03/14/1996 03:31 PM Senate STA

                                                                               
                    SB 231 TITLE INSURANCE                                   
                                                                               
 Number 385                                                                    
                                                                               
 CHAIRMAN SHARP brought up SB 231 as the next item of business                 
 before the Senate State Affairs Committee.  He called Senator                 
 Rieger to testify.                                                            
                                                                               
 Number 377                                                                    
                                                                               
 SENATOR STEVE RIEGER, prime sponsor of SB 231, stated that during             
 the first hearing on the legislation, some good points were raised.           
 His office has done further research since then, and he described             
 the philosophy behind the proposed committee substitute.  First, it           
 was pointed out that the general arguments he was making were in              
 the nature of deregulation of title insurance, but that the                   
 scheduling of a $75.00 fee and the placement of a ceiling could be            
 construed as further regulation, at the same time other aspects               
 were being deregulated.  The proposed committee substitute removes            
 the ceiling on rates and the fixed $75.00 fee on refinancing.  He             
 also researched regulations in other states, and found that                   
 generally, there has been a tendency to continue the regulation of            
 the 12% that represents insurance.  That is to ensure the adequacy            
 of the rates in order to maintain the ability to pay future claims.           
 In a 1992 Supreme Court opinion, the other part of the premium was            
 ruled to be not the business of insurance.  The majority of other           
 states appear to be either already in or moving towards continuing            
 regulation of the insurance portion and not regulating the portion          
 unrelated to insurance.  The proposed committee substitute follows            
 that trend: it maintains regulation of the insurance portion of the           
 rate paid for title insurance, but deregulates the other portion.             
 Most of the rest of the bill has been deleted.                                
                                                                               
 CHAIRMAN SHARP asked if there were questions of the sponsor.                  
 Hearing none, he asked for a motion to adopt the committee                    
 substitute.  The chairman stated it is the intent of the committee            
 to adopt the committee substitute, and then distribute it for                 
 comment.                                                                      
 Number 335                                                                    
                                                                               
 SENATOR RANDY PHILLIPS made a motion to adopt the State Affairs               
 committee substitute for SB 231.                                              
                                                                               
 CHAIRMAN SHARP, hearing no objection, stated the committee                    
 substitute was adopted.  He asked if there were questions from                
 committee members.                                                            
                                                                               
 SENATOR DUNCAN asked the chairman if it was his intention to take             
 testimony from the administration and other interested parties at             
 a future date, after there has been time for people to review the             
 committee substitute.                                                         
                                                                               
 CHAIRMAN SHARP stated that is his intent.  It is his understanding            
 that Senator Rieger has already distributed the committee                     
 substitute to the Division of Insurance.                                      
                                                                               
 SENATOR RIEGER stated that when deregulation occurs, the amount               
 that goes in title insurance premiums is also reduced.                        
                                                                               
 CHAIRMAN SHARP stated there are people signed up to testify on SB
 via teleconference.                                                       
                                                                               
 Number 315                                                                    
                                                                               
 BRYAN MERRELL, State Underwriter - First American Title Insurance             
 Co., Chief Title Officer - First American Title Co., testifying               
 from Anchorage, stated he testified on the previous version of SB
.  He received a copy of the committee substitute late                     
 yesterday, and hasn't had much time to review it.  It is                      
 encouraging to him that the provisions of the former draft                    
 attempting to directly legislate the price of insurance have been             
 deleted.  He thanked Senator Rieger for considering the testimony             
 on that subject.  As he understands it, the new version attempts to           
 deregulate the so-called "non-insurance portion" of the title                 
 premium rate.  However, the bill as written may be interpreted to             
 deregulate all aspects of title premiums, because any portion of            
 the premium based on determination of insurability would also not             
 be regulated.  That is what underwriting title insurance is all               
 about.                                                                        
                                                                               
 MR. MERRELL stated that, in short, the bill is written much more              
 broadly than may have been intended.  Even if this is corrected,              
 there are still some problems: title insurance agents face not only           
 issues related to contract liability based on the policies they               
 issue, but also negligence liability under the minority position              
 taken by the supreme court in the case mentioned by Senator Rieger,           
 which occurred in 1992.  That liability is not covered by                     
 underwriting and the bill does not account for the state's need to            
 be concerned, not only with the solvency of underwriters, but also            
 agents.  Agents bear risks as insurers as well, because agents are            
 liable for the first portion of a loss, based on claim deductibles.           
 Agents are also responsible for the maintenance of title plans and            
 standards and review of title.  This bill would require agents to             
 cut costs and compete.  Rates in other states where this sort of              
 deregulation has occurred have actually risen.  Finally, it cannot            
 be discounted that Alaska has not been a particularly friendly                
 state in which to write title insurance.  SB 231 would make the               
 state even less friendly.  He thinks the government should be                 
 looking for ways to encourage the industry, rather than to                    
 discourage it.  He thinks there is no evidence that the title                 
 insurance industry is making too much money.  You can be assured              
 that if the title insurance industry was making too much money,               
 there would be more than two underwriters in the state.                       
                                                                               
 MR. MERRELL contended there is a house bill pending that would                
 essentially make it impossible to issue extended lenders coverage.            
 That is just another example of the problems with trying to write             
 insurance in this state.  He hopes the committee will consider the            
 total impact of what SB 231 proposes.  He thinks the result will be           
 loss of agents and competition in the state, and perhaps even the             
 loss of an underwriter.                                                       
                                                                               
 Number 250                                                                    
                                                                               
 MARK TOMLINSON, President - Alaska Land Title Association,                    
 testifying from Fairbanks, stated Mr. Merrell is more articulate              
 than him, and already stated what Mr. Tomlinson intended to                   
 communicate.  So on behalf of the Alaska Land Title Association and           
 Fairbanks Title, he supports Mr. Merrell's testimony.  He hopes to            
 have some positive feedback from Senator Rieger at the meeting                
 scheduled for April 11 with the state insurance commissioner.                 
                                                                               
 CHAIRMAN SHARP asked Mr. Tomlinson if he's received a copy of the             
 committee substitute for SB 231.                                              
                                                                               
 MR. TOMLINSON replied he had.                                                 
                                                                               
 CHAIRMAN SHARP asked Mr. Tomlinson to submit any comments he might            
 have to the chairman's office.  The chairman stated SB 231 would be           
 set aside.