Legislature(2023 - 2024)GRUENBERG 120

04/28/2023 01:00 PM House JUDICIARY

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Heard & Held
Heard & Held
-- Public Testimony --
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                HB  29-INSURANCE DISCRIMINATION                                                                             
1:06:16 PM                                                                                                                    
CHAIR VANCE announced  that the first order of  business would be                                                               
HOUSE   BILL   NO.   29,   "An    Act   relating   to   insurance                                                               
discrimination."  [Before the committee was CSHB 29(L&C).]                                                                      
1:06:30 PM                                                                                                                    
REPRESENTATIVE  KEVIN  MCCABE,  Alaska State  Legislature,  prime                                                               
sponsor,  presented CSHB  29(L&C).   He said  insurance companies                                                               
were  in  the  business  of   discrimination.    These  companies                                                               
segregate the  insured into  separate risk  pools based  on their                                                               
differences and  risk profiles  for two  main reasons:  to charge                                                               
different premiums to  different groups based on  their risk; and                                                               
to  incentivize  risk production  by  the  insured.   There  are,                                                               
however, limits to  the type of discrimination  that insurers can                                                               
engage  in, which  was decided  upon  at the  national and  local                                                               
levels of government.   He reported that  insurance companies had                                                               
been  denying   coverage  to  Alaskans  based   solely  on  their                                                               
political affiliation,  expression, or elected status.   The bill                                                               
sought to prohibit discrimination  based solely on those factors.                                                               
Specifically,  CSSB 29(L&C)  would  amend the  insurance code  in                                                               
Alaska from  using political expression, affiliation,  or elected                                                               
status  as  the sole  reason  for  refusing  to ensure  or  renew                                                               
insurance  coverage; limiting  the scope  of insurance  coverage;                                                               
canceling  an existing  policy;  denying a  claim  covered by  an                                                               
existing insurance policy; or increasing  the premium policy fees                                                               
or rates charged on an insurance  policy.  He emphasized that the                                                               
bill would not  prohibit refusals, limitations, or  fees based on                                                               
sound  underwriting   or  actuarial   principles.     Given  that                                                               
insurance  products  are  necessary  to  protect  the  health  of                                                               
property  and in  some instances,  required by  law, he  believed                                                               
that it was in the public  interest to ensure that consumers were                                                               
protected  by  discriminatory  practices.   He  opined  that  the                                                               
proposed legislation would assist in that effort.                                                                               
1:09:08 PM                                                                                                                    
BUDDY  WHITT, Staff,  Representative Kevin  McCabe, Alaska  State                                                               
Legislature, on  behalf of Representative McCabe,  prime sponsor,                                                               
presented the  sectional analysis for CSHB  29(L&C), [included in                                                               
the   committee  packet],   which  read   as  follows   [original                                                               
punctuation provided]:                                                                                                          
     Section 1 amends  Sec. 21.36 to add a  new section that                                                                    
     prohibits a person transacting  insurance in this state                                                                    
     from discriminating against a  person based solely on a                                                                    
     person's  political  affiliation  or  expression  or  a                                                                    
        person's status as an elected state official as                                                                         
     defined in AS 44.99.205.                                                                                                   
     Section 2 amends uncodified law  of the State of Alaska                                                                    
     by  adding a  new section  regarding applicability  and                                                                    
     effective   dates   to    insurance   policies   and/or                                                                    
CHAIR VANCE  sought questions from  members of the  committee for                                                               
Ms. Wing-Heier.                                                                                                                 
1:13:11 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce,  Community &  Economic Development  (DCCED), introduced                                                               
herself  for the  record and  welcomed  questions from  committee                                                               
1:13:26 PM                                                                                                                    
REPRESENTATIVE GROH questioned the inspiration for the bill.                                                                    
MS. WING-HEIER informed  the committee that she had  not heard of                                                               
elected  officials  being  denied   insurance  because  of  their                                                               
elected  status  before being  approached  by  the bill  sponsor.                                                               
However, she  said that independent agents  and brokers confirmed                                                               
that it was, in fact,  happening, highlighting instances of state                                                               
officials, including  school board  members and  borough members,                                                               
not being  able to obtain  insurance.   She noted that  she could                                                               
not  find  any  instances  [of discrimination]  in  reference  to                                                               
political party.                                                                                                                
REPRESENTATIVE GROH  said he  had never heard  of this  issue and                                                               
characterized  it  as "illogical."    He  expressed a  desire  to                                                               
understand the nature of the problem and the apparent cause.                                                                    
MS.  WING-HEIER reiterated  that after  being presented  with the                                                               
bill  she conducted  some research  with insurance  companies who                                                               
confirmed  that  their  guidelines did  not  permit  underwriting                                                               
excess liability of public officials.                                                                                           
1:15:09 PM                                                                                                                    
REPRESENTATIVE   MCCABE  noted   that  that   the  term   "excess                                                               
liability" was commonly  known as an umbrella policy.   He shared                                                               
a personal anecdote  about being denied an  umbrella policy based                                                               
on his status as an elected official.                                                                                           
1:16:07 PM                                                                                                                    
REPRESENTATIVE GROH asked why this was happening.                                                                               
MS.  WING-HEIER   stated  that  insurance   companies  considered                                                               
overall risk.  She shared  her belief that elected officials were                                                               
viewed as  targets for being sued,  which was the reason  for the                                                               
policy denial.                                                                                                                  
REPRESENTATIVE ALLARD  shared that  she had  also been  denied an                                                               
umbrella policy.   She expressed her belief that  the refusal was                                                               
discriminatory,  based  on  either  her   status  as  an  elected                                                               
official or her political affiliation.                                                                                          
1:18:01 PM                                                                                                                    
REPRESENTATIVE  GRAY asked  whether [excess  liability] insurance                                                               
was required of all elected officials.                                                                                          
MS. WING-HEIER said  she could not tell  Representative Gray what                                                               
to purchase.   She indicated that  it was more common  for people                                                               
to buy higher policy limits in today's litigious society.                                                                       
REPRESENTATIVE  GRAY shared  his  understanding  that Article  2,                                                               
Section  6,  of  the  Alaska  Constitution,  offered  legislative                                                               
immunity.   He stated his  belief that he  could not be  sued for                                                               
his words or actions in the legislature.                                                                                        
1:20:14 PM                                                                                                                    
MS. WING-HEIER  acknowledged that  some legislative  immunity was                                                               
provided; however,  in a personal capacity,  legislators were not                                                               
protected  by immunity  outside of  their  role as  a senator  or                                                               
representative.    She shared,  for  example,  that a  legislator                                                               
could be held liable for a "horrific" car accident.                                                                             
REPRESENTATIVE GRAY  pointed out  that any reckless  driver could                                                               
be held  liable.  He  acknowledged that he was  not understanding                                                               
the purpose of the bill.                                                                                                        
1:20:57 PM                                                                                                                    
REPRESENTATIVE   MCCABE    shared   a   personal    anecdote   to                                                               
contextualize the purpose of the bill.                                                                                          
REPRESENTATIVE  GRAY  asked  whether  Representative  McCabe  was                                                               
denied [excess liability] because he was an elected official.                                                                   
REPRESENTATIVE MCCABE said, "That's correct."                                                                                   
1:22:40 PM                                                                                                                    
REPRESENTATIVE EASTMAN  shared a  personal anecdote.   He pointed                                                               
out that  a member  of the legislature's  home had  been recently                                                               
burglarized,  indicating  that  the  insurance  company  may  ask                                                               
questions and wonder whether the  theft was related to her status                                                               
as an  elected official.   He explained that  insurance companies                                                               
may not  want to incur  additional risk by providing  coverage to                                                               
legislators  who are  more likely  to be  victims of  theft or  a                                                               
slashed tire, for example.                                                                                                      
1:25:28 PM                                                                                                                    
REPRESENTATIVE  GROH   pointed  out   that  there  was   often  a                                                               
difference  between someone's  legal rights  and the  reason they                                                               
were asserting them.                                                                                                            
CHAIR  VANCE asked  whether the  bill would  cover all  insurance                                                               
MS. WING-HEIER answered yes.                                                                                                    
1:26:20 PM                                                                                                                    
CHAIR  VANCE questioned  the  need for  the  bill's inclusion  of                                                               
political party.                                                                                                                
REPRESENTATIVE MCCABE explained  that "political affiliation" was                                                               
changed  to "political  party" in  the House  Labor and  Commerce                                                               
Standing Committee.   He acknowledged  that the language  may not                                                               
be necessary; nonetheless, he argued  that an individual could be                                                               
denied umbrella insurance due to his/her party affiliation.                                                                     
REPRESENTATIVE ALLARD  shared a personal anecdote,  claiming that                                                               
she  watched  her  premiums  "skyrocket," in  part,  due  to  her                                                               
political party.                                                                                                                
1:29:58 PM                                                                                                                    
REPRESENTATIVE GRAY  asked whether  an umbrella policy  would pay                                                               
for the  damages if a  legislator was sued for  making defamatory                                                               
statements to a constituent.                                                                                                    
REPRESENTATIVE MCCABE did not know the answer.                                                                                  
MR. WHITT  offered to follow  up with the  requested information.                                                               
He  expounded on  the change  made in  the previous  committee of                                                               
referral, indicating  that the purpose  of the amendments  was to                                                               
tighten up ambiguous language.                                                                                                  
1:34:11 PM                                                                                                                    
REPRESENTATIVE EASTMAN  asked whether the reference  to political                                                               
party was included  based on specific incidents  that had already                                                               
happened or specific incidents that may happen in the future.                                                                   
REPRESENTATIVE MCCABE  answered "future incidents,"  in reference                                                               
to divisiveness and polarization in the country.                                                                                
1:35:22 PM                                                                                                                    
REPRESENTATIVE EASTMAN directed attention to  page 1, line 11 and                                                               
asked  whether the  scope of  the bill  related to  new policies,                                                               
increases to new policies, or increases to current policies.                                                                    
REPRESENTATIVE MCCABE said he envisioned all of the above.                                                                      
REPRESENTATIVE  EASTMAN   considered  a   scenario  in   which  a                                                               
legislator was  a victim  of theft.   He  asked whether  the bill                                                               
would  allow  the  insurance  company to  "jack  up  their  rates                                                               
accordingly  based on  the fact  that it's  now more  likely that                                                               
they'll be a victim of future theft."                                                                                           
MR. WHITT  said if an  insurance company decided to  increase the                                                               
premium or  refused to  renew a policy  based on  something other                                                               
than the individual's  status as an elected  official, there must                                                               
be a  level of proof.   Alternatively,  per the bill  language, a                                                               
refusal  based only  on the  elected official's  status would  be                                                               
against the law.                                                                                                                
REPRESENTATIVE MCCABE added that  there was no retroactive clause                                                               
in the bill.                                                                                                                    
1:40:30 PM                                                                                                                    
REPRESENTATIVE GRAY said he could  envision a scenario in which a                                                               
hypothetical  legislator  was  sued   often  for  "[pushing]  the                                                               
envelope."   He asked whether  that legislator would  get dropped                                                               
from the policy for multiple lawsuits.                                                                                          
REPRESENTATIVE MCCABE  responded that the insurance  policy would                                                               
have every  right to  raise that person's  rates to  "cover [its]                                                               
bases."     He  reiterated  that   the  bill   only  contemplated                                                               
situations in  which rates were  raised, or policies  were denied                                                               
based solely on an elected official's status.                                                                                   
1:42:11 PM                                                                                                                    
MR. WHITT read  page 1, line 13, which read  as follows [original                                                               
punctuation provided]:                                                                                                          
     (b) The provisions of (a) of this section do not apply                                                                     
      if the refusal, limitation, cancellation, denial, or                                                                      
     increase is                                                                                                                
          (1) based on sound underwriting or actuarial                                                                          
     principles reasonably related to actual or anticipated                                                                     
     loss experience; or                                                                                                        
MR. WHITT added  that if an elected official  continued to create                                                               
liability  for himself/herself,  the  insurance company,  through                                                               
sound actuarial  principles, could point  to that liability  as a                                                               
reason to increase  a current policy or deny a  new policy, which                                                               
would be covered under the law.                                                                                                 
1:43:19 PM                                                                                                                    
REPRESENTATIVE  GRAY   asked  whether  insurance   companies  had                                                               
weighed in on the bill.                                                                                                         
MR.  WHITT  reported  that  the bill  sponsor's  office  had  not                                                               
received any letters in support of or opposition to the bill.                                                                   
REPRESENTATIVE  MCCABE suspected  that insurance  companies would                                                               
not be  in favor  of the bill,  as they were  in the  business of                                                               
limiting  their  risk.    He  asserted  that  there  were  enough                                                               
insurance companies  providing umbrella  policies in  Alaska that                                                               
if one decided to  stop insuring in the state as  a result of the                                                               
proposed legislation,  it would  not materially  affect Alaskans.                                                               
He opined that the risk to the average Alaskan was minimal.                                                                     
1:45:08 PM                                                                                                                    
REPRESENTATIVE EASTMAN  asked whether insurance  companies should                                                               
be allowed to discriminate based on age.                                                                                        
REPRESENTATIVE  MCCABE   indicated  that   a  certain   level  of                                                               
discrimination was inherent  to the industry.   He explained that                                                               
because a  twenty-year-old person  lives a more  active lifestyle                                                               
than a fifty-year-old,  the life insurance policy  for the fifty-                                                               
year-old  individual would  cost  more based  on sound  actuarial                                                               
1:46:51 PM                                                                                                                    
REPRESENTATIVE  EASTMAN  posited  that, based  on  Representative                                                               
McCabe's previous statement,  it wasn't considered discrimination                                                               
if there  was proof to  support the insurance  company's argument                                                               
[that  fifty-year-olds were  less active  than twenty-year-olds].                                                               
He asserted  that it should  be easy to demonstrate  that elected                                                               
officials  were  more likely  to  end  up  in  court or  make  an                                                               
insurance claim due to injury, for example.                                                                                     
REPRESENTATIVE   MCCABE  expected   insurance   coverage  for   a                                                               
legislator  to  be more  expensive;  however,  he reiterated  his                                                               
belief  that complete  denial  based on  someone's  status as  an                                                               
elected official was wrong.                                                                                                     
1:48:41 PM                                                                                                                    
REPRESENTATIVE  CARPENTER asked  how discrimination  based solely                                                               
on politics would be proven.                                                                                                    
REPRESENTATIVE MCCABE deferred to Ms.  Wing-Heier.  He shared his                                                               
belief  that the  director  [of the  Division  of Insurance]  had                                                               
enforcement capabilities.                                                                                                       
1:50:23 PM                                                                                                                    
REPRESENTATIVE  GRAY  asked  for   the  definition  of  "umbrella                                                               
CHAIR  VANCE  clarified that  [the  bill]  covered all  types  of                                                               
REPRESENTATIVE GRAY  asked whether  it was  his duty  to disclose                                                               
that he was an elected official when purchasing insurance.                                                                      
REPRESENTATIVE ALLARD nodded in the affirmative.                                                                                
REPRESENTATIVE GRAY shared that he  was not asked to disclose his                                                               
status as an elected official when purchasing his auto policy.                                                                  
REPRESENTATIVE  MCCABE  explained  that an  umbrella  policy  was                                                               
excess  liability, which  covered "over  and above"  [the general                                                               
MR.  WHITT stated  that when  issuing  policies, every  insurance                                                               
company asked  different questions regarding their  actuarial and                                                               
risk models.   He reiterated that  the bill covered all  types of                                                               
insurance policies,  including umbrella policies.   He offered to                                                               
follow up with the Division of Insurance.                                                                                       
1:54:09 PM                                                                                                                    
REPRESENTATIVE  CARPENTER  explained  that Errors  and  Omissions                                                               
(E&O) Insurance  was often  sought out  by elected  officials and                                                               
Chief Executive Officers (CEOs) to protect from liability.                                                                      
REPRESENTATIVE EASTMAN  asked why insurance companies  were being                                                               
asked to bear the additional risk, as opposed to the state.                                                                     
REPRESENTATIVE   MCCABE  agreed   that   the   state  should   be                                                               
indemnifying the  governor, for example.   He indicated  that the                                                               
decision would be a policy call.                                                                                                
1:58:26 PM                                                                                                                    
CHAIR VANCE announced that the bill would be held over.                                                                         

Document Name Date/Time Subjects
HB 29 - Sponsor Statement.pdf HFSH 5/3/2023 1:00:00 PM
HJUD 4/28/2023 1:00:00 PM
HB 29
HB 29 - v.B.PDF HFSH 5/3/2023 1:00:00 PM
HJUD 4/28/2023 1:00:00 PM
HB 29
HB 29 - Sectional Analysis.pdf HFSH 5/3/2023 1:00:00 PM
HJUD 4/28/2023 1:00:00 PM
HB 29
HB 29 - Fiscal Note DCCED (04-05-23).pdf HFSH 5/3/2023 1:00:00 PM
HJUD 4/28/2023 1:00:00 PM
HJUD 5/3/2023 1:00:00 PM
HB 29