Legislature(2003 - 2004)
05/12/2003 01:12 PM Senate JUD
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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
SENATE JUDICIARY STANDING COMMITTEE
May 12, 2003
1:12 p.m.
MEMBERS PRESENT
Senator Ralph Seekins, Chair
Senator Scott Ogan, Vice Chair
Senator Gene Therriault
Senator Johnny Ellis
Senator Hollis French
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 102(STA)
"An Act relating to concealed deadly weapons."
HEARD AND HELD
SENATE BILL NO. 198
"An Act relating to recovery of civil damages by a peace officer
or firefighter; and providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 13
"An Act prohibiting discrimination in insurance rates based on
credit rating or credit scoring; and providing for an effective
date."
MOVED CSSB 13(JUD) OUT OF COMMITTEE
PREVIOUS ACTION
HB 102 - No previous action to record.
SB 198 - See State Affairs minutes dated 5/8/03.
SB 13 - See Labor and Commerce minutes dated 4/8/03, 4/22/03 and
5/1/03.
WITNESS REGISTER
Mr. Mark Enoft
Staff to Representative Eric Croft
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Presented HB 102 for the sponsor
Mr. Brian Hove
Staff to Senator Ralph Seekins
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Presented SB 198 for the sponsor
Officer Mike Couturier
Anchorage Police Department
4501 S. Bragaw
Anchorage, AK 99508
POSITION STATEMENT: Supports SB 198
Mr. Will Aitchison
Anchorage Police Department Employees Association
Anchorage, AK
POSITION STATEMENT: Supports SB 198
Ms. Annette Skibinski
Staff to Senator John Cowdery
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Presented SB 13 for the sponsors
Senator Kim Elton
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Co-sponsor of SB 13
Mr. Jesse Kiehl
Staff to Senator Elton
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Answered questions about SB 13
Mr. Steve Conn
Director
Alaska Public Interest Research Group
PO Box 1690
Seward, AK 99664
POSITION STATEMENT: Commented on SB 13
Mr. Michael Lessmeier
State Farm Insurance
Juneau, AK 99801
POSITION STATEMENT: Commented that SB 13 has potential
Ms. Russina Sgoureva
Progressive Insurance
No address provided
POSITION STATEMENT: Company believes progress was made when
responding to the use of credit scoring
Mr. John George
National Assn. of Independent Insurers
Juneau, AK 99801
POSITION STATEMENT: Supports moving SB 13 from committee if
further negotiations take place
Ms. Linda Hall
Director
Division of Insurance
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supports CSSB 13(JUD) but expressed concern
about the use of credit scoring during the policy renewal
process
ACTION NARRATIVE
TAPE 03-44, SIDE A
CHAIR RALPH SEEKINS called the Senate Judiciary Standing
Committee meeting to order at 1:12 p.m. Senators Therriault and
Ogan and Chair Seekins were present. The first order of business
to come before the committee was HB 102.
CSHB 102(STA)-CONCEALED DEADLY WEAPONS
MR. MARK ENOFT, staff to Representative Croft, sponsor of HB
102, informed members that their packets contain a side-by-side
chart that compares HB 102 to Alaska's current concealed carry
law. HB 102 eliminates the distinction between a concealed
weapon and an open carry weapon. Under current Alaska law, no
permit is required for open carry weapons. HB 102 removes the
permit requirement to carry a concealed weapon but does not
change any other substantive requirements of the current law,
such as who can possess a concealed weapon and where a concealed
weapon can be carried. HB 102 eliminates some confusion about
who must tell a police officer when and where a concealed weapon
is carried. Under current law, a permit holder must notify a
peace officer that he or she is carrying a concealed weapon when
contacted by a peace officer. However, a person carrying a
concealed weapon on his or her own property, or for the purpose
of hunting, personal protection or another lawful activity, is
not required to notify a peace officer. HB 102 will require
everyone who is carrying a concealed weapon to notify a peace
officer. That change will make the law easier for the public to
understand and will provide a certain amount of confidence to
peace officers.
CHAIR SEEKINS clarified that CSHB 102(STA) will not repeal or
eliminate Alaska's concealed carry weapon program because to get
reciprocity in another state, a person would need an Alaska
permit.
MR. ENOFT agreed and said that having a permit makes it easier
to purchase a weapon because the permit holder has already
undergone a criminal background check.
CHAIR SEEKINS noted the buyer can bypass the required waiting
period because the background check was already completed.
[SENATOR FRENCH arrived.]
CHAIR SEEKINS noted that Mr. Judy of the NRA was available to
answer questions and that no one else had signed up to testify.
SENATOR THERRIAULT asked which version the committee was
discussing.
MR. ENOFT informed members that \Q was the most updated version
of HB 102.
SENATOR THERRIAULT moved CSHB 102(STA), version Q, from
committee with its accompanying fiscal notes.
SENATOR FRENCH objected to the motion and expressed concern that
the committee spent only five minutes discussing this
legislation and the subject deserves more time.
CHAIR SEEKINS said he read and likes the bill and assumes other
members have read the bill. He noted that no one signed up to
testify. He believes it would be an honor for Alaska to be the
second state that trusts its law-abiding citizens to carry
concealed weapons. He asked Senator French if he has specific
questions.
SENATOR THERRIAULT asked if this is the first hearing on CSHB
102(STA).
CHAIR SEEKINS said it is the first hearing in the Senate.
SENATOR THERRIAULT withdrew his motion to move CSHB 102(STA)
from committee to accommodate Senator French's concern.
SENATOR FRENCH said he asked his staff to contact various
members of the peace officers association to find out where the
law enforcement community stands on this legislation.
SENATOR OGAN commented that he has ridden with both Anchorage
Police Department officers and the Alaska State Troopers and
both told him, "the bad guys are all packing, you know, give the
good guys a chance to pack." He said he has not talked to them
about this particular bill, but they have acknowledged that,
"all of the bad guys have got guns and they have the good guys
outgunned in the field." He said for that reason he supports the
legislation.
CHAIR SEEKINS said CSHB 102(STA) has been properly noticed and
that the police groups across the state have been watching both
concealed carry weapons bills before the Legislature. He said
since no one signed up to testify against the bill today, he is
assuming no one opposes it.
SENATOR THERRIAULT asked Mr. Enoft if he received feedback from
law enforcement agencies in the state.
MR. ENOFT told members that Representative Croft submitted the
bill to Commissioner Tandeske of the Department of Public Safety
and to Chief Monegan of the Anchorage Police Department.
Commissioner Tandeske said he had not formulated an opinion on
the legislation and that this issue was not one he was willing
to fight. The Anchorage Police Department has not responded.
SENATOR FRENCH asked that CSHB 102(STA) be held in committee
until the next day to await responses from the Anchorage Police
Department.
CHAIR SEEKINS announced that CSHB 102(STA) would be held in
committee.
SB 198-DAMAGES RECOVERED BY POLICE/FIREFIGHTER
MR. BRIAN HOVE, staff to Senator Ralph Seekins, sponsor of SB
198, gave the following explanation of the bill.
SB 198 revises the common law known as the
'Firefighter's Rule'. This rule precludes firefighters
and peace officers from recovering civil damages for
injuries caused by any negligent act inflicted while
on duty. The 'Firefighter's Rule' does not distinguish
between negligent acts requiring the firefighters' or
peace officers' response from negligent acts that are
unrelated to the reason the firefighter or peace
officer was required to respond.
For example, as currently employed, the 'Firefighters
Rule' precludes a police officer from suing for
damages for injuries suffered as a result of being
struck by a drunk driver during the course of
transporting a prisoner to the courthouse. This,
despite the fact that the negligent act, in this case
the drunk driving, is unrelated to the duty the
officer was performing at the time. SB 198 corrects
this incongruity. Yet, on the other hand, this bill
does nothing to change the case where the police
officer is injured during the course of a pursuit of
the drunk driver. This is considered a foreseeable
risk associated with the profession and, accordingly,
well within that which the 'Firefighter's Rule' should
cover.
Therefore, SB 198 makes a distinction between
negligence that is related to the reason the
firefighter or peace officer is responding and
negligence that is unrelated to the reason the
firefighter or peace officer is responding. In a
nutshell, that's what this bill accomplishes.
SENATOR FRENCH asked if other states have similar laws.
MR. HOVE said some do, and testifiers were available to speak to
which states do.
SENATOR OGAN read from page 2 of a handout entitled Peace
Officer's Civil Liability and Internal Affairs Newsletter about
the independent causation section of the Firefighters' Rule:
Thus, while a peace officer may not recover civil
damages for injuries caused by the danger that
necessitates the officer's presence, the officer may
recover civil damages where the cause of the officer's
injury is unrelated to, that is, independent of, the
reason for the officer's presence at the location
where the injury occurred....
The Firefighter's Rule does not bar all lawsuits
against persons who intentionally or negligently
injure peace officers.
He questioned why SB 198 is necessary if, according to the
experts, there is recourse in the Firefighter's Rule.
CHAIR SEEKINS said the Alaska court has ruled the exact
opposite. He noted that Officer Couturier could provide an
example.
OFFICER MIKE COUTURIER, Vice President of the Anchorage Police
Department Employees' Association, told members he would be
covering the police officers' view of this legislation and that
Mr. Aitchison would address any legal questions. He said while
an Anchorage police officer was going from one call of service
to another in late winter of 2001, he was hit at an intersection
by an intoxicated driver who was driving well over the speed
limit. The police officer's neck was broken and he sustained
numerous other injuries that required ten months of recovery.
Although the police officer worked with both insurance
companies, those situations end up costing the taxpayers and the
municipality. The officer received some compensation but not
nearly the same amount another citizen would have requested in a
civil suit. He said the Firefighter's Rule hinders police
officers from civil litigation against a person who has done
harm through negligence or an intentional act, even when that
act has nothing to do with a call for service. The Anchorage
Police Department Employees' Association would like to see SB
198 enacted as it partially restores police officers' and all
first responders' abilities as citizens to hold negligent or
intentionally harmful persons accountable for their acts. He
said first responders accept certain job risks but feel they
should have the same rights as any other citizen to seek
restitution for damages if something happens to them that is
totally unrelated to their jobs. He said these cases are not
common and, to some degree, SB 198 might save municipalities
medical costs, property damage costs and wages.
MR. WILL AITCHISON, attorney for the Anchorage Police Department
Employees' Association, said he has tracked the evolution of the
Firefighters' Rule for over 15 years. It is a rule of common law
that was not created by legislatures but has been adopted on a
state-by-state basis. Not all states have addressed the issue of
whether the Firefighters' Rule should be adopted; about 35
states have. The trend now is clearly away from adopting the
Firefighters' Rule. In the last ten years, states such as New
York, Florida, New Jersey and Minnesota have statutorily
repealed or substantially modified the Firefighters' Rule.
Courts in other states, such as Oregon and Colorado, have
refused to adopt it.
MR. AITCHISON said last year, the Alaska Supreme Court, when
ruling on a case that involved the police chief of Dillingham,
adopted the Firefighters' Rule for the first time. The problem
with the Alaska Supreme Court's decision is that it does not
identify what version of the Firefighters' Rule it adopted and
as many as eight different versions of the rule exist. SB 198
fixes the Firefighters' Rule into law with the version in
existence in California. It is the majority statement of the
rule where it exists: it bars lawsuits when the underlying
negligence is the reason the first responder was called to the
scene; it does not bar lawsuits when the underlying negligence
is from something else. He explained that the description of the
Firefighters' Rule that Senator Ogan read would not be
applicable in the Illinois or Missouri version of the law. He
repeated it is unclear from the Alaska Supreme Court decision
which version it adopted.
SENATOR THERRIAULT asked if a person who is injured while
responding to an accident, when responding is part of their job
duty, would be covered by workers' compensation.
MR. AITCHISON said that is correct.
SENATOR THERRIAULT commented that workers' compensation would
cover lost wages and medical costs. He asked if the insurance
company has the right to go after the drunk driver to recoup the
costs.
MR. AITCHISON said no; according to his understanding of the
law, the insurance company or municipality only has the same
rights that the police officer or firefighter has to pursue that
claim. That is why employers and employees are standing together
against the Firefighters' Rule. That rule transfers the risk of
negligent behavior from the person who acts negligently to the
public and to the injured party.
CHAIR SEEKINS closed public testimony on SB 198.
SENATOR OGAN said after hearing the testimony, his concerns
about the measure have been mitigated.
SENATOR THERRIAULT asked Chair Seekins if the insurance company
can "go after the bad actor."
CHAIR SEEKINS said from his research, he believes it is very
difficult to do so, if not impossible. He said this legislation
could have a very positive fiscal note because municipalities
would be able to recover costs. He pointed out that he looked
into codifying this common law because he believes it is good
public policy to define how that common law is to be interpreted
in this state. This would allow the employer and employee to
subrogate against the person who caused the damage.
SENATOR FRENCH said he believes this legislation is a fair idea
for peace officers and the people currently bearing the cost of
these accidents. He said he is intrigued by Senator Therriault's
inquiry about the interplay between the insurance industry and
who is bearing the cost now. He asked that he be given the
opportunity to read the Alaska Supreme Court opinion on Moody v.
Great Western before action is taken on the bill.
SENATOR THERRIAULT asked for an explanation of the language on
line 6, page 1, "or the personal representative of the peace
officer".
CHAIR SEEKINS said a personal representative would be involved
only when a peace officer died.
SENATOR THERRIAULT said if he was hit by a drunk driver while
driving to work, and his insurance covered his medical bills and
lost wages, his insurance company would then go after the drunk
driver to get paid. He asked if a peace officer would be treated
differently under the Alaska Supreme Court's interpretation and
whether an insurance company would be barred from subrogating
against the drunk driver's insurance company.
MR. AITCHISON said the problem with an insurance company
recovering for damages is that the right to subrogation only
exists when the injured person had the right to recover lost
wages and medical expenses. The insurance company would have no
better claim than the police officer or firefighter. Therefore,
if the claim is barred by the Firefighters' Rule, the insurance
company would have no right to proceed.
CHAIR SEEKINS noted that Senator Ellis had joined the meeting.
SENATOR THERRIAULT asked if firefighters or peace officers are
singled out for special treatment that is detrimental to them.
MR. AITCHISON said they are. They have fewer rights to bring
these sorts of claims than any other class of employees.
CHAIR SEEKINS informed members that he would ask counsel to
research the question of subrogation and would schedule the bill
at a later date.
SB 13-INSURANCE DISCRIMINATION BY CREDIT RATING
MS. ANNETTE SKIBINSKI, staff to Senator Cowdery, co-sponsor of
SB 13, told members this legislation originally banned insurance
companies from using credit histories to determine insurance
rates when underwriting policies. It has evolved, after hours of
work, into a seven-page bill that:
· allows credit information to be used for underwriting and
rate setting for personal insurance, not for commercial
insurance, on new policies only
· allows the insurance industry 60 days to cancel an
insurance policy for bad credit or a poor driving record
· bans the use of credit information from being used to
determine rates or underwriting when a policy is renewed
She repeated that the use of credit scoring is allowed for new
policies only but it cannot be the sole factor used to rate or
underwrite a policy. It must be combined with other substantive
factors, such as the customer's driving record, payment history,
and claims submitted. It will allow the Division of Insurance to
look at the data models used by insurance companies for scoring
to make sure that customers are not discriminated against. The
data models are protected as trade secrets and are not available
to the public. The Division of Insurance will provide the public
with a general description of the scoring models to foster
consumer awareness.
MS. SKIBINSKI said that some of the factors that an insurance
company cannot consider when underwriting new policies are
medical collections, adverse credit, lack of credit, absence of
credit, and particular types of credit cards. An insurance
company must inform a customer if it takes an adverse action
against that customer and it must provide information on how to
correct the problem. In addition, the bill requires the
establishment of a dispute resolution process. She said the bill
is a compromise between Senator Cowdery, the insurance industry,
and the Division of Insurance.
SENATOR THERRIAULT moved to adopt Version S as the working
document of the committee.
CHAIR SEEKINS announced that without objection, the motion
carried.
SENATOR THERRIAULT asked if a person has been a good customer
and qualifies for a policy, an insurance company cannot use
credit scoring when that policy comes up for renewal.
MS. SKIBINSKI said that is correct, however, the insurance
company always has the right to cancel a policy for other
reasons, such as claims, accidents, non-payment, or a DUI.
SENATOR OGAN noted that insurance companies give students with
good grades a reduced rate based on the philosophy that those
students use good judgment. He asked if using credit history
when setting rates is based on the same reasoning. He pointed
out that some people have credit problems because of illness or
circumstances beyond their control.
MS. SKIBINSKI said she assumes the philosophy behind good credit
is the same as good grades yet sometimes life events are beyond
one's control. She said that Senator Cowdery has received over
1,000 e-mails from people who have been affected. Some of those
people never had any traffic violations but had credit problems
due to divorce or for other reasons and their rates jumped 400
percent.
SENATOR THERRIAULT asked how different types of credit cards are
viewed negatively.
MS. SKIBINSKI said the perfect credit model would be of a person
who owned a home, had one or two car payments, and had a VISA or
Mastercard, which was used to 30 percent maximum. She said some
cards, such as an American Express card with no limit, are
considered to be risky. Entertainment cards, such as a Discover
card or Nordstrom credit card, are also considered risky. She
said that information is confidential so it has been difficult
to get from insurance companies.
SENATOR COWDERY said during the interim he found out that a
person may have a credit card limit of $10,000 but spent and
paid an average of $2,000 each month. However, during one month,
the person spent $2,800. The credit report does not show the
available credit limit of $10,000; it appears that the high
spending month was the limit. Also, three basic credit agencies
do credit reports and there is a good chance that each of those
agencies give the same person a different rating. He said the
process is very subjective, which is why the bill allows the
Director of the Division of Insurance to review the data models.
CHAIR SEEKINS asked whether the model would work against a
person who uses a credit card to pay all bills, for the purpose
of gaining mileage, but pays those bills in a timely fashion.
TAPE 03-44, SIDE B
MS. SKIBINSKI said that some banks and finance companies view
paying one's card off every month negatively. She said that was
not addressed in the legislation. She then added that, regarding
Senator Cowdery's statement about a person's full line of
credit, the bill says a person's total line of credit cannot be
considered, but the debt ratio can be considered.
CHAIR SEEKINS asked if a person pays off a $2,000 bill each
month even though that person's credit limit is $10,000, that
person's debt ratio would be 2:10.
MS. SKIBINSKI said she does not believe so; she believes that
person would show up as having paid.
CHAIR SEEKINS said he needed to have an American Express card to
get a COSTCO card and asked whether that would work against him.
SENATOR KIM ELTON, co-sponsor of SB 13, said that unfortunately
many of the committee members' questions cannot be answered. He
explained that this bill opens up a "black box" known as the
credit score, but the formula is unknown because it is a trade
secret. The good thing about SB 13 is that it mandates that the
credit scoring formula be filed with the Division of Insurance
to enable division employees to find answers to the questions
and to determine whether any discrimination is taking place.
SENATOR FRENCH thanked Senators Cowdery, Elton and staff for
introducing this legislation. He said he was interested in an
outright ban because he believes one could make the case that it
was the advent of credit scoring that caused the insurance
industry to begin to lose money in Alaska. The industry has
complained that it began losing money three years ago, a year or
two after it began to use credit scoring.
SENATOR ELTON said it would be unfair to characterize the bill
as one that everyone is happy with. He and Senator Cowdery have
had extensive discussions with members of the insurance
industry. He said all sides have been uncomfortable with some of
the compromises made.
SENATOR THERRIAULT asked where the provision that requires
insurance companies to provide data models to the Division of
Insurance is located in the bill.
MR. JESSE KIEHL, staff to Senator Elton, referred to Section 3
on page 6, line 25. It requires insurers to file their credit
scoring models and any computer algorithms or methods used to
incorporate credit history with the Division of Insurance.
CHAIR SEEKINS referred to page 7, line 11, which says, "the
Director of Insurance shall make available to the public a
general description of insurance scoring models" and asked if
that description will be of each company's model or a general
description of the elements of all models.
MR. KIEHL said that was another issue of compromise. The
Division of Insurance has a two-part mission statement: to
ensure a healthy industry and to protect consumers. This
provision would satisfy both in that it would permit the
division to educate consumers about how their credit history
impacts and affects their insurance. At the same time, it would
protect the industry's substantial investment in these credit
scoring models.
CHAIR SEEKINS took public testimony.
2:10 p.m.
MR. STEVE CONN, Director of the Alaska Public Interest Research
Group (AkPIRG), told members he would leave it to them to decide
whether this legislation protects the consumer. He said the
issue of whether using credit scores as an analytical device to
adequately predict a person's driving record or potential to
file claims is secondary because the credit data that flows into
the three credit reporting agencies is filled with errors. He
referred to a study done by Fair Isaac Corporation, the
developer of reporting software, that pointed out that reports
from the three agencies show extreme variations in the credit
scores; the average variation was 43 percent. That kind of
variation could affect a person's mortgage rates or insurance
premium drastically. He said there is no way to tell whether
credit scores are good devices to use because they are flawed
and unpredictable. Legislators must determine to what degree
this device will impact Alaskans prematurely. He is happy to
hear that a credit score will not be used to establish a
relationship, but it will affect new customers. He is also glad
to see that the bill contains a dispute resolution provision but
it seems to diminish the role and autonomy of local insurance
agents with whom people have been dealing for decades. The agent
will become less relevant in addressing problems, and the
customer will have to use an abstract dispute settlement
process. He said the fundamental issue is that until the data
introduced into credit reporting systems is capable of handling
corrections and certainty, Alaskan consumers should be protected
from the use of credit scores as much as possible.
MR. MICHAEL LESSMEIER, representing State Farm Insurance, told
members that Ms. Skibinksi described the history of SB 13 well.
A tremendous amount of time was spent to reach a compromise to
allow the use of what the industry believes is a valuable tool
to predict loss and to provide consumer protections that address
the kinds of concerns raised by Mr. Conn. He said that SB 13 is
not a perfect bill but it is a very good start. In response to
one of Mr. Conn's concerns, he said the bill contains a
provision for a person who is denied insurance at the outset or
whose policy is cancelled within the 60-day window that requires
the insurer to re-underwrite that customer if the customer
certifies that his or her credit history is disputed and
initiates the dispute process. The bill contains other
provisions to address disputed credit information and is very
consumer-protection oriented.
MR. LESSMEIER said that State Farm Insurance still takes issue
with whether this tool should be used to re-underwrite or re-
write [page 3, line 4, (d)(1)]. As written, an insurer could not
fail to renew a policy based on a consumer's credit history or
insurance score. He believes the industry is okay with failing
to renew on that basis, but it would like to preserve the
ability to re-underwrite or re-rate. That affects consumers in
several ways. For example, for a consumer who has had an
accident, an insurer would prefer to use the best tools it has
for predicting future loss to determine whether that consumer
should be in a standard or preferred company and what the
appropriate rate should be. When that flexibility is removed, an
insurer cannot use the predictive power of the tool. He said
State Farm could not give a good credit discount to a consumer
under this bill. State Farm was not able to work that out in the
discussions about this bill.
MR. LESSMEIER said State Farm is also concerned about the
language on page 3, lines 10 through 12, which pertains to the
absence of credit history. State Farm had previously used a
qualifier, "unless otherwise approved by the Director of the
Division of Insurance," to deal with the absence of credit in
the rating aspect, as well as the use of particular types of
credit cards. He said that is a strong predictive factor in both
a positive and negative way. State Farm's final concern is with
the effective dates of the bill. He said the Division of
Insurance played an important role in the compromise that was
reached. One compromise required that insurers file scoring
models. State Farm has never opposed that filing as long as the
information is kept confidential. However, the bill requires
filing by June 1, 2003, which is unrealistic. He believes the
intent during the discussions was that the guarantee of
confidentiality would go into effect immediately so that various
insurers could file as soon as able but it wasn't to require
them to do so by June 1.
2:20 p.m.
CHAIR SEEKINS said he could not predict that an exclusive
marketing deal between Costco and American Express would
negatively affect his insurance rate.
MR. LESSMEIER said he does not believe it did.
CHAIR SEEKINS said he hopes not, but heard testimony that led
him to believe it did and he cannot peek into the "black box."
He said he knows of exclusive marketing deals that, if they
affect insurance rates in Alaska, would not be fair.
MR. LESSMEIER said he believes the Director of the Division of
Insurance would have the opportunity to look at and prohibit
that.
CHAIR SEEKINS said that Alaska has a mandatory auto insurance
law so the Legislature has an affirmative responsibility to make
sure that people are not unnecessarily discriminated against. He
said having been in the car business, [Ford] rates people on the
predictability to pay and is sometimes wrong. He expressed
concern that a person could be forced to drive uninsured because
the state took a position that allows the use of credit scoring
that affects that person very negatively.
MR. LESSMEIER said he understands that concern and said the
insurance industry opposed the adoption of the mandatory
insurance law in Alaska 20 years ago, one reason being that
people who cannot afford to buy insurance will not do so. The
insurance industry was then challenged with creating a system in
which people could protect themselves from uninsured motorists.
Another challenge has been to make insurance products
affordable. State Farm believes it can predict loss by using
credit scoring as a tool. That tool helps State Farm to achieve
fairness in the system. He said that for every person that may
have to pay more because of credit scoring, many others pay
less.
CHAIR SEEKINS said he is looking for what is fair and affordable
for everyone.
MS. RUSSINA SGOUREVA, Progressive Insurance, said she was
available to answer questions and that she worked with other
industry members to help draft this legislation. Although the
bill contains provisions that will require Progressive to modify
its current marketing in Alaska, it believes that all involved
made progress when responding to the use of credit scoring in
Alaska.
MR. JOHN GEORGE, representing National Association of
Independent Insurers (NAII), said that NAII was also involved in
the negotiations and made some concessions. He said that NAII
does not object to moving the bill out of committee with the
understanding that further negotiations will take place. He
stated the insurance industry would only use credit scoring if
it believed that it truly was predictive. It wants to charge an
appropriate rate to all customers.
SENATOR FRENCH asked Mr. George what sections of the bill he
believes will be renegotiated after it moves from committee.
MR. GEORGE said the biggest issues that remain are re-rating and
re-underwriting using credit scoring, the use of specific types
of credit cards and the lack of a credit card. He said the lack
of a credit card is a more important predictor than which credit
card a person has. He added that obtaining a credit score within
60 days of writing a policy might be problematic for some of the
direct writers who review someone's credit and then mail a
solicitation. He said the issues are not critical but are the
fine details of a negotiation.
CHAIR SEEKINS asked Mr. George if he is speaking for the
industry when he said he would prefer that the committee take
action on the bill in its current form at this time.
MR. GEORGE said he believes everyone he has spoken to would like
to see legislation this year. He stated:
I think the sponsors would like to see a bill, the
insurance industry would like to see a bill. We may
not agree on what that bill is but I think it's
important that we move forward and if it takes moving
it out of this committee to make sure that a bill
happens this year, then I think we could support that.
If we can fix it here and take another two days and it
moves and can still pass, that would be fine too.
SENATOR COWDERY asked what specific credit card is bad for a
credit score.
MR. GEORGE said he cannot answer that. The more important issue
would be whether or not a person has a credit card. He said he
does not believe there is any dispute with the mainstream credit
cards, such as Mastercard, Visa, or American Express. He said he
has not heard that having a store-brand credit card is a major
problem.
SENATOR THERRIAULT said that although an American Express card
has no limit, it is more difficult to get. He questioned what a
specific type of card might say about a person.
MR. GEORGE said that question would be more appropriate for
Isaac Corporation. He said he asked about a Nordstrom credit
card and was told the issue is how a person manages the credit.
CHAIR SEEKINS said that some credit cards are fully
collateralized, which is an indication of a bad credit risk to
begin with. He said it is not the card that is raising the risk,
it is the reason a person has to have that type of card.
SENATOR OGAN asked if Chair Seekins was referring to a debit
card.
CHAIR SEEKINS said he was referring to a card that is backed by
collateral. He noted that many people use credit cards as a
matter of convenience, rather than because they need the credit.
With no one else wishing to testify, he closed public testimony
and announced a three-minute at-ease. Upon reconvening, he asked
Ms. Hall to testify.
MS. LINDA HALL, Director of the Division of Insurance, echoed
many of the previous speakers' statements, one being that a
tremendous amount of work has gone into the compromise committee
substitute. She said all involved parties left the Senate Labor
and Commerce Committee meeting with Senator Seekins' concurrence
that the participants would work on a compromise bill. She said
the bill contains some very good language.
MS. HALL said when she testified at the Senate Labor and
Commerce Committee hearing, she asked for five things, the first
being the filing of the underwriting rating models. This
committee substitute allows the division to look at the scoring
model to make sure it is not unfairly discriminatory and that it
meets the guidelines set out in the legislation. Her second
request was for more consumer protections. She thinks the
committee substitute provides a tremendous amount of consumer
protection. She would categorize the list of prohibitions in
this legislation as among the most stringent in the country. The
consumer protections in the bill address many of the issues that
have come before committee members. This legislation also
contains a dispute resolution process that is more readily
accessible than merely filing a dispute resolution under the
Fair Credit Reporting Act, which places some burdens on the
carriers to help the consumer by requiring that clear reasons be
given for an adverse action. Her fourth request was that credit
scoring not be used as a sole determining factor; other
substantive factors need to be considered. That language is used
by many other states.
MS. HALL said she is still somewhat uncomfortable with the
language on page 3, line 5. Her concern is that if a policy is
not underwritten or rated at renewal, there is the potential to
not allow a person's rates to increase or to be put in a
different tier. If that provision is adopted, there is the
potential to use a whole new set of underwriting criteria for
renewals, which the division will not have access to. Those are
not currently filed. She said all parties involved in this
compromise bill have had lengthy discussions and made
concessions.
SENATOR FRENCH asked Ms. Hall to articulate what criteria might
be used during the renewal process that might not be good.
MS. HALL said she does not want to say they would not be good;
they would be the same criteria used now. Those criteria might
be use of prior insurance, use of the limits purchased that she
hopes has to do with one's driving record; and various types of
underwriting and rating factors. She said the division currently
has rating factors on file but it does not have underwriting
factors on file. In the insurance industry today, underwriting
and rating have become blended. Underwriting factors tend to be
utilized to place consumers in tiers. Historically, insurance
companies had multiple companies: a preferred company, a middle-
ground company, and a non-standard company. Company placement is
considered to be an underwriting factor. However, as technology
advances, computers do more underwriting and less human
involvement occurs. Various factors affect the tiers as they are
put together. That is one reason the division has emphasized the
need to be able to look at both underwriting and rating factors
in this bill.
SENATOR THERRIAULT asked if the division supports the compromise
bill before the committee.
MS. HALL said it does.
CHAIR SEEKINS called for discussion among members.
TAPE 03-45, SIDE A
SENATOR FRENCH said he believes the bill is a step in the right
direction and is better than the protections that exist now,
which are none. He said he intends to watch this legislation as
it moves through the other body as he thinks the real
battleground will be the maintenance of the ban on credit
scoring at renewal.
SENATOR ELLIS gave a "thumbs up" to Senators Cowdery and Elton
for the work they did on this legislation.
CHAIR SEEKINS said he is glad the Division of Insurance will be
actively involved in monitoring what happens as this legislation
goes forward. He said he hopes that other substantive factors,
meaning at least 25 percent or more, will come into play. He is
also eager that people be educated on what factors affect their
insurance rates.
SENATOR ELLIS moved and asked unanimous consent that CSSB
13(JUD) move to the next committee of referral with its
accompanying fiscal notes.
CHAIR SEEKINS noted that without objection, the motion carried.
There being no further business to come before the committee, he
adjourned the meeting at 2:51 p.m.
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