Legislature(2005 - 2006)CAPITOL 17
03/01/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB416 | |
| HB402 | |
| HB439 | |
| HB424 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 402 | TELECONFERENCED | |
| *+ | HB 424 | TELECONFERENCED | |
| *+ | HB 439 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 416 | TELECONFERENCED | |
HB 439-INSURANCE PRODUCT REGULATION COMPACT 4:14:48 PM ACTING CHAIR KOTT announced that the next order of business would be HOUSE BILL NO. 439, "An Act relating to authorizing the state to join with other states entering into the Interstate Insurance Product Regulation Compact and authorizing the compact to supersede existing statutes by approving standards, rules, or other action under the terms of the compact." 4:15:22 PM REPRESENTATIVE JOHN COGHILL, Alaska State Legislature, sponsor, informed the committee that HB 439 was introduced by request. He said that the National Association of Insurance Commissioners (NAIC) has a model act which allows states to enter into a compact for insurance products. He said that the different life insurance products are diverse, as different states make different laws which effect the sale and management of these products. He stated that the industry is looking for areas in which the regulations can be better aligned. He said that this can be done by federal law or by creating compacts between states. He said that there are currently 20 states in the compact, and 26 are needed to create the compact. He offered his understanding that there are 17 states considering joining the compact. He explained that Section 1 of the bill adopts the Interstate Insurance Product Regulation Compact. He referred to Sections 2 and 3, stating that these sections are no longer necessary, and suggested an amendment to remove these sections. He explained that page 2 of the bill includes the reason for joining the compact. This includes promoting and protecting the interests of the consumer. He expressed that these are all reasons for his promotion of the compact. 4:19:28 PM REPRESENTATIVE COGHILL, in response to a question, said that he would like to remove Sections 2 and 3 on page 23. He explained that this is currently happening, and therefore is not necessary. He said that the compact will not supersede the state, and added that it is an agreement for the description of insurance products. 4:21:10 PM REPRESENTATIVE GUTTENBERG asked what types of insurance would be included in the compact. REPRESENTATIVE COGHILL referred to page 5, which specifies life insurance and long-term insurance issues. 4:22:55 PM ACTING CHAIR KOTT, referring to a memo from Legislative Legal and Research Services, asked if the issue regarding the unconstitutionality of the compact had been addressed. REPRESENTATIVE COGHILL replied that the compact contains a severability provision, which is very clear. JOHN GEORGE, American Council of Life Insurers (ACLI), explained that the state does relinquish some authority to the compact; however, the state also retains the ability to take it back. He said that the insurance companies have the option of filing with the state rather than the compact. He said that if the Division of Insurance does not agree with guidelines or rules that the compact sets, the bill includes a provision that allows the Division of Insurance to opt out. In addition, the legislature has the ability to repeal membership in the compact. In regard to the question of constitutionality, he said that a policy form approved by the compact does not preclude an individual from asking the division to hold a hearing. He said that the statutes clearly state that any aggrieved party may ask for a hearing and the director can call a hearing at any time. He added that the compact gives notice before adoption of standards, which allows time to hold hearings if they are needed. MR. GEORGE said that the products that would be covered under the compact are those which have a long-term relationship with the consumer. He explained that auto and homeowner's policies are generally one year. He said that if a person is living in Alaska, it is appropriate for Alaska to have jurisdiction; however, for those people who have moved to the state from other parts of the country, their life insurance policy may originate from the previous state. He said that it is appropriate for life insurance policies to be fairly consistent, regardless of where it is purchased. He opined that when an insurance company is creating a new product, it will first go to states with a larger population and come to Alaska last, making residents of the state wait for years before having access to the product. 4:26:29 PM MR. GEORGE went on to say that the compact was formulated by NAIC and has been studied and approved by the National Conference of Insurance Legislators (NCOIL). He reiterated an earlier comment that six more states are needed to make the compact effective, and said "We would urge you to be the 21st state." REPRESENTATIVE ROKEBERG, referring to the sponsor statement, asked if health insurance would be covered. MR. GEORGE replied that it would not. 4:27:54 PM LINDA HALL, Director, Division of Insurance, Department of Commerce, Community, & Economic Development (DCCED), informed the committee that she would not be taking a position on the bill, but would provide comments. She said that the financial service marketplace is changing and insurance companies are forming banks, which are then selling insurance products. She stated that Alaska has a very mobile population. She said that the NAIC has attempted to do a "speed-to-market", in order to get the products to the consumer as quickly as possible. In regard to federal regulation, she opined that Alaska is more likely to have accessibility on a state level. MS. HALL explained that it has delegated the [Interstate Insurance Product Regulation Commission] to develop uniform standards. She said that these standards must be adopted by two-thirds of the majority of the member states. She noted that the legislature may decide to opt out if a standard does not meet the needs of the state. She said that this can also be done by regulation and opined that this process would be more complicated. In regard to the number of states required to create a compact, she said that it requires 26 states, or sufficient states to have 40 percent of the premium of a product. She said that the four products included in the compact are: life insurance; annuities; disability income; and long-term care insurance. REPRESENTATIVE LEDOUX asked how the products included in the compact is determined. MS. HALL replied that it is her understanding that these products are the most mobile policies. She opined that these are most likely the easiest to regulate. In regard to developing standards, she said that this is a process led by state regulators. She stated that there was some concern that the compact would adopt the regulations of the state with the lowest standards. In regard to giving the insurance company the ability to choose whether it files with the state or with the compact, she said that there was some concern that the insurer may choose the route with the lowest standards to comply with. She stated that the compact appears to have higher standards than the state, which include a 10-day free look and minimum readability standards. She said that while Alaska currently has general product standards, it does not have a readability standard. She said that the standards that are being set have potential to provide greater consumer protection than current law. MS. HALL went on to highlight that page 22, Section 1 points out which areas would still be reserved to the states. She said that while she did not request that the bill be introduced, she believes that there is potential to provide benefits to Alaskan consumers. MS. HALL, in response to a question, said that the interpretation of the standard is challenged more often than the standard itself. She opined that the state still maintains the ability to enforce this. 4:38:38 PM REPRESENTATIVE GUTTENBERG asked what the state's course of action would be if the compact takes up an issue that is outside the state's policy and the state decides to opt out. MS. HALL opined that the legislature would vote on the issue. REPRESENTATIVE ROKEBERG asked if Ms. Hall [would agree with the bill passing.] MS. HALL replied that [she would.] REPRESENTATIVE GUTTENBERG noted that Ms. Hall is a member of NAIC and asked if she feels confident that the state would be well represented [by the other members of the NAIC.] MS. HALL replied that she does. 4:41:27 PM REPRESENTATIVE ROKEBERG asked if the bill has a fiscal note. MS. HALL offered her understanding that the original funding will be provided by NAIC; however, the majority of the funding will come from filing fees. ACTING CHAIR KOTT closed public testimony. He noted that there is a proposed amendment from the sponsor. REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 1, which would remove Sections 2-3. There being no objection, Amendment 1 was adopted. 4:44:21 PM REPRESENTATIVE LYNN moved to report HB 439, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 439(L&C), was reported from the House Labor and Commerce Standing Committee.
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