred to each time a contract
was sold to a member of the public.
MR. ELDER explained that there would be a filing for each program.
In further response to Chairman Rokeberg, Mr. Elder said that
typically, the industry standard is a one year, two year, three
year and a ten year program. If that continues, the provider would
file a notice for each of those programs.
CHAIRMAN ROKEBERG stated that the language was not clear to that
point. He referred to page 2, line 7 of the CS which in part
reads, "at least 10 days before any offers or sales are made...."
He asked if that refers to the exempt registered individual.
MR. ELDER clarified that it referred to the issuer, the viatical
settlement provider. He noted that the agent is not filing
anything, except to register as an agent.
Number 0938
MR. ELDER continued with Section 2 which also provides for the
registration of agents, paragraph (2). Paragraph (3) is the
disclosure requirement to the investor. He pointed out that much
of the language in subsection (g) is from the current exemption at
(b)(5)(B). Paragraph (3) is the language which was passed in HB 83
related to the exemptions of (b)(5)(B). Paragraph (4) requires
that the firm be in business for three years and have no defaults.
Subsection (h) lists those things which would disqualify an issuer
from utilizing this exemption, although it may not disqualify the
issuer from a full registration. That language is taken from the
accredited investor exemption in HB 83. Subsection (i) merely
allows copies of advertising materials and such to be requested by
the department.
MR. ELDER moved on to Section 3 of the CS which is a new section to
AS 45.55. This section would provide purchasers the right to
rescind purchase within three days of receipt of the final
disclosure document or paying the agreed upon amount, whichever is
later. Subsection (b) of Section 3 simply specifies that notice
would become effective. Section 4 changes the definition of
"issuer" to include the person creating the fractional or pooled
interest or the person who effected the transaction with the
investor. He clarified that it would not include a broker, dealer,
or agent. Section 5 includes the amendment to the definition to
"security" which adds "viatical settlement contract" on line 14,
page 5 of the CS. Mr. Elder referred to page 6, Section 6 which
inserts three new definitions necessary in the Securities Act which
are as follows: viatical settlement contract; viatical settlement
provider; and viator. With regard to the definition of viatical
settlement contract, he stressed that the language is not referring
to the regulation of the viatical settlement provider's
relationship with the viator. There is only the regulation of the
sales of the securities by the viatical settlement provider. He
pointed out that the definition of viatical settlement contract
excludes four items, subparagraphs (A), (B), (C), and (D).
Subparagraph (A) is essentially the sale of the contract by the
viator to the viatical settlement provider. Subparagraph (B)
excludes the transfer or sale between the viator and a friend or
family member. Subparagraph (C) excludes the use of the life
insurance policy when it is being used as collateral for a loan.
Subparagraph (D) excludes the viator when that person utilizes the
accelerated benefits under the terms of the life insurance policy.
MR. ELDER commented that to the extent possible, the division is
staying out of the insurance business. Only the security and
investor protection side is being addressed. Mr. Elder noted that
he had conversations with the Division of Insurance which agrees
that these are securities and that it is in the Division of
Securities, Banking & Corporations' purview and responsibility to
regulate this part of the business. With regard to the possible
suggestion that the NAIC Model Act should be adopted, he pointed
out that deals with the viatical settlement provider and the
viator. That provides protections for the viator which is a
separate issue that is not addressed in this legislation. If that
is addressed at some point, he suggested that be kept separate from
the regulation of securities.
Number 1296
CHAIRMAN ROKEBERG inquired as to the location of the language in
the bill which addresses the agents making the sales.
MR. ELDER directed the chairman to page 2, line 21 of the CS. In
further response to Chairman Rokeberg, Mr. Elder clarified that
agents register with the division.
CHAIRMAN ROKEBERG inquired as to the procedures of AS 45.55.030(a),
(c) and 45.55.040. Are they exempt agents also?
MR. ELDER explained, "We already have in our Act the definition of
agent. If they're exempt from that definition, then they would not
register."
CHAIRMAN ROKEBERG posed the situation in which the agent was an
insurance person.
MR. ELDER said the person would have to register with the division.
He commented that many are already registered with the division.
The registration is a simple procedure in which each company with
agents would file a form with the division and pay the fee. In
further response, Mr. Elder said that there is a requirement for
agents who register under our chapter to take the Series 63 exam
which covers state law.
Number 1414
REPRESENTATIVE CISSNA referred to Section 3 and asked if it is
standard to provide three business days for the right of
rescission.
MR. ELDER commented that there is nothing standard about viatical
settlements which are so new. He noted that Maine is on the verge
of passing a new law from which this language was taken. He
pointed out that the committee should have information related to
the legislative hearings in Maine. The director of securities in
Maine decided to change the three days to 30 days due to the
testimony of a sales agent and an investor who experienced
problems.
REPRESENTATIVE CISSNA seemed to agree with the change to 30 days.
REPRESENTATIVE MURKOWSKI pointed out that the information in the
committee packet indicates there is a split with regard to whether
viatical settlements should be covered under the Division of
Insurance or the Securities Act. She understood Mr. Elder's and
Chairman Rokeberg's testimony to be that the Division of Insurance
feels that securities should have primacy over this issue. She
surmised that the division feels this way because this legislation
regulates the sales of the securities. If the relationship between
the viator and the viatical settlement provider was being
regulated, it may be appropriate to be under the Division of
Insurance. However, since the discussion here surrounds the sale
of the investment contract, this is subject to securities.
MR. ELDER added, "What we and what the Division of Insurance are
both saying is that the relationship of the viator and the viatical
settlement provider and everything that goes past that to the
insurance company, that would - that the NAIC Model Act talks
about, that would be properly discussed with the Division of
Insurance. ... Let's say you passed a viatical settlement act
that adopted that, they would agree that the sale of the securities
forward to the investor should be something that would be regulated
by our division."
Number 1692
DANA CASHEN, Accelerated Benefits Corporation; Co-Chair,
Legislative Committee, National Viatical Association (NVA),
testified via teleconference from Florida. She informed the
committee that the Accelerated Benefits Corporation is a licensed
viatical settlement corporation in Orlando, Florida. Ms. Cashen
said she was happy to see and in favor of Alaska taking interest in
protecting its consumers. She noted that NVA and the Viatical
Association of America have been working with the (National
Association of Insurance Commissioners) NAIC Viatical Settlement
Working Group to draft the Model Act and address some of the
concerns with the industry. Ms. Cashen said that with her initial
reading of the bill, there are some concerns with some of the
language. Therefore, she expressed the need to have more time to
sit down with the involved parties in Alaska in order to discuss
some of the alternatives that she has worked on. Ms. Cashen
informed the committee that she is in Tallahassee, Florida today
watching "our House Bill" move from committee to the floor. The
legislation is pretty interesting and addresses the scenario being
addressed in HB 190, the portion of the transaction which deals
with the purchaser and the viatical settlement provider. Florida
already has laws regulating the viator and the viatical settlement
provider. Florida is the first state to do such.
MS. CASHEN noted that the NAIC Working Group has received a couple
of charges to address for 1999. One of those charges is to review
the relationship between the purchaser and the viatical settlement
provider. This will be discussed at a meeting next week in Kansas
City, Kansas. The discussions will begin with regard to how more
protections can be provided to the purchaser. Ms. Cashen commented
that her consensus from NVA is that it would like to work with
Alaska to share information from the NAIC, Florida, and other
states.
CHAIRMAN ROKEBERG asked Ms. Cashen to explain what the NAIC is.
MS. CASHEN clarified that the NAIC is the National Association of
Insurance Commissioners. The association includes commissioners
from around the country who meet on a quarterly basis. The
association is fairly complex and covers many different insurance
issues.
CHAIRMAN ROKEBERG noted that the committee packet includes the
April 15, 1999 "Draft NAIC Model Act With Wraparound." He asked if
the Model Act refers to the transaction between the sales agent and
the purchaser.
Number 2066
MS. CASHEN explained that the current NAIC Model Act only deals
with the relationship between the viator and the viatical
settlement provider. The aforementioned information in the
committee packet is the viatical settlement industry's attempt to
take the current model and insert language within that model which
addresses the purchaser to provider relationship. In addition to
disclaimers and advertising regulations, the main concept in the
NAIC Model Act With Wraparound is to have agents soliciting
purchasers to buy these policies to be licensed as are life
insurance agents. Ms. Cashen felt this is clearly an insurance
product and those speaking with potential purchasers should have
such knowledge. For example, in Florida where there are viatical
settlement laws the Department of Insurance is able to regulate the
entire transaction.
CHAIRMAN ROKEBERG noted that his staff had a copy of Florida's SB
1242, but recalled that Ms. Cashen referred to a House Bill.
MS. CASHEN specified that to be the Senate's companion bill. She
informed the committee that the House Bill is HB 2235 which passed
out of Florida's House Insurance Committee today. House Bill 2235
should be headed to the floor at least by early next week. The
Senate Bill has passed out of Florida's Senate Insurance Committee
and the Senate Judiciary Committee and is headed to the Senate
floor. Therefore, both bills should be headed to both floors next
week. In response to Chairman Rokeberg, Ms. Cashen explained that
the two bills in Florida have some differing language. She
explained that in Florida, each house has to pass the identical
version. Ms. Cashen predicted that there would be discussion
regarding the differences and whichever body passed its bill out
first would be the vehicle.
REPRESENTATIVE MURKOWSKI pointed out that the legislation before
the committee would amend the Alaska Securities Act to include a
viatical settlement contract. She surmised that is not the case
with Florida's legislation. She inquired as to what other states
have done with their Securities Act and whether viatical settlement
contracts are included within the definition of a security.
MS. CASHEN said that up until this legislative session there were
not any states that included viatical settlement contracts in their
Securities Act. This year about three to five states have
introduced legislation similar to that being introduced in Alaska.
To her knowledge, only two have passed this session. Ms. Cashen
stated that the vast majority of states passing viatical settlement
legislation seemed to follow the lead of the NAIC model. She
commented that the issues being dealt with in Alaska are on the
radar screen of the NAIC.
TAPE 99-42, SIDE A
Number 0001
DOUG HEAD, President, Viatical Association of America (VAA),
testified via teleconference from Florida. Mr. Head noted that the
committee should receive the wraparound document that is being
proposed to the NAIC. The wraparound document was developed in
negotiations with Florida's Department of Insurance which is
largely reflected in Florida's Senate bill. However, there is one
significant difference between Florida's House and Senate bills.
Florida's Senate bill addressed the emerging Life Settlement
Industry which involves transactions of policies of healthy persons
such as high net worth executives who wish to dispose of their life
insurance. The wraparound document sent to the committee should
contain some language referencing the Life Settlement Industry.
Mr. Head commented that he believed that the viatical settlement
industry has been extensively reviewed from the viator's side by
NAIC.
Number 0166
MR. HEAD stated that the greatest concern with the legislation
before the committee is the adequacy of the definitions. The
discussion from committee members regarding how exactly this would
function is also of concern for Mr. Head. He pointed out that VAA
has a number of members that are large institutional purchasers.
Mr. Head commented that the previous description of the typical
viatical transaction is not necessarily identical from the many
models of different methods for raising funds experienced by
companies in VAA. Therefore, he expressed the need to have the
opportunity to review the specifics of this law with all VAA
members. He was concerned that the transaction does not always
involve a one, two, three, or ten year package of policies.
Sometimes the transaction involves single policies, multiple
policies, and the registration process which may make it
prohibitive to do business in Alaska. He noted that Maine is a
state in which essentially, no one does business due to the passage
of Maine's Viatical Act about a year ago. Mr. Head said that he
would like to work with the committee to ensure that there are
appropriate protections under the insurance umbrella for all
aspects of that industry.
CHAIRMAN ROKEBERG asked if there are two different viatical
associations.
MR. HEAD replied yes, but noted that at this point there is really
no separation in policy.
CHAIRMAN ROKEBERG asked if it would be correct to view Mr. Head as
representing the viatical settlement providers.
Number 0431
MR. HEAD informed the committee that he is employed by a viatical
settlement broker, the Medical Escrow Society, the largest in the
nation. He clarified that he works directly with viators. Under
the NAIC model, a viator is a person who owns a policy on the life
of a person that may not necessarily be terminally ill. In further
response to Chairman Rokeberg, Mr. Head clarified that the owner of
the policy may or may not be the person with the disease under the
viator definition in the NAIC model. The terminally ill person is
identified as the insured. Mr. Head noted that the NAIC Model Act
contains many definitions which he urged the committee to review
because the NAIC definitions may be improvements on those in HB
190. Mr. Head explained that to him a provider is a company, no
matter how they are funded, that is engaged in purchasing viatical
settlements.
CHAIRMAN ROKEBERG noted that there has been testimony that very few
states have regulations. Ms. Cashen testified that three to five
states may have some type of security regulations.
MR. HEAD said that there are a number of states and securities
commissioners that have made rulings or are in negotiations.
Depending upon the fund-raising model utilized by the provider,
there are a range of possibilities. The funding models, the
relationship with particular purchasers, the definitions of
securities, commissioners and the legislatures vary from state to
state. He believed that North Dakota, South Dakota, and Iowa are
the only states that have engaged in legislation moving in this
direction. North Dakota has effectively outlawed viatical
settlements no matter who is the provider. South Dakota has no
industry, that he was aware of. Iowa has a small industry. Larger
states such as Texas, New York, California, and Florida have had
successful experiences regulating the relationship between the
provider and the (indisc.). "Florida is the first with a living,
dynamic viatical settlement industry to begin to figure out how to
structure the purchaser side regulation under the insurance
umbrella."
CHAIRMAN ROKEBERG inquired as to how many states have a regulatory
scheme that is enforced by their Insurance Commission or their
Division of Insurance.
MR. HEAD said that he believed that every state which has a
viatical settlement law, with the mentioned exceptions, places
viatical settlements under the Division of Insurance. The last
time he looked, he counted 27 such states.
Number 0796
CHAIRMAN ROKEBERG informed Mr. Head that Alaska is problematic in
that it does not have any law or regulations specifically drafted
for the viatical settlement industry. Therefore, Mr. Elder and the
Division of Securities, Banking & Corporations generated some cease
and desist orders when advertisements guaranteed returns on
investments of these contracts.
MR. HEAD commented that may have been an appropriate step. He said
that the VAA model suggests and agrees with NAIC that there should
be extensive disclosure to purchasers. However, Mr. Head believed
that regulating this under the securities umbrella seems to divide
the process. Mr. Head indicated that it would be best to track the
entire transaction due to the belief that the product from its
beginning is an insurance product, a life insurance policy.
Therefore, full regulation of the entire transaction should fall
under life insurance regulators.
CHAIRMAN ROKEBERG noted that the Alaska Division of Insurance does
not agree with Mr. Head. He inquired as to the types of problems
that occurred prior to any regulatory reform because there seems to
be a plethora of abuse and misunderstanding surrounding the
viatical industry.
MR. HEAD stressed that the biggest problem, as with any new
product, is that there are fraudulent actors. The most disastrous
of those fraudulent scenarios occurred in the West and Northwest
and may have entered Alaska. With regard to Kiplinger's article,
Mr. Head believed it was not entirely accurate and that there was
some poor and sensational reporting. Mr. Head acknowledged that
there is fogginess surrounding this industry, but he hoped that
this option will continue to be provided for those who have life
insurance and wish to sell it. This is a property issue which
everyone should keep under review. He stated, "We need to be
concerned about whether there is a market for their policies and
whether we properly regulate it. And we think we're moving, with
the NAIC, in the right direction and that Alaska should - and we
are more than anxious to work with you to develop appropriate
regulation and we do believe very strongly that it belongs in the
insurance department."
CHAIRMAN ROKEBERG identified one of the current dilemmas as whether
the Alaska Division of Banking, Securities, & Corporations should
regulate until a statutory scheme is in place for this. Chairman
Rokeberg did not believe it to be in the public's interest to cease
marketing of these, if they can be done in a manner which does not
harm the public. He did not believe it appropriate to shut down
the viatical settlement industry, while Alaska "gets its act
together legislatively."
MR. HEAD agreed with that view. He cited one of the difficulties
as the collateral issues associated with direct securities
regulation which confuse the potential for people to make
appropriate investments in this product. There are also problems
created for the viator who wishes to sell his/her life insurance
policy. For example, a terminally ill individual with two $20,000
policies who wanted to sell those policies to a brother-in-law
would be required to file due to the single sale exemption.
Number 1153
MR. HEAD commented that there are many technical issues with
HB 190. The definitions need extensive review. He noted that he
would like to work quickly and with the Department of Insurance to
establish a complete regulatory scheme to protect the terminally
ill viator as well as investors. With the emergence of life
settlements, there is yet another emerging problem. Therefore, all
of this regulatory phenomena should be placed in a central
location. Mr. Head believed it would be difficult for the Division
of Banking, Securities, & Corporations to regulate the other side
of the industry, as the director commented earlier.
CHAIRMAN ROKEBERG said that he had heard mention that many in the
securities industry do not really have the understanding or
patience to sell this product. Therefore, those with a life
insurance background are better marketing sales agents for this
type of product. Is that an appropriate assessment?
MR. HEAD agreed that Chairman Rokeberg's assessment was
appropriate. In further response to Chairman Rokeberg, Mr. Head
explained that there are many variables in life insurance which are
best known by life insurance agents. He did not know of any
security that required premium payments which is unique to life
insurance. Furthermore, there are issues regarding maintaining
premiums on portions of the policies. Today it is possible to sell
portions of a life insurance policy and that creates significant
premium issues which are best handled by a life insurance agent.
CHAIRMAN ROKEBERG asked whether that was due to the pre-paid
dividends and the adjustments for annual premiums with an aged
policy.
Number 1301
MR. HEAD replied yes. For example, an individual with a life
expectancy of two years who purchased a policy at 60 years of age
has a much higher premium than an individual at the same age who
purchased the same policy at 30 years of age. Therefore, these
packages are part of what a good insurance person can explain to a
purchaser. For securities sales people, the language associated
with such a situation is not typically familiar language. In
summary, Mr. Head stated that good disclosure to the investor is
the objective. Good disclosure would best come from a sales person
who has knowledge of the product he/she is selling. He agreed to
be available to talk with staff and offered to provide the
committee with additional written testimony to illustrate some of
these problems.
CHAIRMAN ROKEBERG announced that he would be talking with those in
the industry in Alaska as well as the various departments. He also
announced that he did not intend to report HB 190 out of committee
today and will only do so when the legislation is ready.
Number 1417
JACK GWALTNEY, General Agent, Future First Financial Group,
Gwaltney & Gwaltney, Incorporated, testified via teleconference
from Anchorage. With regard to the testimony from those in
Florida, they are accurate in what it would take to do this right.
Mr. Gwaltney agreed that there needs to be some legislation to
accommodate all parties concerned. He noted that the testimony has
made it apparent that there are many parties involved in one of
these transactions. This is a complicated issue. Mr. Gwaltney
offered to work with the committee on this issue.
CHAIRMAN ROKEBERG announced that HB 190 would be held.
ADJOURNMENT
Number 1530
There being no further business before the committee, the House
Labor & Commerce Standing Committee meeting was adjourned at 5:27
p.m.
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