04/11/1994 01:50 PM Senate JUD

 SENATOR TAYLOR brought  SB 362  (OMNIBUS INSURANCE REFORM) before the    he   
 committee as the next order of business.                                      
                                                                               
 DAVID WALSH, Director, Division of Insurance, Department of                   
 Commerce & Economic Development, said SB 362 is a combination of              
 small but not controversial items contained in one bill.  The bill            
 has a zero fiscal note.                                                       
                                                                               
 SB 362 contains items in three areas:  (1) small, but substantive             
 changes in Title 21; (2) small NAIC models; and (3) provisions that           
 would allow the division, when there are no outstanding obligation,           
 to accept the surrender of a certificate of authority.                        
                                                                               
 Mr. Walsh noted the division had provided, for the committee's                
 information, a sectional analysis of the bill, as well as a side-             
 by-side analysis of the bill where the statutes were changed.                 
                                                                               
 Mr. Walsh also pointed out that the division had two requirements             
 for any items to be in the bill.  The main one was that they be               
 absolutely noncontroversial, and, secondly, that they not be part             
 of any larger bill, which is why separate legislation relating to             
 risk-based capital was introduced.                                            
                                                                               
 Number 225                                                                    
                                                                               
 Responding to a question from Senator Taylor, Mr. Walsh said a                
 provision in the bill clarifies what the risk retention groups do             
 and reduces the number of hurdles that they have to jump through.             
 He added that there are very few risk retention groups in the                 
 state, but the ones that exist are very pleased with the change.              
                                                                               
 Number 260                                                                    
                                                                               
 SENATOR DONLEY asked for an explanation on the provision relating             
 to consumer credit insurance.  DAVE WALSH responded that credit               
 insurance is one of the most problematic areas that they regulate,            
 and the bill allows the division to establish some regulations and            
 is a first step in what they hope is going to be a solution.  In              
 the past, Alaska has been listed as among the worst states for                
 credit insurance.   BARBARA THURSTON, Chief Actuary, Division of              
 Insurance, added that the main thing it does is it increases the              
 disclosures that need to made to consumers.  It also adds a 30-day            
 period where the consumer can look at the policy and change his               
 mind.                                                                         
                                                                               
 Number 335                                                                    
                                                                               
 SENATOR TAYLOR asked if would be possible to impose a requirement             
 that no bank, credit bureau, or lending institution may profit in             
 any way from the sale, brokerage, or whatever, of any policy of               
 insurance.  MR. WALSH acknowledged that such a provision could be             
 added to the bill if that was the will of the committee.  However,            
 the division didn't want to come in with a bill as big as SB 362              
 with anything that was going to generate a lot of controversy and             
 a lot of contention.                                                          
                                                                               
 SENATOR TAYLOR inquired what change was made to Alaska Rule of                
 Civil Procedure 45.  MR. WALSH answered that the change came from             
 the Department of Law.  There was concern that the division does              
 get proprietary information in conjunction with an exam.  If the              
 division has proprietary information, information which,                      
 essentially, does not belong to them, but belongs to the company              
 itself, this stops a collateral attack to obtain the information              
 from the division.  There is concern that without this kind of                
 section, the division will be forced into litigation to get the               
 kind of information it needs from the companies.                              
                                                                               
 Number 475                                                                    
                                                                               
 SENATOR DONLEY asked if there were any provisions in the bill                 
 relating to automobile insurance.  MR. WALSH directed attention to            
 Section 53 which, he said, clarifies some of the ambiguities in               
 this type of insurance and levels the playing field for the                   
 consumer.                                                                     
                                                                               
 Number 625                                                                    
                                                                               
 SENATOR JACKO referred to Section 30 wherein it provides that the             
 director may adopt regulations for additional education or                    
 experience.  He asked Mr. Walsh how much additional education or              
 experience he perceived would be required and how this would affect           
 people who live in places where there aren't educational                      
 experiences provided.  MR. WALSH replied that it is a section that            
 the independent agents and brokers have wanted for a long time.  It           
 allows the adoption of continuing education regulations.  Part of             
 it is to allow for the fact that there are a significant number of            
 agents and brokers in rural Alaska, and allows for doing their                
 continuing education by viewing video tapes at home or even                   
 teleconference kinds of courses.  SENATOR JACKO suggested putting             
 the provision in statute rather than having it as a regulation.               
                                                                               
 Number 677                                                                    
                                                                               
 SENATOR TAYLOR commented there is large movement in the Legislature           
 called "tort reform," and this is second large bill on insurance              
 reform he has seen, and they raise a lot of serious questions.                
                                                                               
 TAPE 94-35, SIDE A                                                            
                                                                               
 Number 010                                                                    
                                                                               
 SENATOR DONLEY asked if the statutes provide that insurance agents            
 cannot discount their fees, and if those fees are statutorily fixed           
 fees.  MR. WALSH answered that the fees are not fixed by statute,             
 but the statute does provide that an agent cannot discount their              
 commission.  The fees are set by the companies.  He noted that                
 there are only a couple of states that allow any type of cutting              
 commissions, etc.  He said that, ultimately, discounting is a                 
 policy decision that the Legislature makes, and, if the Legislature           
 wishes to allow discounting, they will regulate it the way the                
 Legislature wants them to.  However, it is not something that the             
 division believes is good because they want a level playing field             
 for all consumers similarly situated.                                         
                                                                               
 Number 105                                                                    
                                                                               
 SENATOR DONLEY asked what the division's policy was in approving              
 commission rates.  MS. THURSTON responded that there is very little           
 variation in commission rates.  Basically, the companies have to              
 compete for the business, and the way they do that, in most cases,            
 is to keep the premiums lower.  As long as the commissions are                
 within the normal bounds, the division generally approves it, and             
 they do routinely question commissions that look out of line.                 
                                                                               
 There was further discussion between committee members and Mr.                
 Walsh concerning contingency fees, discounting and commission                 
 rates.  Mr. Walsh said they would do some research and put some               
 information together for the committee's information.                         
                                                                               
 There being no further witnesses to testify on SB 362, SENATOR                
 TAYLOR thanked the Division of Insurance for their participation              
 and assistance.  He stated the bill would be held in committee for            
 further work.