04/19/2005 01:30 PM House FINANCE

HOUSE BILL NO. 216                                                                                                            
                                                                                                                                
     An Act relating to insurance ratemaking and form                                                                           
     filing.                                                                                                                    
                                                                                                                                
JON BITTNER, STAFF, REPRESENTATIVE  TOM ANDERSON, pointed out                                                                   
that  under existing  law property/casualty  insurance  rates                                                                   
and forms are  subject to the insurance  commissioner's prior                                                                   
approval before they may be put  in place.  While maintaining                                                                   
the  insurance  commissioner's   authority  to  oversee  rate                                                                   
changes,  a  key component  of  the  bill  is creation  of  a                                                                   
percentage "flex  band."   HB 216 allows  an insurer  to make                                                                   
rate increases  and decreases  within  the flex band  without                                                                   
having   to  obtain   the  insurance   commissioner's   prior                                                                   
approval.   Rate changes  outside  of the flex  band must  be                                                                   
filed with the  insurance commissioner for review  before put                                                                   
into effect.                                                                                                                    
                                                                                                                                
Mr. Bittner highlighted the purpose of HB 216.                                                                                  
                                                                                                                                
   · Create an environment where insurers compete more                                                                          
        vigorously on rates and products offered to                                                                             
        consumers.                                                                                                              
   · Encourage insurers who are in the Alaska market to stay                                                                    
        and would attract new insurers to Alaska, which                                                                         
        would result in more competition.                                                                                       
   · The bill is in line with the national movement away                                                                        
        from strict government price controls toward a more                                                                     
        flexible and competitively oriented system for                                                                          
        regulation of insurance rates and forms.                                                                                
                                                                                                                                
Mr. Bittner  commented  that HB  216 had been  the result  of                                                                   
discussions  among   insurance  companies,  agents   and  the                                                                   
Director of Insurance  and their staff.  The  participants in                                                                   
the  effort used  the flex-rating  model law  adopted by  the                                                                   
National Conference  of Insurance Legislators (NCOIL)  as the                                                                   
starting point.   Some elements  of that model  were adopted.                                                                   
HB 216  is consistent  with NCOIL's  goal of modernizing  the                                                                   
state insurance regulation.                                                                                                     
                                                                                                                                
1:54:34 PM                                                                                                                    
                                                                                                                                
LINDA HALL,  DIRECTOR, DIVISION  OF INSURANCE, DEPARTMENT  OF                                                                   
COMMUNITY  AND ECONOMIC  DEVELOPMENT,  acknowledged that  the                                                                   
legislation was a combined effort.   Last year, when the bill                                                                   
was up  before the Legislature,  the Division  requested that                                                                   
it remain  in Committee  until more work  could be  done with                                                                   
the industry.  The bill is a compromise  of various positions                                                                   
while meeting  the needs of  the industry, the  Division, and                                                                   
consumer protection.  She urged support of the bill.                                                                            
                                                                                                                                
Ms.  Hall   identified  the  changes   in  the  bill.     The                                                                   
legislation  promotes flexibility  for  products coming  into                                                                   
the  market  more quickly.    It  provides the  Division  the                                                                   
protection necessary to have rates  meet standards.  Ms. Hall                                                                   
requested support for the bill,  as it will bring Alaska more                                                                   
in line with what is happening nationally.                                                                                      
                                                                                                                                
1:57:29 PM                                                                                                                    
                                                                                                                                
Representative Croft  asked the problem for  using a complete                                                                   
number.  Ms. Hall  responded that 10% was chosen  as it meets                                                                   
statutory provisions.   Discussion followed between  Ms. Hall                                                                   
and Representative  Croft regarding filing proceedings.   Ms.                                                                   
Hall pointed  out that worker's  compensation is  exempt from                                                                   
the rate  filing procedure.  She  felt it could be  too broad                                                                   
of a band to put in place without  other types of oversights.                                                                   
The change is a "big step".  Representative Croft agreed.                                                                       
                                                                                                                                
1:59:32 PM                                                                                                                    
                                                                                                                                
JOHN  GEORGE,  PROPERTY  CASUALTY  INSURANCE  ASSOCIATION  OF                                                                   
AMERICA, advised that the industry  has been working for many                                                                   
months  to  create  something  acceptable  and  supported  by                                                                   
everyone.     It  provides   public  safety  while   allowing                                                                   
insurance  companies to  compete.   He urged  support of  the                                                                   
legislation.                                                                                                                    
                                                                                                                                
2:00:47 PM                                                                                                                    
                                                                                                                                
Vice-Chair Stoltze  MOVED to  REPORT CS HB  216 (FIN)  out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS HB  216 (L&C)  was reported  out of  Committee with  a "do                                                                   
pass" and  with zero note #1  by the Department  of Commerce,                                                                   
Community and Economic Development.                                                                                             
                                                                                                                                
2:01:40 PM