Legislature(2001 - 2002)
04/12/2001 01:37 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 138-INSURANCE CODE AMENDMENTS
CHAIRMAN RANDY PHILLIPS called the Senate Labor & Commerce
Committee meeting to order at 1:37 pm and announced SB 138 to be up
for consideration.
SENATOR LEMAN moved to adopt the committee substitute to SB 138,
Ford 4/6/01/F. There were no objections and it was so ordered.
MR. BOB LOHR, Director, Division of Insurance, said he was
available to answer questions.
CHAIRMAN PHILLIPS asked if he saw any deficiency other than the
public policy question of opt in/out in the F version.
MR. LOHR answered no, other than that one issue, the rest of the
issues were addressed quite nicely.
MR. JOHN GEORGE, American Council of Life Insurers and National
Association of Independent Insurers, said the redraft of the bill
was fine and all his clients would support it.
MR. STEVE CONN, Executive Director, Alaska Public Interest Research
Group, said the concern of consumer organizations over the opt
in/out policy is that it flows from the fact that the Gramm-Leach-
Bliley Act did away with the walls established during the
depression days between the financial institutions, like the
brokerage houses, insurance companies, small loan companies and
banks. "It allows them to merge."
With that merger comes the opportunity for these
financial institutions to share important and privileged
information and, to be quite blunt, many of them desire
to do so. That is to take good customers to the bank and
share them with their own or a third party who is an
insurance company and vice versa. So, the consumer who
gives information for one discrete purpose may find that
information being shared all over. Of course, here in
Alaska with our constitutional right to privacy, we have
a particular and long standing interest in privacy of
information.
Many of the institutions suggest that opt out is
satisfactory, but the reality of that is very much
something different. Many of us have received the
documents stuffed within statements from banks and other
companies lately, because most of this is beginning at
the federal level. It is hard as the devil to find the
information necessary to figure out when and how and on
what basis to opt out. Most people just see this as
another envelope stuffer and pitch it out. This lay
opinion has now been underscored by an academic study.
Mark Hocheiser, PhD. has conducted a study and subjected
many of these notices to the various readability
standards that have been widely established and has found
out that most of these documents according to the reading
scores are virtually unreadable. To most, especially
people with English as a second language and the elderly,
have a difficult time reading them. The easiest way to
deal with this, and the way that certainly comports well
with our own concern for privacy in this state and to
make use of the opportunity granted at the federal level
for each state to make this choice, is to have
individuals opt in and not opt out. That is to say, if
the banks think it's in your best interest or the
insurance company to share this information with someone
in its corporate family or with someone beyond its
corporate family, let it reach out to the consumer and
offer the opportunity and let that consumer deliberate
and agree to opt in on the sharing of information.
Unless, as one lobbyist for an insurance company said
another day, we believe privacy is dead, in which case we
have nothing to discuss about this. We're sort of tilting
at windmills. I encourage the committee to pass forward a
bill that makes opt in and not opt out the choice,
because at the end of the day, opt out is no choice,
whatsoever.
MR. GEORGE responded:
There's two important points. One is that the federal
government has already regulated financial institutions
that are regulated under the federal government under
Gramm-Leach-Bliley. So certain institutions already have
the opt out provision. By changing that standard for
insurance companies, you are now creating a different set
of rules for insurance companies to play than the
national banks, the stock brokerages, and others. So
automatically, the insurance companies are placed at a
disadvantage. We can't change the federal standard for
those federally regulated institutions. We can only deal
with the state.
We believe that there are certain advantages to the
sharing of information, not only from the financial
institution side, but from the consumer side. For
instance, rather than an institution mailing a mass
mailing to everyone in America, they can target markets
of people who are more likely interested in their
product. As the prior witness stated, we all get a lot of
junk mail and we toss it, because it's totally unrelated
to us, but once in a while you find something that's
really hits your target. Something you are interested in.
If we could focus more of these mailings on things you
are interested in, I think that's an advantage to the
consumer. It does improve competition among the players
if they can get access to the information and, therefore,
target the consumers. It creates some efficiencies and
those can be passed on as cost savings. It's certainly
cheaper to mail to a target group than to everybody in
America. Lastly, the standard that is going to be set
across the country for insurance companies is going to be
opt out. I'm confident that will be the case. Alaska will
be different. That, therefore, makes it more expensive
for insurance companies to operate for that limited
purpose in the state of Alaska and, therefore, may not
provide the opportunities to people in Alaska to avail
themselves of these new and creative products.
MR. GOERGE said that the efficiencies technology has brought to
this industry will be lost and the cost will be passed on to the
consumer. "We have done studies and consumers are more protective
of their time than their privacy on these types of issues."
SENATOR DAVIS moved to delete all materials on page 25, line 31 -
page 26, line 10 (the opt out provision).
MS. SUZANNE HANCOCK, Staff to Alan Austerman, explained that the
amendment gives people the opportunity to opt in, if they choose,
but does not put the onus on the individual to seek out a way of
removing themselves from these lists.
CHAIRMANT PHILLIPS called for the vote. SENATORS LEMAN and PHILLIPS
voted nay; SENATOR DAVIS voted yeah; and the motion failed by a
vote of 2 to 1.
SENATOR LEMAN moved to pass CSSB 138 (L&C) from committee with
individual recommendations. There were no objections and it was so
ordered.
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