Legislature(2001 - 2002)
04/04/2001 03:20 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 4, 2001
3:20 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 184
"An Act relating to the business of insurance, including changes
to the insurance code to implement federal financial services
reforms for the business of insurance and to authorize the
director of insurance to review criminal backgrounds for
individuals applying to engage in the business of insurance;
amending Rule 402, Alaska Rules of Evidence; and providing for
an effective date."
- HEARD AND HELD
HOUSE BILL NO. 106
"An Act relating to the authorizations for state financial
institutions; relating to confidential financial records of
depositors and customers of certain financial institutions;
relating to the Alaska Banking Code, Mutual Savings Bank Act,
Alaska Small Loans Act, and Alaska Credit Union Act; and
providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 184
SHORT TITLE:INSURANCE CODE AMENDMENTS
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
03/14/01 0588 (H) READ THE FIRST TIME -
REFERRALS
03/14/01 0588 (H) L&C, JUD
03/14/01 0589 (H) FN1: ZERO(CED)
03/14/01 0589 (H) GOVERNOR'S TRANSMITTAL LETTER
04/04/01 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
BOB LOHR, Director
Division of Insurance
Department of Community and Economic Development (DCED)
3601 C Street, Suite 1324
Anchorage, Alaska 99503
POSITION STATEMENT: Testified for the division on HB 184.
LINDA BRUNETTE, Licensing Supervisor
Division of Insurance
Department of Community and Economic Development (DCED)
P.O. Box 110805
Juneau, Alaska 99811-0805
POSITION STATEMENT: Testified on HB 184.
JOHN GEORGE, Lobbyist
National Association of Independent Insurers (NAII); and
American Family Life Assurance Company of Columbus (AFLAC);
American Council of Life Insurance (ACLI)
3328 Fritz Cove Road
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of NAII, AFLAC, and the
ACLI on HB 184.
SHELDON WINTERS, Lobbyist
State Farm Insurance
Lessmeier & Winters, LLC
431 North Franklin Street, Suite 400
Juneau, Alaska 99801
POSITION STATEMENT: Spoke on HB 184 on behalf of State Farm
Insurance.
STEVE CONN, Executive Director
Alaska Public Interest Research Group (AkPIRG)
P.O. Box 101093
Anchorage, Alaska 99510
POSITION STATEMENT: Testified on HB 184.
ACTION NARRATIVE
TAPE 01-47, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:20 p.m. Those present
at the call to order included Representatives Murkowski, Halcro,
Kott, and Crawford. Representatives Meyer, Hayes, and Rokeberg
arrived as the meeting was in progress.
HB 184-INSURANCE CODE AMENDMENTS
[Contains discussion of HB 106 and SB 138, the companion bill.]
Number 0056
CHAIR MURKOWSKI announced that the committee would take up HOUSE
BILL NO. 184, "An Act relating to the business of insurance,
including changes to the insurance code to implement federal
financial services reforms for the business of insurance and to
authorize the director of insurance to review criminal
backgrounds for individuals applying to engage in the business
of insurance; amending Rule 402, Alaska Rules of Evidence; and
providing for an effective date."
Number 0129
BOB LOHR, Director, Division of Insurance, Department of
Community and Economic Development (DCED), stated that HB 184
would implement the conforming provisions for the Division of
Insurance to the federal Gramm-Leach-Bliley Act (GLBA), also
known as the Financial Services Modernization Act of 1999.
MR. LOHR, referring to a handout from the division entitled
"Department of Community and Economic Development, Alaska
Division of Insurance, HB 184," explained that the mission of
the division is to protect and serve the state by regulating all
aspects of insurance in Alaska to protect and educate the
consumer, and to enhance the insurance business environment.
Both of those goals would be substantially enhanced, he
remarked, by HB 184.
MR. LOHR offered some history. Just following the depression,
as an attempt to recover in 1933, the Glass-Steagall Act was
adopted and erected barriers among the major sectors of the
American economy; it was in effect from 1933 to 1999. The GLBA,
Financial Services Modernization Act removed the barriers among
banking, insurance, and the securities industries. It was
predicted that there would be a "flurry" of acquisitions and
mergers by insurance companies, banks, and securities firms.
MR. LOHR expressed that it hasn't happened quite as quickly as
it was predicted to happen, he said, but just within the last
week Alliance Insurance in Germany merged with Riesner Bank (ph)
to become the fourth-largest financial conglomerate in the
world. This morning's news was that American International
Group, Inc. (AIG) made a bid to beat out a British company that
was also bidding on American General, a $23 billion bid.
Clearly, those are indicators of the kinds of mergers
contemplated by GLBA that are now occurring. These changes
necessitate adaptation by the regulators in all three fields to
the new reality. This bill essentially conforms the insurance
regulatory system at the state level to changes in the federal
system.
MR. LOHR said insurance is unique, because it is regulated by
states, and there is no federal counterpart to insurance, unlike
banking where there is federal regulation of national banks and
state regulation of state-chartered banks. In securities, there
is both a federal Securities Exchange Commission (SEC) role and
a National Association of Securities Dealers (NASD) role. There
is nothing analogous to state regulation of insurance at the
federal level. And frankly, [the division] likes it that way,
he emphasized, because [the division] thinks that the
appropriate place to do insurance regulation is at the state
level, and it is more effectively done there.
Number 0420
MR. LOHR expressed that if [Alaska] doesn't adapt and conform to
the approach contemplated in GLBA, there is a substantial risk
of preemption by the federal government and establishment of a
federal insurance regulator. Many of the measures in the bill
are designed to enhance consumer protection, making it easier
for insurance to operate in this new competitive environment
where banks and securities firms are competitors selling
insurance.
MR. LOHR said if "they" have to deal with the regulatory systems
in 51 different jurisdictions before responding to competitive
pressures from banks and securities firms, that won't work and
won't be acceptable as a business model, and state regulation
will become obsolete and be preempted.
MR. LOHR explained that [the division] is trying to streamline
the processes to become more efficient in this highly
competitive world economic environment. [The division] is
working cooperatively with other state officials, federal
officials, banking officials, interested parties, insurance
companies, trade associations, and consumer groups.
Number 0530
MR. LOHR said GLBA would do three basic things: establish
producer-licensing or agent-licensing provisions; address
privacy; and protect consumers who purchase insurance through
banks, expanding coverage of the consumer protection provision
to banks selling insurance.
MR. LOHR went on to further explain producer licensing. If a
minimum of 29 state jurisdictions, states, or territories do not
adopt either "uniformity" or "reciprocity" in licensing for
nonresident agents and brokers, then Congress has commanded that
the National Association of Registered Agents and Brokers
(NARAB) be formed.
Number 0612
CHAIR MURKOWSKI asked how that would work. She asked for
verification of her understanding that if by November 2002 only
25 states have signed on, then it will be under the auspices of
what is set out in GLBA. What happens to the 25 states that
signed on? And is what those states enacted preempted by GLBA?
MR. LOHR responded that he believed that to be correct. The
national model would preempt it; however, the reality is that
"they" would be largely conforming to what the national model
had become at that point. The NARAB group would establish many
of the same consistency provisions that those 25 states would
have adopted in their conforming amendments.
Number 0729
MR. LOHR verified that it wouldn't affect the jurisdictions that
had acted as much as those that hadn't. There is concern,
however, that if it goes national, it could affect revenues to
the states because currently insurance-producer licensing taxes
produce far more revenue, which goes to the state general fund,
than the cost of the division as a whole for regulation
insurance; [the division] [contributes] $23 to $25 million a
year to the general fund, and the total budget for the division
is less than $5 million. There has been talk of trying to
preserve state revenue if the national system of licensing
[prevails]; however, how long the preservation of revenue can be
maintained without a commensurate requirement is hard to say, he
remarked.
MR. LOHR commented that the National Association of Insurance
Commissioners (NAIC) adopted the Producer License Model Act
(PLMA) in October 2000 for states to use as a guideline for
developing legislation to meet the reciprocity elements of GLBA,
and to move toward uniformity. The GLBA sets out a standard of
either 29 jurisdictions meeting reciprocity or 29 jurisdictions
meeting uniformity; it doesn't work to have 15 of each, he
explained. Reciprocity was selected as a preferable approach
because it is more manageable to implement in multiple
jurisdictions than it would be to get truly uniform legislation
in 29-plus jurisdictions. And it is a tough thing to do in one
year, he added. In Alaska there are more than 10,700 licensees,
including 2,900 residents and 7,800 nonresidents. The dramatic
growth has been due to a 38 percent increase in the number of
nonresident licensees, while the trend for resident licensees
has remained steady.
Number 0867
LINDA BRUNETTE, Licensing Supervisor, Division of Insurance,
Department of Community and Economic Development (DCED), when
asked if there was a difference in the fee licensing structure
for residents versus nonresidents, replied affirmatively.
Nonresident fees are almost double resident fees, she remarked.
MR. LOHR reiterated that total for fees from all sources to the
division from the producer-licensing premium tax and from other
sources is approximately $27 million. The producer-licensing
provisions are based on the NAIC model, with the goal of
achieving reciprocity, and [the division] would then give
licenses on a reciprocal basis, moving toward more uniform
elements in the law. If a person is qualified for a license
within his or her home jurisdiction, then it is good enough for
Alaska, he said, and vice versa.
Number 0974
MR. LOHR said [the division] issues a nonresident license, which
gives a person the same authority that he or she has in the home
state, and [the division] would accept the home state's
continuing education requirements. [Alaska] has its own
continuing education requirements for maintaining a license
here, he said. [The division] would remove any retaliatory
provisions and all discriminatory requirements based on place of
residency or operations. Nondiscrimination is a required
element of the federal law for reciprocity.
CHAIR MURKOWSKI asked if the difference in the licensing fee
between a resident and a nonresident would be viewed as
discriminatory.
MS. BRUNETTE said there has been discussion on the national
level; the NAIC legal staff identified that this should be an
issue whereby states can retain revenue currently generated, and
the division is currently looking at the fee issues to determine
which changes, if any, need to be made.
MR. LOHR said he believes the answer is not clear at this point.
There has been talk that if states implement GLBA and
reciprocity, then there will be no harm to state revenues. He
said, however, that he didn't believe it was "black letter" law
in federal legislation; it is more of an interpretation of what
nondiscrimination means, whether or not with respect to
licensing provisions. Having a standard that kicks in only if a
person is a nonresident clearly is prohibited, but he pointed
out that there hasn't been any case law on differential fees.
MR. LOHR, upon being asked how other states handle it, responded
that he believed that many states do [have differential fees for
residents and nonresidents] and treat them as Alaska does. This
bill doesn't propose changing the fee structure for licensing at
this point.
Number 1101
REPRESENTATIVE HAYES asked: If [Alaska] joins on with the other
29 states [in reciprocity], how is the same level of funding
maintained?
MR. LOHR responded that a person would have to buy the license,
because in exchange for the ease of getting the license in all
jurisdictions, what is contemplated is that a person would have
a single point of application for licensing. A person would
send the fees and a single application confirming that the
person is in good standing in the home state, and upon a
criminal background check and so forth, [the state] would issue
the license. From the point of view of a national company that
wants to get agents or broker licenses in multiple
jurisdictions, it is worth the price of continuing to pay the
fee to each state as well as paying the processing fee for the
computerized treatment. It is contemplated that this can be
turned around in a 24-hour period, he emphasized, and is a
dramatic change in the way licensing works. [The division] is
excited about the potential for this system, he added.
Number 1283
MR. LOHR explained that the licensing provisions would also
provide that [Alaska] accepts the national uniform license
application. The benefits of enacting producer licensing
include: streamlining the licensing process and eliminating the
duplicative requirements for licensure; being more efficient and
cheaper; having no retaliatory fee requirements; leveling the
playing field; and engaging [Alaska] in a collaborative effort
to identify "rogue" agents.
MR. LOHR said the Federal Bureau of Investigation (FBI) has
excellent information on the criminal background, and
administrative and regulatory records of agents and brokers
nationwide. Right now some conforming provisions are needed, he
expressed, in order for the FBI and the United States Department
of Justice to recognize Alaska as a participant in that system.
[Alaska] currently gets fingerprints, but it may take six weeks
or more, because of having to submit fingerprint cards, and not
having our system standard with that of the FBI. There is
language further on in the bill that would allow [Alaska] to
easily participate within the national criminal justice system
to identify people that [the division] doesn't want to issue
licenses to.
Number 1316
REPRESENTATIVE ROKEBERG mentioned HB 132 that came through the
committee regarding Alcoholic Beverage Control Board (ABC)
fingerprinting, which allowed the department access to the
national standards for fingerprinting background checks for
applicants seeking liquor licenses. Because of the abuse of the
Alaska Public Safety Information Network (APSIN) system, there
was significant discussion about who was authorized in the
department. Is there a limit to who would have access, he
asked.
MR. LOHR said there is a restriction regarding permissible uses;
the reason for making an inquiry is tightly limited. As to
whether there is a limit on the number of people within the
office that could have access to it, he said he didn't know that
there would be a specific number, but it would include the
investigative staff.
MR. LOHR mentioned that [the division] currently has access to
APSIN and has used it for a number of years, and, to his
knowledge, there have been no allegations or incidents of abuse.
It has been used routinely to ensure that licenses are only
issued to those who qualify, and within the last six months
there was an applicant who claimed no criminal background, but
who through fingerprinting turned out to have a substantial
criminal background, which made this person inappropriate for a
license. Unfortunately, he exclaimed, because of the mismatch
between [Alaska] and the delay in processing fingerprints, [the
division] had already issued the license and had to persuade the
person to surrender it immediately. Had it needed to be done,
papers would have been served at that point indicating a formal
complaint by the division.
Number 1445
MR. LOHR commented that this concluded his presentation on
producer licensing; he said there are two other portions that
deal with privacy and consumer protection that he would address
next.
REPRESENTATIVE ROKEBERG asked Mr. Lohr if feedback had been
received from the industry about this section, and asked if
there had been any problems.
MR. LOHR said the feedback from the American Council of Life
Insurers (ACLI) and from the National Association of Independent
Insurers (NAII) has been largely supportive. Both the property
casualty and the life [insurance] side are in support of these
changes; in addition, he said, the Association of Agents and
Brokers is also supportive of the language. Several trade
groups have suggested specific changes, and [the division] has
developed possible amendments for the committee to consider,
largely addressing the specific concerns that have been brought
to [the division]. [The division] has near-universal support
for the producer-licensing provisions of the bill, he exclaimed.
He recognized both Linda Brunette, Licensing Supervisor, and
Katie Campbell, Life and Health Actuary, for their excellent
work in addressing concerns with proposed language.
REPRESENTATIVE ROKEBERG recognized that this has been a
difficult bill to draft and he commended the division. How long
has the bill been in circulation with the industry for review,
he asked.
Number 1587
MR. LOHR said it was made available in February and the bill was
introduced on March 14 [2001], so it was about one month in
advance of the bill's introduction. [The division] has tried to
work with all interest groups, and they have taken this work
draft and sent it to their national associations for comment and
feedback; [the division] has received feedback from a number of
those national groups. He mentioned that the division was
requested by the Senate Labor and Commerce Standing Committee to
give a copy to the Alaska Public Interest Research Group
(AkPIRG)
REPRESENTATIVE ROKEBERG said he is concerned about people in
industry having a chance to review it and provide feedback.
MR. LOHR went on to talk about the privacy section. [The
division], he said, couldn't resist quoting the state
constitutional provision on privacy, Article 1, Section 22, "The
right of the people to privacy is recognized and shall not be
infringed. The legislature shall implement this section." The
consumer privacy provisions of HB 184 confirm the director's
authority to adopt privacy standards that are consistent with,
but no less restrictive than, the NAIC model regulation. The
information protected with the NAIC model includes personally
identifiable financial or health information. In the case of
financial information, this is information that an insurance
company obtains from an applicant in getting insurance coverage
and is typically a narrower range of information on finances
than a bank would already have about a person. Banking
information would be far more extensive, he said, such as the
profile that might be available through credit card purchases,
which is a far more detailed profile on an individual's
preferences than would be obtainable from an insurance company
dealing with financial information obtained in the process of
dealing with an application for insurance.
Number 1716
MR. LOHR explained that there are two standards for financial
information consistent with the GLBA: one is "opt out," which
means that the insurance company must notify a person that it
has financial information about him or her. If a person doesn't
object to [the company's] releasing that information, then it is
authorized to do so. "Opt in," he explained, is a tougher
standard that means that unless a person actively consents to
sharing financial or health information with other companies,
then the insurance company would be prohibited from doing so.
MR. LOHR explained that "opt in" takes the active consent of the
individual, while "opt out" would include all those that do not
respond to a notice and opportunity to make a decision about
sharing information, and both are permissible under GLBA. The
division views health information obtained by an insurance
[company] as being far more sensitive than financial
information, because if an insurance company were able to share
information on health status needed to process an insurance
application with a bank that is considering whether to make a
loan to that person, that information could be used to a
person's detriment; therefore, it warrants a higher degree of
privacy protection than financial information obtained from an
insurance company.
Number 1802
REPRESENTATIVE HALCRO referred to where it states that protected
financial information may be shared among affiliates without
restrictions. He asked: If he buys insurance from a company
that owns another company that sells financial services, can the
two companies share information between themselves? Is that
what [the division] would consider affiliates?
MR. LOHR responded affirmatively, but said it is for financial
information only. He said he wasn't sure that regulation or
statute could prohibited [companies] from sharing among
affiliates; under federal regulation [companies] can already do
it, and they don't need permission; this is provided under GLBA.
REPRESENTATIVE HALCRO asked if [the legislature] could restrict
the sharing of information.
MR. LOHR explained that GLBA clearly provides states the ability
to go beyond the protections provided by federal regulators. If
there were a dispute as to whether a state or federal regulation
is stronger with respect to protecting privacy, the state
regulation would be upheld. The Federal Trade Commission (FTC)
is the judge in any dispute, he explained, and the congressional
provisions on privacy in GLBA clearly provide state authority to
go beyond what the federal government has already adopted for
privacy regulations. There was widespread recognition that the
privacy regulations in effect at that time were probably not
adequate, and there was a question about whether GLBA's privacy
provisions went far enough - hence the discussions of other
privacy regulations out there.
Number 1944
KATIE CAMPBELL, Life and Health Actuary, Division of Insurance,
Department of Community and Economic Development (DCED),
explained that [a state] could go beyond [GLBA], so being more
restrictive with consumer information wouldn't be preempted. It
could be said that a company couldn't share information with
affiliates without a notice and without giving the consumer an
opportunity to make a choice, she explained.
Number 2460
REPRESENTATIVE HALCRO said he agreed that health information is
of a higher privacy [level] than financial information; however,
they are fairly similar. For example, if he buys a life
insurance product, it doesn't necessarily mean that he wants to
receive solicitations from other sources. If he wants that
information, he would contact them. There ought to be opt-in
for both financial and health information, he remarked, and the
consumer shall be allowed to make the choice.
MR. LOHR explained that opt-out is probably an appropriate
standard for financial insurance information. He said whether
junk mail an invasion of privacy is in the eye of the beholder.
Alaska's insurance market is such, he explained, that if Alaska
becomes too nonstandard compared to the prevailing national
approach for sharing information, given the fragility of some
elements of the market, Alaska could end up with products not
being offered that people want and need. Companies could
decide, given the limited size of our market, that it is too
much hassle having a separate privacy rule to enforce it in a
state as small [in population] as Alaska. On the national level
what is desired, he explained, is to train all the staff in the
calling center to a standard of what privacy responsibilities
are; if there are different standards for states according to
the level of privacy, then compliance is a problem.
MR. LOHR pointed out that there is a strong mutual interest in
trying to have a consistent, uniform approach towards standards,
and Alaska has participated in the effort to develop those
standards.
REPRESENTATIVE HALCRO asked for verification of his
understanding that, for example, some companies enter the market
to sell a product, but the company is hoping to sell other
products as well from the company or through affiliates.
Number 2123
MR. LOHR said he believed that to be correct. Companies now
regard the ability to market information to Outside firms as a
valuable business asset. It may also be beneficial to the
customer, he pointed out, to the extent that the company can
target marketing toward the customers' interests. Customers
ultimately make the decision under either model; it simply takes
a more active affirmative response [to opt out]. He agreed that
it takes more attention on the customer's part under the opt-out
system; however, he said there are good reasons for supporting
an opt-out approach for financial information with insurance
[companies]. He added that he couldn't say the same for banking
because of a lack of knowledge on the subject.
CHAIR MURKOWSKI asked how privacy is handled in the insurance
world.
MR. LOHR said [the division] hasn't regulated it in the past;
this would be new authority for the state.
CHAIR MURKOWSKI asked for verification that the model being
discussed is the opt-out standard for financial information,
with an opt-in standard for health information. She mentioned
that the other bill before the committee [HB 106] deals with
financial institutions and has an opt-in provision as it relates
to GLBA. She asked why financial information is being treated
differently regarding GLBA depending on whether it's under the
auspices of the Division of Insurance or the Division of
Banking, Securities and Corporations.
Number 2284
MR. LOHR explained that he and Mr. Elder, Division of Banking,
Securities and Corporations, have discussed the provisions, and
both agree that consistency among banking, regulation of
privacy, and insurance regulation of privacy is not essential.
It may be appropriate to have a standard for insurance
regulation of financial information different from that of a
bank. It ties primarily to the difference in the nature and
volume of information that [the division] receives, he said;
insurance application information is typically limited, whereas
the banking relationship involves more detail.
CHAIR MURKOWSKI asked for an example of what is considered
financial information from insurance standards.
MS. CAMPBELL explained that a homeowner's policy, where a person
may put down the value of the home on the application, is
considered financial information. Anything that isn't health
information would fall within the financial information
definition, which includes things like a person's address, name,
and so forth. She said the amount of life insurance a person
has is another piece of financial information, which is
different in nature from what a bank would obtain, with the
exception of the credit report.
Number 2460
REPRESENTATIVE HALCRO asked if [a company] has to send out a
notification for the consumer to opt out.
MR. LOHR replied that there are specific notice provisions
required; even in the federal approach, it would be part of a
regulation that [Alaska] adopts if this authority is confirmed
to [the division]. [The division] would require that
notification and provide a ready means by which the consumer can
[opt out].
MS. CAMPBELL, upon being asked how that is handled today,
replied that [the division] doesn't have anything currently in
place, but if the regulation is adopted, there is an initial
notice that the consumers would receive upon applying for
insurance. She said there would be an explanation and separate
form with the option to opt out of sharing that information;
then, on an annual basis, [an institution] would be required to
send those notices out stating what a person's privacy rights
are.
Number 2505
REPRESENTATIVE HALCRO said consumers need the ability to
interact [with the institution regarding opting out].
MR. LOHR said there are things that a company would like a
customer to know, and then there are those that a company has to
tell a person. The already-in-place federal regulation and [the
division's] proposed regulations would address the type size and
would [emphasize] making the notice meaningful to obtain
informed consent. Otherwise, he remarked, there is risk that
someone might not fully notify the customer of what the option
is. For opt-out to work, there has to be a meaningful
opportunity to make that choice.
MR. LOHR, referring to the handout regarding the health
information standards, said the opt-in standard means that
insurance companies may not share protected health information
without explicit [permission from the consumer].
TAPE 01-47, SIDE B
Number 2489
MR. LOHR commented that unlike for financial standards, insurers
are not required to provide notices describing their privacy
policies, because the incentive is for the company to obtain
consent from the customer if he or she wishes to share it, thus
taking care of that problem.
MR. LOHR explained that standards do not apply to insurers who
are in compliance with the United States Department of Health
and Human Services (DHHS) regulations implementing the Health
Insurance Portability and Accountability Act (HIPAA), the
federal health legislation scheduled to take effect in 2002.
The effort here, he emphasized, is not to create a duplicative
set of health privacy regulations, but rather to tide over from
current [regulation] until these regulations take effect at the
federal level. Sharing health information among both affiliates
and nonaffiliates is restricted.
REPRESENTATIVE ROKEBERG asked Mr. Lohr if these are the 600
pages of regulations being developed under [HIPAA] for privacy.
MR. LOHR replied that that is how they are regarded, although
the bulk of it is actually the preamble, an explanation in
response to the 50,000-some comments received on the proposed
regulations, regarding how the choices were being made to deal
with this or that. There is more preamble than actual
regulations; nevertheless, there are plenty of regulations to
raise concerns about whether people can do business under the
proposed privacy regulations.
REPRESENTATIVE ROKEBERG, referring to Section 44 of the bill,
said it allows one to adopt standards already published and
adopted by the NAIC; he asked how extensive those regulations
are.
Number 2327
MR. LOHR responded that [the committee] could be provided with a
copy of that model regulation. Basically, he said, that is the
regulation adopted through a nine-month process last year, which
involved testimony from virtually every trade association, from
large insurance companies, and from interest groups including
"funded consumers" concerning the contents of that regulation.
It represents a consensus view of what is needed, he said, and
it was unanimously adopted by the NAIC in October 2000 as a
model. If authorized to do so, [the division] would propose to
start a regulatory process by promulgating that rule as the
starting point. With that language of "no less restrictive
than" [the division] would be looking at public comment and gaps
in privacy that Alaskans expect and deserve. [The division]
expects considerable testimony on that question. [The division]
would then have the NAIC model regulation as a floor below which
it could not go, but it would not restrict it from going further
if the public testimony indicated that there was a need to do
so.
REPRESENTATIVE ROKEBERG said his greatest concern is whether
those regulations are at odds with statutes and regulations
adopted in Alaska, and particularly the privacy provisions
encompassed in Alaska's so-called patients' bill of rights
enacted last year, which is going into effect now.
Number 2327
MR. LOHR explained that the privacy provisions in HB 211, the
patients' bill of rights, represented, in his view, a high water
mark for privacy protection. They are strict and don't
contemplate opt-out or opt-in, and they don't allow sharing of
financial information; that is an extremely high standard, he
said, and is one that arguably could make it difficult to
attract or retain insurance companies under those provisions.
Currently, that provision applies only to health maintenance
organizations (HMOs) and some health care insurers. It is the
most restrictive form of privacy protection out there, and there
is a question as to whether it is the appropriate standard. If
that is the policy decision of this committee, then opt-in for
health would not be nearly strong enough; there would need to be
a prohibition on sharing, and he pointed out that it could have
serious consequences for the marketplace.
REPRESENTATIVE ROKEBERG said it was his intention to have a very
high standard when [this legislation] was drafted, but he's
always tried to not dissuade entry into the marketplace,
especially relating to health care insurance. He said he is
concerned about the provisions that did; the intention was
related particularly to some of the pharmaceutical companies and
others who had an interest in that clause, which the
[legislature] made relatively small. It allowed [guidance] for
the general day-to-day operations of all people that share that
information. He said he has been working on an issue dealing
with treatment of people who have substance abuse problems; [the
court] needs to know if a person has a prior conviction or prior
treatment relating to substance abuse to be able to administer
the proper treatment.
Number 2157
MR. LOHR surmised that provisions dealing with criminal justice
access would be different from those involving sharing of
information with other companies, and would be covered with a
subpoena and other provisions. [The division] hasn't had a
problem getting necessary information for criminal justice
purposes or for investigating insurance fraud in terms of
running into a privacy provision that could withstand an
administrative subpoena from the division; however, he said that
question would be looked at.
REPRESENTATIVE ROKEBERG said if the court doesn't have to
subpoena the information, then he suspects that the defendant
would be required to supply it, so it would be consensual at
that point.
MR. LOHR said a subpoena is needed if someone isn't cooperating,
but privacy provisions wouldn't withstand efforts to obtain
information. He said he could share with the committee an
analysis done for the HB 211 privacy provisions, and the
proposed standard for GLBA state (indisc.) legislation to show
how [the division] has compared the two.
CHAIR MURKOWSKI indicated she is in favor of the suggestion.
Number 2157
MR. LOHR said the privacy standards are stronger for health
information because the GLBA standard is geared toward banks and
securities firms and not toward the insurance industry; there is
a much larger volume of health information, and typically this
information is more sensitive when compared to financial
information. There is greater sharing of information among
banks, securities firms, and insurers who are now allowed to
affiliate. The privacy model, he exclaimed, is appropriate
because it preserves the insurance industry's ability to
transact insurance while also protecting consumer privacy.
There is broad support out there from industry, consumer groups,
and others, he explained, and there is a strong [belief] that
state regulation of insurance can work effectively to protect
consumers, while also allowing competition in this new
environment. Those need to be balanced in order to have a
successful approach.
CHAIR MURKOWSKI, going back to the financial information, said
[the division] outlined that the financial information can be
shared among affiliates without restrictions. She asked if
sharing can be done among nonaffiliates, and whether there are
restrictions.
MR. LOHR replied affirmatively.
Number 2085
REPRESENTATIVE HAYES asked how "affiliate" is defined. And he
asked: If [the legislature] tries to tighten this, would this
restrict the [exchange] of information within the company?
MR. LOHR responded that sharing of health information among
affiliates is prohibited in regulation; however, sharing of
health information for purposes of meeting the customers' needs
is not restricted. There are still some gaps that need to be
addressed, he said; for example, HIPAA, the DHHS regulations on
health, does not prohibit using that information for marketing
purposes. It needs to be addressed, because there is no
restriction. Some states have experimented with going too far
in restricting access; for example, in Hawaii last year there
was a major crisis when workers' compensation information wasn't
available to those that needed access, and there were criminal
penalties in effect for using the information for proper
business purposes, mainly for processing claims. This shut down
the workers' compensation market until a special session of the
legislature convened to address it and come up with a realistic
interim standard; it is possible to go overboard, he pointed
out. It has to be a workable system where the reason the
customer provides the information in the first place is able to
be satisfied.
CHAIR MURKOWSKI said a definition of "financial information" is
not included in the text of the bill. She reiterated that Ms.
Campbell had said earlier that anything on an application that
is not health-related would be considered financial
[information]. She said the information besides the health
information could be shared without affirmative consent for
those things strictly related to the health [aspect]. For
instance, just because it is related to medical [information],
there are parts of that that could be shared and parts that
couldn't.
Number 1999
MR. LOHR responded affirmatively. Upon being asked who decides
whether or not a person's gender is classified as financial or
health information, he deferred the question to Katie Campbell.
MS. CAMPBELL pointed out that there are very specific
definitions in the regulations on what constitutes health
information in the NAIC model regulation. She said the
definition of health information says:
...any information or data except age or gender,
whether oral or recorded in any form or medium created
by or derived from a health care provider or the
consumer that relates to ... past or future physical,
mental, [behavioral] health, or condition of the
individual, provision of health care, or payment for
the provision of health care.
CHAIR MURKOWSKI asked: And since that is in the NAIC model,
[the legislature] doesn't have to incorporate it here? Is it
incorporated somehow by reference?
MR. LOHR replied that the proposed statutory standard is
consistent with, but no less restrictive than, these
regulations; the health information definition couldn't
encompass less than the NAIC model regulation. Given the
confirmation of [Alaska's] authority to do so, [the division]
will issue this set of regulations as the starting point for a
proposed regulation in Alaska, and will then take public comment
on it.
Number 1843
REPRESENTATIVE HALCRO asked what some of the arguments are from
companies that want to protect the ability to share financial
information.
MR. LOHR deferred the question to the companies themselves;
however, he said the primary reason is that if the "other guy"
can do it and they can't, then they are at a competitive
disadvantage. It is a little scary what is on the Internet now
about any one of us, if someone is willing to pay something to
obtain it, and it is all done with unregulated sources. In
addition, if national securities firms and banks are able to
collect information and market it, and if insurance companies
can't by regulation, then that is a competitive disadvantage in
this new field where mergers, acquisitions, takeovers, and
intense competition are developing at a tremendous rate.
[Companies] don't want to be on an unlevel playing field in
terms of marketing information about a customer.
Number 1757
MR. LOHR went on to the third section, consumer protection. The
consumer protection provisions, he said, deal with the financial
institution's sales of insurance. This talks about banks and
related entities selling insurance to customers. There are
extensive consumer protection provisions for insurance companies
already in place for processing claims and so forth.
MR. LOHR said Sections 104 and 305 of GLBA provide 13 safe-
harbor provisions whereby, if states are operating within these
safe-harbor provisions, the consumer protection provisions will
be upheld and federal law will not be used to preempt them.
Federal banking regulators cannot preempt insurance regulators
at the state level if they are operating within one or more of
the 13 safe harbors. If they get beyond those safe-harbor
provisions, then federal bank regulators can preempt the state's
authority. He said he understands that this expands the
applicability of consumer protections beyond depository
institutions as provided in GLBA to all financial institutions
that may transact business in Alaska. There are four major
areas of protection related to licensing that include
misrepresentation, disclosure, "anti-tying," and the anti-
coercion provision.
Number 1688
MR. LOHR asked: Why should these be adopted for a financial
institution's sales of insurance? He answered that it is [the
provisions] would provide important protections for Alaskans who
may purchase insurance through a financial institution. If
insurance companies are subject to following consumer protection
rules, banks should be subject to them when selling insurance;
it is a "functional regulation" within the GLBA scheme of
regulation. It avoids possible federal preemption and
enforcement of these protections in Alaska. Again, it makes a
strong symbolic statement that state regulation can be effective
in protecting consumers, while also allowing the insurance
industry to remain competitive in a changing financial services
marketplace.
Number 1631
MR. LOHR said there are two other GLBA-related provisions that
are extremely important, so he went over them again. One
requires that a person with a felony conviction involving
dishonesty or breach of trust obtain consent from the director
before transacting insurance, which is required by the federal
violent crime control and protection Act, Title 18, Sections
10.33 and 10.44. The federal government basically said, "We're
not going to let anyone work in the business of insurance if
they've had a federal felony conviction dealing with dishonesty
or breach of trust." If a person wants to be in the insurance
business with one of those felonies, he or she must obtain
permission from the state director of insurance before doing so.
MR. LOHR said as he understands it, federal law cannot create
state authority directly, and it will take state discussion as
to whether that provision should be implemented. [The division]
is seeking explicit state authority to carry out that
requirement of federal law, to be able to make a decision on
convicted felons on a case-by-case basis after reviewing the
person's record. He said [the division] would be considering
the degree of rehabilitation, the sensitivity of the position
that the person would be occupying, and whether there are others
in that firm who are willing to monitor the person's activities.
When asked what [the division] currently does, Mr. Lohr stated
that [the division] does implement the federal provision;
however, there is some doubt that if it were challenged on it,
[the division] would have requisite state authority, so [the
division] is trying to "backpedal" to cover that aspect.
MR. LOHR said it would remove barriers in current law to allow
for electronic submission of fingerprints since the technology
exists and the hard copy approach creates substantial delays.
Number 1550
CHAIR MURKOWSKI pointed out that the bill carries a zero fiscal
note. She then asked if the division is capable of dealing with
electronic [fingerprint] submissions.
MR. LOHR expressed that [the division] is not set up with the
software; however, it is anticipated that because of the strong
national interest, "heavy lifting" of that will be done at the
national level, allowing a centralized approach toward
electronic processing. At this time, he said, there are only 14
states that use fingerprints as a basis for licensing insurance
applicants, and [the division] isn't sure how other [states]
manage, because [fingerprints] have proven to be an important
element in consumer protection in Alaska. [The division] has
kept some crooks out of the business of insurance by using them.
If there is a fiscal impact, he explained, he believed it would
be deserved, because there needs to be a nationally consistent
technological approach toward fingerprinting in order to have
all of the states submitting this information electronically to
a central repository.
CHAIR MURKOWSKI surmised that the cost of going through the
fingerprinting process is included in the [applicant's] fees.
MR. LOHR concurred.
Number 1478
MR. LOHR referred to a handout entitled "Recommended Amendments
to HB 184," which includes amendments stemming from the feedback
received [from various groups]. The first amendment [under
"Producer Licensing consistent with NAIC Model" in the handout]
addresses changes in producer licensing by adding an additional
exemption from licensure for employees of an insurer who perform
administrative, managerial, or clerical functions, that are only
indirectly related to the transaction of insurance. [The
division] is essentially not trying to require that customer
service representatives be licensed as agents when helping a
customer by updating information to the customer's file and so
forth.
Number 1387
MR. LOHR turned his attention to the second amendment under
"Producer Licensing," which read:
Allow payment of compensation without a license as
long as no transaction of insurance takes place.
MR. LOHR said it would allow payment of compensation without a
license as long as no transaction of insurance takes place. It
would help ensure that Alaska meets the reciprocity requirements
by giving the director the option to require surplus-line
brokers to maintain a bond. Currently the surplus-lines bond is
required of any licensee, and is a provision that would likely
be considered discriminatory against nonresidents as an
additional licensing requirement. If the division had the
authority to make a decision about requiring the bond or not, it
would enable [the division] to be truly reciprocal with other
states.
CHAIR MURKOWSKI asked for an example.
MS. BRUNETTE explained that for people who may be licensed on an
individual basis to represent an agency, there is the
opportunity to share a commission with the agency even though
the agency is not directly transacting business. When asked why
a person would want to share the compensation, Ms. Brunette
replied that it is typically [laid out] in the employment
arrangement. For example, as part of an employment arrangement,
the employer might say that the employee could share insurance
under the employer's name, but the employee would have to share
a commission with the employer for each piece of business sold.
REPRESENTATIVE ROKEBERG asked for verification that [the
division] only licenses people, not agencies.
Number 1285
MS. BRUNETTE said [the division] currently license both, but if
the agency has multiple people employed, it would need to obtain
the agency license. If it is a one-employee situation, it is an
optional provision allowing people to share commissions.
Another example, she said, would be a referral business where an
agent is put into a situation in which he or she can't place the
business directly, but may know someone who can, and the
business is referred on. The person receiving the business
could share the commission for the referral.
REPRESENTATIVE HAYES asked how this differs from a broker.
MS. BRUNETTE said [Alaska] calls people "producers," but there
is a distinction as to whether a person is an agent [or a
broker]. An agent is a person who actually represents the
insurance company and its products; a broker is a person who
represents a particular client for his or her needs.
Number 1196
REPRESENTATIVE HALCRO asked if the first [recommended amendment]
relates to an employee who answers the phone and is giving out
information about different product lines.
MR. BRUNETTE said that section specifically addresses salaried
employees.
MR. LOHR said he doesn't believe a receptionist could be in the
business of assisting an insurance transaction without a license
under law, so that person wouldn't be a candidate for this
shared arrangement. Typically, he said, it is people "higher on
the food chain" who want a "piece of the action" for what their
folks are doing. It is contemplated to do this kind of thing,
but wouldn't involve an unlicensed person involved in the
sharing.
Number 1085
MR. LOHR said he envisioned that the receptionist would be
updating existing customer information and so forth. The minute
he or she tries to match insurance needs with company products,
however, the person is going to be in trouble with [the
division] if the person doesn't possess a license.
MR. LOHR said under the consumer protections [from the
recommended amendments], the definition of financial
institutions is being clarified to exclude insurers and include
credit unions, which he said are two technical changes. There
is one redundant privacy provision in the consumer protection
section, which would already be covered by the privacy
provisions elsewhere in the bill, so [the division] would
purpose to eliminate it. It would make a technical correction
to the amendments made to the domestic violence anti-
discrimination provision to make it consistent with the
legislative intent at the time that the provision was adopted.
If [the division] didn't make this change, he thought it would
be a substantive change in the law; [the division] is not
intending a substantive change there, he said, but would rather
keep the intent of an agreement to obtain passage of domestic
violence provisions in insurance. He said it has to do with
where the word "only" appears in the sentence.
CHAIR MURKOWSKI referred to the definition of financial
institution. She asked if it mirrors the definition of
financial institution in HB 106 by adding in the credit unions
and excluding insurers.
MR. LOHR replied that [the division] would have to look at the
provision to be certain.
Number 0906
REPRESENTATIVE ROKEBERG asked what portions of the bill [the
legislature] needs to pass this year.
MR. LOHR responded that the privacy provision would be high on
the list, because July 1 is the deadline to have provisions in
effect. If it is not in effect by then, there is a risk of
federal preemption of some state authority with respect to
insurance. The second deadline, he said, is November 2002 for
[enactment] of the producer licensing provisions. This date
will be three years following the congressional enactment of
GLBA. If there are not 29 jurisdictions reciprocal by that
date, NARAB would be formed. The sooner Alaska can get in line
with where the industry is going, the better.
REPRESENTATIVE ROKEBERG asked if [the division] proposes
adopting the NAIC regulations by reference and having them
published under the Administrative Procedure Act (APA) before
July 1.
MR. LOHR answered affirmatively for the privacy provisions. He
said [the division] should have included the authority to go
ahead and begin a regulatory process pending consideration of
the bill as part of the recommended amendments.
Number 0824
REPRESENTATIVE ROKEBERG said [the committee] could adopt [the
provisions] by reference in statute, which he said is not a wise
thing to do.
CHAIR MURKOWSKI said she is trying to understand the need to
rush the privacy provision. [Federal regulators] have given a
short lead time on this, she emphasized.
MR. LOHR added that he didn't want to overstate the case, and he
didn't believe that if [Alaska's] privacy provisions were not in
effect then, [the division's] authority to enforce privacy
provisions would be preempted; rather, there is a comparison
done between [Alaska's] privacy regulations and those of the
federal agencies. If Alaska's are found to be less protective
of privacy, then some other preemptive provisions would go into
effect; however, he said it would take three years before
[Alaska] would be at risk for being preempted. The goal from
industry, he explained, has been to know what the rules are
going to be in advance and to hopefully have a consistent
national system. For example, [the division] has issued an
order clarifying that [Alaska] does not intend to enforce the
federal privacy rules at the state level before a date certain,
because [the division] wants to make it clear what privacy
provisions apply.
Number 0646
CHAIR MURKOWSKI mentioned that it specifically states in the
letter from the governor [dated March 9, 2001] that these need
to be adopted and enforced by July 1 or [Alaska] risks losing
the authority to enforce the state consumer protection
standards. [The state] doesn't want to risk losing the
authority to do any of this, but [the committee] needs to know
if this is "drop dead" date or if it is an "it would really be
nice if we were there by then" date.
MR. LOHR said he would clarify this in writing, but he believed
it to be some of both. The consumer protection provisions that
the [governor's] letter references are not the entire scheme of
privacy, and these are not all unfair-claim-practice
regulations; rather, they are a specific subset of that set out
in federal law, which [the division] will provide for the
[committee].
REPRESENTATIVE ROKEBERG said the committee might want to
consider a statutory sunset date if open-ended authority is
given to [the division] to undertake the project, for there to
be a review at an appropriate time.
Number 0535
JOHN GEORGE, Lobbyist, National Association of Independent
Insurers (NAII); American Family Life Assurance Company of
Columbus (AFLAC); and the American Council of Life Insurance
(ACLI), said the three companies have diverging opinions. "We"
have been working with the division and there is a lot of
agreement, but there are still some areas that "we" are working
on and finalizing. The first section of the bill, the licensing
section, and some of the amendments were suggestions by [NAII,
AFLAC, and ACLI]. In the privacy section, however, there is
great divergence, he said.
MR. GEORGE stated that there are some advantages to the consumer
and to the insurance company to disclosing financial
information, and there are some efficiencies, for example,
passing on information that results in a 2 percent interest rate
break on a credit card because a person is part of a preferred
group or getting the platinum card instead of the regular card
and so forth.
Number 0354
MR. GEORGE said direct deposit is another example, or if a
person wanted a direct billing to his or her bank account to pay
an insurance premium; those are the kinds of things that are
developing now, and there is a great opportunity to develop more
if [companies] can share minimal amounts of financial
information. He pointed out that buying group health insurance
is cheaper than buying individual [insurance], because it is
easier to market. Sharing information that is protected in
certain ways allows for some efficiencies and benefits.
MR. GEORGE explained that when buying an insurance company, the
buyer is going to want to know what the "book of business" is.
That information can't be disclosed, he explained, because only
some of these people have opted in. There are a lot of
different things that financial information is used for,
including reinsurance with affiliates and nonaffiliates. Right
now, information is being shared and one doesn't know about it,
but under GLBA every financial institution is going to have to
[disclose] that information, and the consumer gets to decide if
he or she wants to opt out. Under GLBA the customer will get a
notice saying what the information will be used for, and if
there is a change to what is going to be done with it, the
[company] has to notify the customer. The protection under
[GLBA] is greater than what is there today.
MR. GEORGE referred to the consumer protection section of the
bill. There has been much discussion between the ACLI and the
division about this, he expressed, and the preference would be
that it not be in [the bill]; however, the division has been
working with "us" to come up with language that works, and "we"
are not going to object to it. The NAIC is working on a model
with standardization as its ultimate goal.
Number 0018
CHAIR MURKOWSKI pointed out that Mr. George had said that there
was some divergence among his clients on the privacy issue;
however, the comments that he made were pretty much in favor of
the opt-out provision through GLBA.
TAPE 01-48, SIDE A
MR. GEORGE said the divergence is regarding whether this bill
ought to include medical health information or not. But
everyone is in line with the opt-out standard as opposed to an
opt in for financial information.
REPRESENTATIVE ROKEBERG asked Mr. George if he would prefer not
to have Section 44 and the other provision in the bill, to not
have it be GLBA-oriented or required.
MR. GEORGE clarified that he has three clients and he
[personally] doesn't have an opinion. The financial protections
are absolutely needed. One client of his has said from the
outset that it supports the NAIC model, which includes the
health and financial information regulations; other clients
would prefer to go with just the financial information. He said
he presents it to the committee as factual. Life insurance
companies, he explained, have a different philosophy than
property casualty; for example, property casualty deals with
medical or health information much differently than a life
insurance or a health insurance company would deal with health
information. The company adjusting workers' compensation claims
would like to be able to access health insurance information
from other sources so the claim can be properly adjusted to
avoid fraud. For instance, in the case of a person who has
filed 27 slip-and-fall claims against grocery stores, that
information would be useful, although health insurers really
have a different use for that information.
MR. GEORGE, upon being asked if his clients have objections to
the NAIC model regulations, replied that NAII supports the NAIC
model on privacy, and his other two clients would suggest a
different standard.
Number 0239
REPRESENTATIVE ROKEBERG said this is what troubles him about
adopting [regulation] by reference, because it basically gives
the division the authority to take up those regulations.
MR. GEORGE remarked that these are policy decisions for the
legislature to make.
REPRESENTATIVE ROKEBERG said it would be helpful if Mr. George
could glean out the problem areas in the regulations so the
committee could address them in statute and give direction to
the division.
Number 0338
MR. GEORGE responded that it is primarily in the health
information [section]. [His three clients] agree that there is
going to be something on financial information. There is a
National Conference of Insurance Legislators (NCIL) model, which
deals somewhat differently with health, he said; that is a
greater standard than GLBA, but less than the NAIC model.
Number 0420
SHELDON WINTERS, Lobbyist, State Farm Insurance, said State Farm
has some concerns with the bill, primarily with the privacy
section, and has been in contact with the division. [State
Farm] is hopeful it can be worked out, he said, and he would
like to reserve the opportunity to come back before the
legislature if that doesn't happen.
MR. WINTERS expounded that there are a couple of word changes
that seem technical, but which have some significant meaning in
the producer licensing section.
REPRESENTATIVE MEYER asked if the privacy question is too
restrictive or not restrictive enough.
Number 0549
MR. WINTERS said in a "nutshell" State Farm does not support the
NAIC model that is proposed in this bill. [State Farm] takes a
different look at how the state ought to enact the regulations
that are required by GLBA. In Section 44, instead of setting
the NAIC model as the floor, set GLBA as the floor because that
is what [the state] is trying to comply with by July 1, 2001.
As long as the division is given the authority from the
legislature to enact regulations that are consistent with, but
no less restrictive than GLBA, [the state] has accomplished "to
the extent of a drop-dead deadline, that problem."
MR. WINTERS said essentially that gives all interested parties
the ability to sit down in the regulatory process and express
concerns and work through that. It also gives the division the
opportunity to adopt the NAIC provision if it feels that it is
the requirement, but it also allows flexibility. The privacy
regulations are dynamic, and the NAIC is considering amendments
to its model. Mr. George had stated in his testimony to the
committee that there is an NCIL model, and State Farm's concern
is that if through this legislative process the NAIC model sets
this minimum requirement, it basically ties everybody's hands;
if it turns out that it is not a working model, next year the
only way to change it would be to come to the legislature again,
instead of working through the division.
Number 0688
CHAIR MURKOWSKI said she appreciates the comments and encourages
Mr. Winters to work with the division. She added that the
committee will not be moving the bill today, because there is
still a lot of work that has to be done. If the bill is still
being considered by the committee, she said, and if the input
[Mr. Winter] provides [to the division] isn't being considered,
she encourages him to come back and testify.
Number 0719
STEVE CONN, Executive Director, Alaska Public Interest Research
Group (AkPIRG), via teleconference, explained that the group is
a statewide consumer group that has been in the state for over
25 years. He said he would explain why every consumer group
including AkPIRG, both nationally and locally, believes that
opt-in should be required in situations involving disclosure of
financial or health information. Let the consumer make the
choice, he emphasized, because we all know from personal
experience from daily mailings that opt-out is often no choice
at all.
Number 0851
MR. CONN clarified that opt-in means sharing information not
only with third parties, but also within the institutional
family or affiliates. He said he hopes the new situation and
the new danger is understood. The Glass-Steagall Act was
repealed by GLBA when the stock market was a lot higher and
everyone was feeling flush. The reason the barriers were broken
down from the corporate side, he expressed, was quite simple.
The banks want to share the information with the insurance
companies, with brokerage firms, and with the small-loan and
often predatory loan companies funded by banks. They are all
one big family, and this is what they want to do. They want to
determine from whose customer base to proceed.
MR. CONN said it is in [the companies'] interest to merge and
share information, but it isn't in the consumers' interest.
Many consumers, particularly elderly ones, do not know that
insurance and brokerage products are not federally insured.
MR. CONN emphasized that Alaska's constitution has a privacy
section that is explicit. He thinks Alaskan consumers believe
that their privacy is not dead. [Alaskans] want the capability
to opt in, and if there is an important subject that must be
shared between entities, then certainly the corporation that is
taking the business can do [the consumer] the service of
reaching out and asking whether it can share information, either
health or financial information.
MR. CONN said he disagrees with those who suggest that there is
a small amount of financial information; in the insurance realm,
for example, he personally deals with his house, cars, and a
number of things. [The company] has a long-term [relationship]
with him, and he said he has a reliable insurance agent; he
doesn't want that agent sharing his information with a corporate
partner or to a third-party affiliate merely to increase
business. He said he doesn't think being strong in the area of
opting in will throw [Alaska] out of compliance. He said the
compliance has more to do with licensing and reciprocity.
Number 1008
MR. CONN said there is the constant theme song that if insurance
doesn't like what is happening, is it might go elsewhere, but he
doubts whether that is true. He looks to the legislature, he
emphasized, not to the Division of Insurance, which has been so
reluctant to share this legislation with the consumer
organizations until being asked by a committee. He asked the
lawmakers to stand up for the right to privacy, as was done with
the patients' bill of rights, and press for opt-in rather than
opt-out at every turn, both in HB 184 and in HB 106.
CHAIR MURKOWSKI indicated that the bill would be held over and
that she would be looking to Mr. Lohr for notice regarding when
the bill could be rescheduled.
Number 1115
REPRESENTATIVE HAYES asked if [the committee] is going to try to
get this bill through both chambers, or just parts of it.
CHAIR MURKOWSKI said [SB 138, the companion bill] was heard in
Senate Labor and Commerce Standing Committee in one hearing.
MR. LOHR agreed and said it will be up again tomorrow [in the
Senate] and he thought there might be a committee substitute
(CS) offered at that time. He said [the division] would be
happy to provide the text of the amendments as soon as they are
back from Mr. Ford. He mentioned that the consultation with
industry would hopefully happen on Friday.
[HB 184 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:15 p.m.
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