Legislature(1999 - 2000)
02/02/2000 01:41 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 190 - VIATICAL SETTLEMENTS Number 0101 CHAIRMAN KOTT announced the next order of business would be HOUSE BILL NO. 190, "An Act relating to viatical settlement contracts." He noted that Bob Lohr was online from Anchorage. He asked Mr. Lohr if he had the most recent version of HB 190, Version N (1- LS0576\N, Bannister, 2/1/00). BOB LOHR, Director, Division of Insurance, Department of Community and Economic Development (DCED), speaking via teleconference from Anchorage, affirmed that. Number 0135 REPRESENTATIVE ROKEBERG made a motion to adopt Version N as a work draft. There being no objection, it was so ordered. LESIL McGUIRE, Legislative Assistant to Representative Pete Kott, and Committee Aide, House Judiciary Standing Committee, Alaska State Legislature, came forward to explain the changes made in Version N. The bill drafters had inserted changes to reflect some concerns of members last time. Two concerns needed to be addressed. The first deals with the degree of privacy afforded to the viator and the insured, as well as to a viator or an investor. The first change occurs on page 2, lines 16 through 20, subsection (e), governing privacy between the insured - the viator - and the insurance company. A sentence added at the end of subsection (e) enables the viator to waive this prohibition against disclosure if it is in writing and has been signed. MS. McGUIRE noted that the second change occurs on page 5, lines 21 through 26, which is the exact language used on page 2, lines 16 through 20. She indicated the only difference is that it governs privacy between the viator and the Department of Community and Economic Development (DCED), as well as the investor. The same waiver language is included. Page 5, lines 12 through 20, responds to a concern Representative Kerttula had with respect to buyer information. That clause is the same language that was in the original HB 190 and has been reincluded in Version N. Number 0334 REPRESENTATIVE ROKEBERG said he has been in contact with both the Division of Insurance and the Division of Banking, Securities and Corporations (DBSC), which stated they would like to make two minor technical amendments. He made a motion to adopt Conceptual Amendment 1 on page 2, line 18, deleting "name" and substituting "identity". The same change would be made on page 5, line 23. He asked Katy Campbell to comment on those changes. KATY CAMPBELL, Actuary L/H, Division of Insurance, Department of Community and Economic Development, responded that this was a discussion that took place with the National Association of Insurance Commissioners (NAIC). The concern is that other information could be given out, such as an address, that could lead to identifying an individual. She said this takes care of anything that could identify that person. MR. LOHR concurred with the amendment. CHAIRMAN KOTT asked whether there was any objection to the adoption of Conceptual Amendment 1. There being no objection, it was adopted. Number 0452 REPRESENTATIVE ROKEBERG made a motion to adopt Conceptual Amendment 2 on page 5, lines 17 through 20, which would delete all of the language after the word "includes" and substitute "state-mandated disclosure form". He asked Vince Usera to comment. VINCE USERA, Senior Securities Examiner, Division of Banking, Securities and Corporations (DBSC), Department of Community and Economic Development, explained: In our discussions, when we were dealing with our regulations, we discussed ... all provisions with the Viatical Association of America [VAA]. They registered strong disapproval of giving out ... an audited income and expense and balance statement to the investor. Now, our regulations provide they must give that to us - to the division - in order to prove that they're a going concern and that they have the wherewithal to meet their obligations. But for one, I don't think most investors really know how to read the statement properly, and, second, the Viatical Association objected strongly that that's going too far in removing their level of privacy too. REPRESENTATIVE MURKOWSKI said she understands the rationale but wonders exactly what is required by the division. Number 0593 MR. USERA replied that the division requires proof of being in business for three years, audited income and expense statements for the most recent year, and other information. The division is going to look out for the investor in that respect. "If they're a going concern, they'll get the exemption," he added. "They can go sell their product. But I don't think giving it to the investor is going to necessarily save the investor any heartache." REPRESENTATIVE MURKOWSKI referred to the proposed deletion of the provision on page 5, lines 19 through 20, regarding disclosure of any significant negative factor that may affect the outcome of an investment; she said she happens to like this provision. MR. USERA assured Representative Murkowski that this provision is still being required. REPRESENTATIVE MURKOWSKI wondered if there is any way to let the investor know. For example, if she were an investor and inquired at the division about a company, would the division tell her that there were a few black marks on the company's record? MR. USERA indicated it is unlikely the company would be given the exemption and allowed to sell here in that case, but it depends on the situation. For example, it may be a black mark that the company had overcome. He added, "We will do our job in protecting the investor, and if that requires disclosure of certain information about the company, I believe we would disclose it." Number 0717 REPRESENTATIVE MURKOWSKI expressed concern that although the division has the information, a wall may exist that prevents the investor from having access to it. She said she doesn't know how much information should be made available, and she recognizes the concern. REPRESENTATIVE ROKEBERG responded that the information would include the state-mandated disclosure form, but it doesn't exclude their giving other information, which could be handled by regulation. He added, "'Includes but not limited' is the way our statute drafting manual is." He explained that he'd thought this was an improvement because it gives the department a little more flexibility and perhaps - under the right circumstances - they would give more information than was stipulated in statute. "That's why I took their recommendation as a 'positive,'" he concluded. Number 0784 MR. USERA explained that except for investigation files, all his division's files are public record. He stated, "If we know of something about the company that is negative, ... we can and will tell them. We already provide the statement of risk, but disclosure of any significant factor may still be in the bill. ... And that doesn't have to be out. We kept the word 'includes' in order to leave it flexible enough to allow ... other items. The main choking point, if you will, is audited income and expense statements." Number 0837 REPRESENTATIVE GREEN referred to line 18 and proposed deleting only the language [added by proposed Conceptual Amendment 2] after "disclosure form", then reinserting "and a disclosure of any significant negative factor". He asked whether that would pass muster. MR. USERA answered, "That would be fine with us." Number 0871 REPRESENTATIVE MURKOWSKI pointed out the need to say "factors" to avoid excluding a factor if there were two. MR. USERA concurred. Number 0894 REPRESENTATIVE ROKEBERG made a motion to adopt that as an amendment to Conceptual Amendment 2. CHAIRMAN KOTT announced that there was no objection to the amendment to the amendment and, therefore, Conceptual Amendment 2, as amended, was before the committee. REPRESENTATIVE ROKEBERG restated the amended amendment as follows: "includes the state-mandated disclosure forms and a disclosure of any significant negative factors that may affect the outcome of the investment." Number 0949 MR. USERA said the word "negative" would not be included. UNIDENTIFIED REPRESENTATIVES concurred. REPRESENTATIVE KERTTULA asked whether there is any definition of "significant factor." MR. USERA said he thinks he knows what it is. He suggested that using "negative" would limit it to some degree, because a positive or neutral factor may significantly affect the outcome of the investment. For instance, if the insured has a life expectancy of 15 years, that is neither a good nor bad factor, but it may cause the investment to be a loss. REPRESENTATIVE KERTTULA said she is glad they are including more language, but she is still a little concerned. Although she trusts Mr. Usera, he isn't always going to be there, and it is a lot of latitude. She asked whether the statement of risks is something the companies had objected to as well. MR. USERA answered no, that the companies didn't object to the division's disclosure form; it is based on Maine's form, which is tried and true. He said he had beefed it up a little, adding a few more factors that have to be considered. REPRESENTATIVE ROKEBERG suggested to Representative Kerttula that it isn't needed there because it could be redundant. Number 1065 REPRESENTATIVE KERTTULA responded that she doesn't want to be redundant but is worried about latitude with the state form, which could change in future years. It would perhaps make her more comfortable to include the balance sheet, the statement of risks, and the disclosure of any significant factors. She restated the need to say as much as possible because Mr. Usera won't always be with the division. MR. USERA answered: At least in the early part, we wanted the latitude to change the disclosure form at will, because ... we're interested in protecting the public. ... If we find something that the public should know about, we'll incorporate that in our form; and we can do it overnight. If it's in statute, we're hamstrung. It may be something you want to revisit, from a legislative standpoint, perhaps in another couple of years when this activity either becomes stabilized or doesn't rear its ugly head, one or the other. But you have further information to go on. Number 1133 REPRESENTATIVE KERTTULA asked whether Mr. Usera really would have any problem including the balance sheet and statement of risks. MR. USERA replied: The financial factors - the income and expense, and the balance sheet - they're going to give that to us, and it will be there, in our files and disclosable. ... Any investor who says, "I want to see their balance sheet," we'll give it to them. But I don't think we want to require that that be given as a matter of course. It's more paper .... Frankly, the disclosure forms, we tried to keep them short because the more you disclose, the less effect you have. ... There comes a point of diminishing returns, because the disclosures are so voluminous that nobody reads them. REPRESENTATIVE KERTTULA asked whether the division will ensure that the public understands the right to have access to the balance sheet. MR. USERA affirmed that, mentioning the division's web site. Number 1204 CHAIRMAN KOTT asked whether there was any objection to Conceptual Amendment 2, as amended. REPRESENTATIVE KERTTULA said, "Yes." CHAIRMAN KOTT announced, nevertheless, that seeing no objection, Conceptual Amendment 2 was adopted. Number 1230 REPRESENTATIVE ROKEBERG made a motion to move Version N of HB 190, (1-LS0576\N, Bannister, 2/1/00), as amended, from the committee with individual recommendations and the attached zero fiscal notes. There being no objection, CSHB 190(JUD) was moved from the House Judiciary Standing Committee.
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