Legislature(2001 - 2002)

05/07/2002 01:50 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
            SB 320-MOTOR VEHICLE INSURANCE & REPAIRS                                                                        
                                                                                                                              
CHAIRMAN BEN STEVENS called the Senate  Labor & Commerce Committee                                                            
meeting to  order at 1:50  p.m. and announced  SB 320,  version x,                                                              
to be up for consideration.                                                                                                     
                                                                                                                                
MS. ANNETTE  DEAL, Staff  to Senator Cowdery,  sponsor of  SB 320,                                                              
explained the changes.  Section 1(c) says that an  insurer may not                                                              
use credit  to cancel  a policy.  Section 1(g)  - The Fair  Credit                                                              
Reporting Act -  under adverse action - those  actions are spelled                                                              
out. Section  2(a) -  the insurer when  filing their  credit model                                                              
only has to file  it if requested by the director  of the Division                                                              
of Insurance.  Section  2(c) has  items added  to a credit  report                                                              
that cannot be  included as part of the scoring  formula including                                                              
a number  of marketing,  promotional or  insurance inquiries,  any                                                              
collection account  identified with  the medical industry  and the                                                              
consumer's  total available  line of  credit. She  added that  the                                                              
debt ratio is acceptable.                                                                                                       
                                                                                                                                
Section  3 was  added  that deletes  the repeal  date  and it  was                                                              
changed  to a  report  being  due one  time,  one year  after  the                                                              
effective date  and includes information on how  insurance scoring                                                              
has affected  consumers in Alaska,  who receives the  benefit, how                                                              
credit rating  is affecting rates  and other issues  as determined                                                              
by the director.                                                                                                                
                                                                                                                                
SENATOR TORGERSON asked if section  2 is confidential and if it is                                                              
not required to be filed with the  department, how would they know                                                              
if a company is using credit scoring or not.                                                                                    
                                                                                                                                
MS.  DEAL noted  that  language  says  "if requested"  and  that's                                                              
language the sponsor  would prefer to not have in  there. She says                                                              
the information  is confidential within the Division  of Insurance                                                              
and the onus is on them to not have unfair discrimination.                                                                      
                                                                                                                                
SENATOR TORGESON asked how they would know.                                                                                     
                                                                                                                                
MS.  DEAL said  the  Division  of  Insurance cannot  not  disclose                                                              
information about  why a person's  policy was cancelled.  However,                                                              
when adverse  action is  taken, they  have to  report that  to the                                                              
person. This is  included in the letter they send  out; it doesn't                                                              
have to be requested at a later time.  The provision to cancel has                                                              
been deleted. They  can charge you a higher premium  and non-renew                                                              
you under their  particular company, but they would  have to place                                                              
you with  an affiliate  company that they  have, so basically  you                                                              
would stay within the particular insurance company.                                                                             
                                                                                                                                
SENATOR TORGERSON  said that  didn't answer  his question,  but he                                                              
didn't think  that anyone  could say what's  going on  unless it's                                                              
requested by the director.                                                                                                      
                                                                                                                                
     The  idea is  to have  some public  awareness of  what's                                                                   
     going  on and it's  all confidential.  We have the  same                                                                   
     thing right  now. The Division of Insurance  has already                                                                   
     testified that  the people file their credit  score with                                                                   
     them to get their rates approved.  Now we're saying they                                                                   
     don't  even   need  to  file  it  with  them.   I  don't                                                                   
     understand that.                                                                                                           
                                                                                                                                
PORTIONS OF THE FOLLOWING TESTIMONY ON SB 320 ARE VERBATIM                                                                    
                                                                                                                                
SARAH   MCNAIR  GROVE:   PROPERTY-CASUAL   ACTUARY,  DIVISION   OF                                                            
INSURANCE, THE  DIVISION HAS SUPPORTED THE  LEGISLATURE'S ATTEMPTS                                                              
TO PLACE PARAMETERS ON THE USE OF  CREDIT INFORMATION IN INSURANCE                                                              
RATES, HOWEVER  BELIEVE THE PROPOSED LEGISLATION  FAILS TO ADDRESS                                                              
ISSUES THAT ARE  OF CONCERN TO CONSUMERS AND,  IN PARTICULAR, WE'D                                                              
LIKE TO POINT OUT A COUPLE OF AREAS  THAT WE THINK ARE SIGNIFICANT                                                              
OMISSIONS.                                                                                                                      
                                                                                                                                
FIRST ON THE  UNDERWRITING SIDE, THE LEGISLATION  SHOULD INCLUDE A                                                              
PROHIBITION  THAT AN  INSURER MAY  NOT  FAIL TO  RENEW A  PERSONAL                                                              
INSURANCE POLICY  BASED IN WHOLE  OR IN PART ON  CONSUMERS' CREDIT                                                              
HISTORY.                                                                                                                        
                                                                                                                                
SECOND, WE  BELIEVE THAT THE  LEGISLATION SHOULD ALSO  INCLUDE THE                                                              
SAME  LIMITATIONS  ON  THE  USE  OF  PARTICULAR  TYPES  OF  CREDIT                                                              
INFORMATION ON THE UNDERWRITING SIDE  AS IT DOES ON THE RATING AND                                                              
THAT PIECE IS MISSING FROM THIS.                                                                                                
                                                                                                                                
STEVENS: COULD YOU REPEAT THE SECOND ONE AGAIN?                                                                               
                                                                                                                                
GROVE: PROHIBITIONS  ON THE TYPES  OF CREDIT INFORMATION  THAT CAN                                                            
BE USED THAT ARE  INCLUDED ON THE RATE MAKING SIDE  SHOULD ALSO BE                                                              
INCLUDED  ON  THE  UNDERWRITING   SIDE.  FOR  EXAMPLE,  THIS  BILL                                                              
CURRENTLY PROHIBITS  THE USE OF MEDICAL INFORMATION  FROM A CREDIT                                                              
REPORT IF IT'S USED IN RATE MAKING  BUT DOES NOT INCLUDE THAT SAME                                                              
PROHIBITION IF IT'S USED IN UNDERWRITING.  SO AN INSURANCE COMPANY                                                              
COULD USE YOUR MEDICAL INFORMATION  IN THEIR CREDIT REPORT TO DENY                                                              
YOU COVERAGE, TO SAY WE WON'T ISSUE YOU A POLICY.                                                                               
                                                                                                                                
WE ALSO  BELIEVE THAT SOME  OF THE PROHIBITIONS  THAT ARE  USED IN                                                              
THE RATE MAKING SHOULD BE STRENGTHENED  AND THEN THOSE SAME THINGS                                                              
CARRIED  OVER  TO  THE UNDERWRITING  SIDE.  FOR  AN  EXAMPLE,  THE                                                              
INSURER  SHOULD BE  PROHIBITED  FROM USING  A  PARTICULAR TYPE  OF                                                              
CREDIT  CARD  -  A  PENNY'S  CARD   VERSUS  A  NORDSTROM  CARD  OR                                                              
MASTERCARD KIND OF  THING, AND THE TOTAL NUMBER  OF INQUIRIES, NOT                                                              
JUST  MARKETING, PROMOTIONAL  OR INSURANCE  INQUIRIES, WHICH  THEY                                                              
SAY THEY ALREADY DO NOT USE.                                                                                                    
                                                                                                                                
UNLESS THE  BILL PROVIDES  SUBSTANTIAL AUTHORITY  TO REGULATE  AND                                                              
ENFORCE  THE MANNER  IN WHICH  A CONTROVERSIAL  PRACTICE IS  USED,                                                              
GRANTING  CONFIDENTIALITY  TO  THAT   PRACTICE  IS  INAPPROPRIATE.                                                              
CONSUMERS SHOULD  KNOW THAT  THE PRACTICE IS  FAIR AND THAT  IT IS                                                              
BEING FAIRLY REGULATED. WE BELIEVE  THAT THIS LEGISLATION DOES NOT                                                              
PROVIDE  ADEQUATE   CONSUMER  PROTECTIONS   TO  JUSTIFY   GRANTING                                                              
CONFIDENTIALITY TO  THE MODELS THAT  ARE USED IN  UNDERWRITING AND                                                              
IN RATING.                                                                                                                      
                                                                                                                                
THE  PROPOSED   LEGISLATION  LACKS  A  BALANCE   BETWEEN  CONSUMER                                                              
CONCERNS AND INDUSTRY  CONCERNS AND SOME OF THE  ISSUES THAT WE'VE                                                              
RAISED WE  BELIEVE COULD  STRENGTHEN THE  CONSUMER PROTECTIONS  OF                                                              
THIS LEGISLATION.                                                                                                               
                                                                                                                                
AND THEN I WOULD LIKE TO ADDRESS  THE ISSUE THAT SENATOR TORGERSON                                                              
RAISED OF  HOW WE  WOULD KNOW.  THIS BILL  DOES NOT ELIMINATE  THE                                                              
CURRENT  REQUIREMENT THAT  INSURERS FILE  THEIR RATE FILINGS  WITH                                                              
US. SO THAT  WOULD NOT CHANGE  AND BASED ON OUR  CURRENT PRACTICE,                                                              
WE  DO  ASK  INFORMATION  ABOUT HOW  INSURERS  ARE  USING  CREDIT,                                                              
REPORTS OF CREDIT  INFORMATION IN THEIR RATE MAKING  PRACTICE. THE                                                              
ONE THING THAT  HAS BEEN AN ISSUE  WITH SOME INSURERS AND  THAT WE                                                              
HAVE  DISAPPROVED  FILINGS  FOR  IS BECAUSE  THEY  HAVE  NOT  BEEN                                                              
WILLING TO GIVE  US THE ACTUAL MODELS OF HOW  THEY ARE CALCULATING                                                              
THE SCORES  AND SO THIS WOULD  ALLOW THEM TO  GIVE IT TO US  SO WE                                                              
WOULD NOT BE ABLE TO DIVULGE THE CONTENTS OF THAT MODEL.                                                                        
                                                                                                                                
STEVENS:  QUESTIONS?  DID  YOU  WORK   WITH  THE  SPONSOR  IN  THE                                                            
DEVELOPMENT OF [version] \F?                                                                                                    
                                                                                                                                
GROVE: WE  DID DISCUSS THINGS WITH  HER, YES, AND WE  RAISED THESE                                                            
SAME ISSUES, ALTHOUGH THESE ARE NOT NEW ISSUES.                                                                                 
                                                                                                                                
STEVENS: I  MUST BE SORT OF  SLIPPING HERE, BUT WASN'T  YOUR FIRST                                                            
TESTIMONY THE FIRST  TIME WE HEARD THIS BILL? NOW  HAVE YOU GOTTEN                                                              
MORE RESTRICTIVE IN  YOUR TESTIMONY SINCE THE FIRST  TIME WE HEARD                                                              
THIS BILL?  THE FIRST TIME I  BELIEVE YOU GUYS TESTIFIED  YOU WERE                                                              
NEUTRAL ON THE BILL.                                                                                                            
                                                                                                                                
GROVE: WE  SAID THAT WE SUPPORTED  SOME KIND OF PARAMETERS  ON THE                                                            
USE OF  CREDIT INFORMATION AND  THE FIRST TIME  WE HEARD IT  WAS A                                                              
PROHIBITION AND AT THAT POINT WE  FELT THAT THAT WAS A POLICY CALL                                                              
SO WE  DID NOT  WEIGH IN  WHETHER IT  SHOULD BE  A PROHIBITION  OR                                                              
WHETHER  IT  SHOULD  BE  PARAMETERS  LIKE  THIS.  NOW  THAT  WE'RE                                                              
DISCUSSING WHAT THE PARAMETERS ARE ...                                                                                          
                                                                                                                                
STEVENS: THIS  IS GETTING  A LITTLE  FRUSTRATING. WE'VE  HAD THREE                                                            
COMMITTEE HEARINGS BETWEEN THE SPONSOR  AND ALL THE PEOPLE AND NOW                                                              
EVERY TIME WE  COME TOGETHER IT GETS FURTHER AND  FURTHER APART. I                                                              
THOUGHT  WE WERE  GOING  TO  HAVE A  CONSENSUS  ON  THIS FROM  THE                                                              
DIVISION AND  NOW YOU COME IN AND  SAY THAT YOU DON'T  SUPPORT THE                                                              
BILL. IS THAT WHAT YOU'RE TELLING US?                                                                                           
                                                                                                                                
GROVE: WE DO NOT SUPPORT THE WAY  THAT IT IS CURRENTLY WRITTEN AND                                                            
IT RAISED SOME ISSUES THAT WE THINK NEED TO BE ADDRESSED.                                                                       
                                                                                                                                
STEVENS: THANK YOU.                                                                                                           
                                                                                                                                
GROVE: BUT WHATEVER YOU PASS WE WILL ENFORCE AS WE NEED TO.                                                                   
                                                                                                                                
STEVENS: THANK YOU.  COMMENTS FROM COMMITTEE MEMBERS?  LET'S GO TO                                                            
JOHN GEORGE.                                                                                                                    
                                                                                                                                
JOHN GEORGE: THANK  YOU MR. CHAIRMAN. MY NAME IS  JOHN GEORGE. I'M                                                            
HERE TODAY  ON BEHALF OF  THE NATIONAL ASSOCIATION  OF INDEPENDENT                                                              
INSURERS,  A  PROPERTY  CASUALTY  TRADE  ASSOCIATION  REPRESENTING                                                              
ABOUT  690 INSURANCE  COMPANIES THROUGHOUT  THE  COUNTRY, MANY  OF                                                              
WHOM  DO  WRITE  INSURANCE  IN  THE   STATE  OF  ALASKA,  ALTHOUGH                                                              
CERTAINLY NOT ALL  690 OF THEM, BUT WE DO ACCOUNT  FOR FAR GREATER                                                              
THAN 50 PERCENT OF ALL THE AUTO AND  HOMEOWNERS' INSURANCE WRITTEN                                                              
IN THE STATE OF ALASKA.                                                                                                         
                                                                                                                                
THERE'S  BEEN A  LOT OF WORK  DONE ON  THIS BILL  AND THE  VARIOUS                                                              
DIFFERENT DRAFTS  OF IT. I'LL THROW  OUR TWO CENTS IN -  WE'RE NOT                                                              
REAL HAPPY WITH THE BILL EITHER FOR  THE OPPOSITE REASONS THAT THE                                                              
DIVISION  OF INSURANCE  IS NOT  HAPPY. BUT  LET ME  GIVE YOU  SOME                                                              
                                                              RD                                                                
NATIONAL PERSPECTIVE AS WELL. SO  FAR, AND THIS IS AS OF THE 3  OF                                                              
MAY, TWO STATES  HAVE PASSED BILLS THAT WOULD  BE MORE RESTRICTIVE                                                              
THAN  WHAT  YOU'RE   TALKING  ABOUT  AND  THAT'S   WASHINGTON  AND                                                              
MARYLAND.   THREE  STATES   HAVE  PASSED   BILLS  THAT  ARE   LESS                                                              
RESTRICTIVE  - THAT  WOULD  BE IDAHO,  UTAH  AND MINNESOTA.  THREE                                                              
STATES HAVE BILLS  PENDING THAT ARE NOT AS RESTRICTIVE  AND MAY OR                                                              
MAY NOT PASS - THAT'S ARIZONA, MISSOURI  AND KANSAS. ELEVEN STATES                                                              
HAVE ELECTED NOT TO PASS LEGISLATION.                                                                                           
                                                                                                                                
STEVENS:  CAN  I  INTERRUPT  YOU  FOR  A  MINUTE?  THIS  HAS  BEEN                                                            
BOTHERING ME -  EVERYBODY'S BEEN BRINGING THIS UP.  WHY IS IT THAT                                                              
ALL  OF A  SUDDEN THIS  YEAR EVERYBODY  IN  EVERYBODY'S STATE  HAS                                                              
INITIATED THIS  LEGISLATION? WHERE DID  THIS COME FROM?  JUST FILL                                                              
ME IN ON THAT.  DID IT COME OUT OF A GOVERNOR'S  CONFERENCE OR DID                                                              
IT COME OUT OF A - YOU KNOW...                                                                                                  
                                                                                                                                
GEORGE: I THINK  THERE ARE PROBABLY - THERE ARE  SEVERAL INSURANCE                                                            
COMPANIES THAT HAVE BEEN AGGRESSIVELY USING IT AND ...                                                                          
                                                                                                                                
STEVENS: BUT  IT'S BEEN BEING USED  FOR UP TO SIX YEARS  EVEN HERE                                                            
IN ALASKA.  THE QUESTION I  HAVE IS WHY IS  IT ALL OF A  SUDDEN IN                                                              
ONE YEAR  28 STATES ARE INTRODUCING  LEGISLATION TO GET  RID OF IT                                                              
WHEN IT'S BEEN USED FOR SIX YEARS?  I'M NOT ASKING YOU TO HAVE THE                                                              
ANSWER TO  THAT BUT THAT'S A  QUESTION THAT'S JUST SORT  OF POPPED                                                              
INTO  MY HEAD.  YOU KNOW,  EVERYONE  SAYS OH,  THEY'RE DOING  THIS                                                              
HERE, THEY'RE DOING THIS THERE. WHY ALL OF A SUDDEN?                                                                            
                                                                                                                                
GEORGE: I  DON'T HAVE A PRECISE  ANSWER ALTHOUGH I  THINK PROBABLY                                                            
IT  DID   COME  UP   AT  A  NATIONAL   ASSOCIATION  OF   INSURANCE                                                              
COMMISSIONERS MEETING OR AN [INDISC] MEETING OR ONE OF THOSE.                                                                   
                                                                                                                                
STEVENS: IT COULDN'T HAVE BEEN -  WAS IT INDUSTRY DRIVEN OR WAS IT                                                            
POLITICALLY  DRIVEN?  THAT'S  THE   QUESTION.  OR  WAS  IT  PUBLIC                                                              
INTEREST RESEARCH GROUP DRIVEN?                                                                                                 
                                                                                                                                
GEORGE: I  CAN'T ANSWER  THAT. I  DON'T HAVE  A PRECISE  ANSWER TO                                                            
THAT. MOST  STATES, THE  MAJORITY OF STATES  HAVE EITHER  TAKEN UP                                                              
BILLS  AND NOT  GONE  FORWARD WITH  THEM. I  SAID  11 STATES  HAVE                                                              
CONSIDERED  BILLS AND FAILED  TO PASS  THEM. THERE'S ANOTHER  FIVE                                                              
STATES -  CALIFORNIA, NEW  YORK, OHIO,  SOUTH CAROLINA,  TENNESSEE                                                              
AND VERMONT - THAT ARE NOT EXPECTED TO ADVANCE LAWS THIS YEAR.                                                                  
                                                                                                                                
STEVENS:  HOW  MANY STATES  TOTAL  DO  YOU  HAVE THERE  THAT  HAVE                                                            
ADDRESSED THE ISSUE THIS YEAR?                                                                                                  
                                                                                                                                
GEORGE:  INCLUDING  ALASKA THAT  WOULD  BE 25  -  SO  HALF OF  THE                                                            
STATES. BUT TWO  HAVE PASSED MORE RESTRICTIVE LAWS  AND THREE HAVE                                                              
PASSED LESS RESTRICTIVE LAWS AND THE REST HAVE DONE NOTHING.                                                                    
                                                                                                                                
STEVENS: SO  25 STATES IN  ONE YEAR ALL  OF A SUDDEN  DECIDED THAT                                                            
IT'S TIME  TO STOP  THIS PRACTICE.  I'M JUST  TOO SUSPECT  TO KNOW                                                              
THAT IT'S  NOT BEING INITIATED FROM  SOMETHING. I DON'T  KNOW WHAT                                                              
IT IS - I DON'T KNOW THAT ANSWER  TO THAT, BUT ANYWAY I'M SORRY, I                                                              
JUST HAD TO ASK  THAT QUESTION BECAUSE IT'S BEEN  BOTHERING ME FOR                                                              
SEVERAL WEEKS ON THIS BILL.                                                                                                     
                                                                                                                                
GEORGE: FINE. AND MAYBE I HAVE THE  SOLOMON SOLUTION. SINCE NO ONE                                                            
SEEMS  TO BE  REALLY HAPPY  WITH  THE COMPROMISE  THAT'S COME  UP,                                                              
SENATOR  ELTON OF THE  TRANSPORTATION COMMITTEE,  WHERE THIS  BILL                                                              
HAD ITS FIRST  HEARING, HAS COME  OUT WITH A PRESS  RELEASE ASKING                                                              
FOR A PROBE OF  CREDIT SCORING WITH THE ATTORNEY  GENERAL'S OFFICE                                                              
AND THE DIVISION  OF INSURANCE. AND FRANKLY, WE THINK  THAT IS NOT                                                              
A BAD IDEA. IT'S  ONE OF THOSE, IF YOU KNEW WHAT  WE KNEW WE THINK                                                              
YOU'D AGREE WITH  US AND WE HEAR LOTS OF ANECDOTAL  STORIES AND WE                                                              
THINK  THIS MIGHT  DISCRIMINATE AGAINST  PEOPLE  IN THESE  CERTAIN                                                              
CATEGORIES AND ALL, BUT I DON'T THINK  ANYBODY'S REALLY STUDIED IT                                                              
OTHER THAN THE INSURANCE INDUSTRY  AND COME UP WITH REAL HARD FACT                                                              
FINDING. SO WE'RE  TRYING TO LEGISLATE BASED ON  INNUENDOES AND WE                                                              
THINK THIS MIGHT AND SO MAY A PROBE ...                                                                                         
                                                                                                                                
STEVENS: A  PROBE INTO THE DIVISION  OF INSURANCE OR A  PROBE INTO                                                            
THE INSURANCE COMPANIES?                                                                                                        
                                                                                                                                
GEORGE: A STUDY  OF CREDIT SCORING, RATING, THE  OPEN COMPETITION,                                                            
PRIOR [INDISC.], FILE  USE, THE WHOLE SCENARIO AND  GET OUT ON THE                                                              
TABLE ALL  OF THE  FACTS SO THAT  THE LEGISLATURE  CAN LOOK  AT IT                                                              
WITH ...                                                                                                                        
                                                                                                                                
STEVENS: WELL THIS IS THE THIRD HEARING  WE'VE HAD ON THIS BILL. I                                                            
MEAN WE'VE  TURNED FACTS OVER BEFORE  AND THE ONE FACT  THAT STILL                                                              
GETS IN  MY MIND IS THE  FACT THAT IF  WE TAKE THIS TOOL  AWAY, 51                                                              
PERCENT OF THE RATE PAYERS IN THE  STATE INSURANCE RATES ARE GOING                                                              
TO GO  UP, NINE PERCENT  ARE GOING TO GO  DOWN AND 40  PERCENT ARE                                                              
GOING TO STAY  THE SAME. ISN'T THAT THE NUMBER  THAT WAS TESTIFIED                                                              
IN FRONT OF THE TRANSPORTATION COMMITTEE?                                                                                       
                                                                                                                                
GEORGE: I DON'T BELIEVE THAT THAT IS THE NUMBER SENATOR.                                                                      
                                                                                                                                
STEVENS: THAT'S  THE NUMBER I READ  IN THE TESTIMONY  FROM MICHAEL                                                            
HAROLD. ARE  YOU ON LINE MR. HAROLD?  IS THAT THE NUMBER  THAT YOU                                                              
TESTIFIED IN FRONT OF THE TRANSPORTATION COMMITTEE?                                                                             
                                                                                                                                
HAROLD:  I DID  TESTIFY  AND I  DID MAKE  THE  STATEMENT THAT  OUR                                                            
COMPANIES TELL US  THAT THE MAJORITY OF THEIR  POLICYHOLDERS, WHEN                                                              
THEY  USE CREDIT  SCORING  AS A  FACTOR  IN RATE  MAKING,  RECEIVE                                                              
DISCOUNTS. SO  CONSEQUENTLY, IF THEY  WERE NOT ALLOWED TO  USE THE                                                              
TOOL, THEN  EITHER CURRENT  OR FUTURE  POLICYHOLDERS WILL  HAVE TO                                                              
PAY MORE - THE MAJORITY OF THEM.                                                                                                
                                                                                                                                
GEORGE: I  BELIEVE WHAT HE'S SAYING  THEN IS THAT THE  MAJORITY OF                                                            
PEOPLE WILL SEE ...                                                                                                             
                                                                                                                                
STEVENS: I  GOT TESTIMONY FROM MR.  HAROLD RIGHT HERE  ON FEBRUARY                                                            
28 - IT  SAYS 51 PERCENT OF  THE POLICYHOLDERS WOULD  RECEIVE RATE                                                              
INCREASES  THAT WOULD  AVERAGE  $180  A YEAR,  40  PERCENT OF  THE                                                              
POLICIES WOULD  STAY THE SAME,  NINE PERCENT OF  THE POLICYHOLDERS                                                              
ARE MOST LIKELY TO SUFFER LOSSES  AND WOULD GET DISCOUNTS ON THEIR                                                              
PREMIUM.  ARE  YOU  BACK-PEDALING  ON  US ON  YOUR  TESTIMONY  MR.                                                              
HAROLD?                                                                                                                         
                                                                                                                                
MICHAEL HAROLD:  NO SIR, I  AM NOT. I  THINK THAT THE  TESTIMONY I                                                            
GAVE IN  THE TRANSPORTATION COMMITTEE  WAS FROM ONE OF  OUR MEMBER                                                              
COMPANIES THAT I'D ASKED TO GIVE  ME AN ASSESSMENT OF HOW IT WOULD                                                              
IMPACT AND AT  THAT TIME [INDISC] WHAT WE WERE  DISCUSSING AND HOW                                                              
THAT WOULD IMPACT THE RATING STRUCTURE ON THEIR POLICYHOLDERS.                                                                  
                                                                                                                                
STEVENS: OKAY,  THANK YOU  MR. HAROLD. WE  HAD TESTIMONY  FROM THE                                                            
INDIVIDUAL - FROM  PROGRESSIVE WHO TOLD ME THAT  TWO-THIRDS OF HIS                                                              
POLICYHOLDERS'  INSURANCE RATES  WERE GOING  TO GO  UP IF WE  TOOK                                                              
THIS AWAY. I  CAN'T REMEMBER THE INDIVIDUAL'S NAME,  BUT HE SAT IN                                                              
YOUR CHAIR AND SAID THAT.                                                                                                       
                                                                                                                                
GEORGE: AND PART OF THE CONFUSION,  AND MAYBE I'M MISTAKEN ON THIS                                                            
...                                                                                                                             
                                                                                                                                
STEVENS:  THE PART OF  THE CONFUSION  IS THAT  EVERY TIME  THAT WE                                                            
COME TO THIS POINT  TO WHERE IT SOUNDS LIKE WE  HAVE AN AGREEMENT,                                                              
I  GET  EVERYBODY  IN  THE  SAME  ROOM  TOGETHER  AND  THERE'S  NO                                                              
AGREEMENT. WHY ARE WE WASTING THE TIME TO DO THIS?                                                                              
                                                                                                                                
GEORGE: I UNDERSTAND THAT. I THINK  THE CONFUSION MAY BE - IT'S MY                                                            
CONFUSION BECAUSE IF  CREDIT SCORING IS ALLOWED, AND  LET'S SAY WE                                                              
HAVE NO CREDIT  SCORING ALLOWED NOW, IF YOU ALLOW  IT, PEOPLE WILL                                                              
GET A DISCOUNT. IF, AS THEY ARE USING  IT NOW FOR UNDERWRITING BUT                                                              
NOT RATING,  SOME PEOPLE  IF THEY CAN'T  USE IT FOR  UNDERWRITING,                                                              
THEN THEY WILL  HAVE TO INCREASE  PREMIUMS AND IF THEY  CAN USE IT                                                              
FOR UNDERWRITING AND  RATING, PEOPLE WILL GET A  DISCOUNT. IF THEY                                                              
CAN'T USE IT FOR EITHER, THEN SOME PEOPLE WILL PAY [INDISC]                                                                     
                                                                                                                                
STEVENS:  THE DIVISION  OF INSURANCE  TOLD US  THE LAST TIME  THAT                                                            
THERE'S  RATES THAT  ARE  APPROVED BY  THE  DIVISION. RIGHT?  FIVE                                                              
RATES IF I'M  CORRECT. IS THAT RIGHT? THERE'S FIVE  RATES FOR AUTO                                                              
INSURANCE?                                                                                                                      
                                                                                                                                
GROVE: FIVE TIERS.                                                                                                            
                                                                                                                                
STEVENS: AND SO THE INSURER USES  THE CREDIT SCORING AS ONE OF THE                                                            
TOOLS IN THE  PROCESS TO DETERMINE WHERE THAT  INDIVIDUAL FALLS IN                                                              
WHAT  TIER.  EXPLAIN TO  ME,  BECAUSE  I'M  NOT IN  THE  INSURANCE                                                              
BUSINESS,  WHAT  THE  DIFFERENCE  BETWEEN  UNDERWRITING  AND  RATE                                                              
SCORING IS.                                                                                                                     
                                                                                                                                
GEORGE: UNDERWRITING  IS DECIDING WHETHER  OR NOT YOU  WILL INSURE                                                            
SOMEONE AND WHICH  COMPANY YOU'RE GOING TO PLACE  THEM IN OR WHICH                                                              
TIER. RATING IS  HOW YOU JUSTIFY WHAT YOU CHARGED  THE PERSON ONCE                                                              
YOU DECIDED TO WRITE THEM IN THAT PARTICULAR CLASS.                                                                             
                                                                                                                                
STEVENS: BUT THE RATES ARE APPROVED BY THE DIVISION?                                                                          
                                                                                                                                
GEORGE: ABSOLUTELY THEY ARE.                                                                                                  
                                                                                                                                
STEVENS: BUT WHERE  YOU PUT THAT INDIVIDUAL - THE  DIVISION HAS NO                                                            
INPUT  INTO THAT?  IT'S  ALL UP  TO  THE INDIVIDUAL  COMPANY  THAT                                                              
DECIDES TO TAKE THAT CONSUMER ON AS A RISK.                                                                                     
                                                                                                                                
GEORGE:  I BELIEVE  THAT  THAT'S  ACCURATE ALTHOUGH  PROBABLY  THE                                                            
DIVISION OF INSURANCE WOULD BETTER BE ABLE TO ANSWER THAT.                                                                      
                                                                                                                                
GROVE:  MR. CHAIR,  WHEN AN  INSURER USES  IT AS  A TIER  CRITERIA                                                            
WITHIN ONE  COMPANY, THEN  THAT IS PART  OF THEIR RATING  PLAN AND                                                              
THAT'S WHAT  THEY FILE  WITH US  AND TELL  US HERE'S THE  CRITERIA                                                              
THAT WE'RE GOING  TO USE, HERE'S THE SCORE THAT THEY  HAVE TO HAVE                                                              
TO BE ELIGIBLE FOR EACH INDIVIDUAL  TIER. SOME COMPANIES USE PRIOR                                                              
INSURANCE,  THEY USE  CREDIT INFORMATION,  WHATEVER CRITERIA  THEY                                                              
WANT TO  USE TO  PLACE AN INDIVIDUAL  INTO A  TIER. THAT  IS FILED                                                              
WITH US  AS PART  OF THE RATE  FILING. WHEN IT  IS USED  TO DECIDE                                                              
WHICH COMPANY AN  INDIVIDUAL IS GOING TO, THAT  IS AN UNDERWRITING                                                              
AND THAT IS NOT FILED WITH US.                                                                                                  
                                                                                                                                
STEVENS: THANK YOU.                                                                                                           
                                                                                                                                
TORGERSON: AND  YOU DON'T GET THEIR  MODEL ON HOW THEY  DID THAT -                                                            
IS THAT RIGHT?                                                                                                                  
                                                                                                                                
GROVE: WHAT  WE HAVE DONE IS  WE HAVE ASKED FOR  INFORMATION ABOUT                                                            
THE MODEL.  WE'VE ASKED FOR THE FACTORS  THAT THEY USE  OFF OF THE                                                              
CREDIT REPORTS.  BECAUSE  OF THE CONFIDENTIALITY  ISSUES,  WE HAVE                                                              
ACTUALLY NOT ASKED COMPANIES, ALTHOUGH  WE HAVE RESERVED THE RIGHT                                                              
TO DO  SO IF WE  HAVEN'T GOTTEN  ENOUGH ADDITIONAL INFORMATION  TO                                                              
GIVE US THE SPECIFIC  WEIGHTINGS THAT THEY PUT  ON EACH PARTICULAR                                                              
FACTOR,   BUT   WE'VE   ASKED   FOR    STATISTICAL   SUPPORT   AND                                                              
JUSTIFICATION.                                                                                                                  
                                                                                                                                
TORGERSON: SOUNDS LIKE THE PRISON BILL.                                                                                       
                                                                                                                                
STEVENS: CAN  I SWITCH GEARS BACK  TO A QUESTION TO  THE DIVISION?                                                            
WHAT SORT OF - I'M SURE THERE'S STATUTES  AND REGULATIONS THAT ARE                                                              
IN   PLACE   NOW  THAT   PREVENT   DISCRIMINATORY   PRACTICES   IN                                                              
UNDERWRITING AND IN RATE PAYING. IS THAT CORRECT?                                                                               
                                                                                                                                
GROVE: THAT'S CORRECT.                                                                                                        
                                                                                                                                
STEVENS:  ARE THE PRACTICES  THAT  ARE OUTLINED  IN THIS BILL  ANY                                                            
DIFFERENT THAN THE  ONES THAT ARE ALREADY IN STATUTE?  I'M TALKING                                                              
ABOUT IN UNDERWRITING NOW.                                                                                                      
                                                                                                                                
GROVE: IN UNDERWRITING THEY ARE NO DIFFERENT.                                                                                 
                                                                                                                                
STEVENS: THEY ARE NO DIFFERENT.                                                                                               
                                                                                                                                
TORGERSON: DO  YOU HAVE THE AMENDMENTS  THAT YOU WANT IN  HERE? DO                                                            
YOU HAVE THEM WRITTEN UP?                                                                                                       
                                                                                                                                
GROVE: NOT WITH ME BUT WE DID HAVE SOME AMENDMENTS, YES.                                                                      
                                                                                                                                
STEVENS: I'M SORRY, WE SHOT YOUR TESTIMONY TO SHREDS HERE.                                                                    
                                                                                                                                
GEORGE: AND BASICALLY WHAT I WAS  ABOUT TO CONCLUDE WITH IS THAT A                                                            
FULL BLOWN STUDY  TO DETERMINE REALLY WHAT THE  FACTS ARE, WHETHER                                                              
OR NOT  A PARTICULAR CREDIT  FACTOR DISCRIMINATES  AGAINST SOMEONE                                                              
BECAUSE OF  RACE OR RELIGION OR  MEDICAL BILLS OR  EMPLOYMENT, YOU                                                              
KNOW WE HEAR  THESE ANECDOTAL STORIES  THAT IT MIGHT BUT  WE DON'T                                                              
BELIEVE THAT  IT DOES AND  WE THINK THAT  IF YOU REALLY  LOOKED AT                                                              
IT,  SPENT  SOME  TIME  TO  COME UP  WITH  A  REAL  SOLUTION  THAT                                                              
EVERYBODY COULD AGREE  ON THE FACTS ON THAT WOULD  BE FAR AND AWAY                                                              
BETTER AND  AS I SAY MOST STATES  HAVE ELECTED NOT TO  JUMP OUT ON                                                              
THE [INDISC]  OF THIS BUT TO THINK  ABOUT IT A LITTLE  BIT SO THEY                                                              
CAN COME UP WITH  THE PROPER SOLUTION. I WOULD HATE  TO THINK THAT                                                              
ALASKA WOULD  HAVE THE THIRD MOST  RESTRICTIVE BILL IN  THE UNITED                                                              
STATES BECAUSE  WE'RE JUST NOT A  MAJOR INSURANCE MARKET  AND IT'S                                                              
HARD TO INDUCE COMPANIES TO WRITE  INSURANCE HERE AS IT IS BECAUSE                                                              
LARGER  STATES  HAVE  THE  VOLUME  AND THEY  HAVE  A  LITTLE  MORE                                                              
LEVERAGE  FOR  THAT.  SO,  I  THINK,  RATHER  THAN  BEING  ON  THE                                                              
FOREFRONT OF  THIS ISSUE THAT  WE MIGHT BE  BETTER OFF TO  GET OUR                                                              
FACTS TOGETHER, SEE  WHAT WORKS IN THE OTHER STATES  AND COME BACK                                                              
AND DO IT AGAIN.                                                                                                                
                                                                                                                                
STEVENS: THANK YOU. SENATOR AUSTERMAN.                                                                                        
                                                                                                                                
AUSTERMAN: HAVE YOU  HEARD OF ANY COMPANIES THAT  WILL PULL OUT OF                                                            
ALASKA BECAUSE OF THIS BILL?                                                                                                    
                                                                                                                                
GEORGE: NO, NOT  IN SO MUCH AS THEY MIGHT PULL  OUT, ALTHOUGH IT'S                                                            
POSSIBLE. IT WOULD  PROBABLY DISCOURAGE NEW COMPANIES  FROM COMING                                                              
IN BUT WE HAVE ALREADY SEEN SOME  COMPANIES, FOR INSTANCE, TIGHTEN                                                              
THEIR UNDERWRITING  RESTRICTIONS AND  REALLY REDUCE THEIR  BULK OF                                                              
BUSINESS BECAUSE  THEY'RE NOT ALLOWED  TO USE IT FOR  RATING. THEY                                                              
ARE NOT AS  CONFIDENT IN THE  RATING METHODS THEY'RE USING  NOW AS                                                              
THEY WOULD  BE IN CREDIT  SCORING AND  THEREFORE THEY  HAVE REALLY                                                              
RESTRICTED THE  BULK OF BUSINESS  THAT THEY HAVE SO  IT DEFINITELY                                                              
HAS ALREADY AFFECTED  COMPANIES AND THERE ARE  COMPANIES THAT HAVE                                                              
FILED - TOLD THAT  THEY HAD TO PROVIDE THEIR SECRET  DATA AND THEY                                                              
COULDN'T  BE KEPT  CONFIDENTIAL  AND  THEY WITHDREW  THEIR  FILING                                                              
THEN, AT  WHICH TIME  THEY SAID OKAY,  IF WE HAVE  TO USE  OUR OLD                                                              
METHOD THEN WE'RE  GOING TO REALLY BE RESTRICTED  AND NOT WRITE AS                                                              
MUCH BUSINESS AS WE CAN BECAUSE WE'RE  NOT AS CONFIDENT THAT WE'RE                                                              
CHARGING AN ADEQUATE RATE FOR THOSE.                                                                                            
                                                                                                                                
AUSTERMAN: I  MEAN THIS  IS A BUSINESS  DECISION BY THE  COMPANIES                                                            
AND THEY'LL  BASE IT  UPON WHAT  THE LAWS  ARE AND EITHER  THEY'LL                                                              
WRITE IT AND CHARGE MORE OR THEY'LL LEAVE.                                                                                      
                                                                                                                                
GEORGE:  WHETHER  THEY'RE  ALLOWED TO  CHARGE  MORE  OR NOT  IS  A                                                            
QUESTION WHETHER THE DIVISION OF  INSURANCE WILL ALLOW THEM TO BUT                                                              
REALLY  IT'S  AN   ALLOCATION  ISSUE.  IT'S  NOT   THAT  INSURANCE                                                              
COMPANIES ARE  GOING TO MAKE MORE  MONEY, IT'S THAT  THEY'RE GOING                                                              
TO BE CHARGING  PEOPLE THAT ARE GOING  TO HAVE MORE LOSSES  - MORE                                                              
PREMIUM. THOSE  THAT HAVE  LESS LOSSES WILL  PAY LESS  PREMIUM AND                                                              
THAT'S  REALLY  A MORE  ACCURATE  PREDICTOR  OF WHICH  CLASSES  OF                                                              
PEOPLE WILL  HAVE BETTER LOSS HISTORY  AND THEREFORE CAN  PAY LESS                                                              
INSURANCE  AND THOSE  THAT ARE GOING  TO HAVE  A HIGHER  PREDICTED                                                              
LOSS WILL PAY A HIGHER PREMIUM. SO  IT'S AN ALLOCATION ISSUE, IT'S                                                              
NOT A PROFIT ISSUE.                                                                                                             
                                                                                                                                
TORGERSON: SOUNDS TO ME LIKE YOU  HAVE THE RIGHT IN PUERTO RICO OR                                                            
OTHER THE STATES OR YOU'RE GOING  TO ABANDON US. YOU MAY HAVE BEEN                                                              
SUCCESSFUL IN  LOBBYING 28 STATES AND  NOT HAD THEM PASS  THIS BUT                                                              
IT'S GOING TO  HAPPEN SO THIS IS AN INDUSTRY  CHANGE THAT'S COMING                                                              
DOWN THE  PIKE AND  IT DOESN'T BOTHER  ME IF  ALASKA IS  THE THIRD                                                              
MOST RESTRICTIVE. I MIGHT BE PROUD  OF THAT TO TELL YOU THE TRUTH.                                                              
                                                                                                                                
STEVENS: WE REALLY ARE ALL OVER THE MAP.                                                                                      
                                                                                                                                
MR.  STEVEN  CONN,  EXECUTIVE  DIRECTOR,  ALASKA  PUBLIC  INTEREST                                                            
RESEARCH  GROUP    (AKPIRG):  I  REALLY  APPRECIATE  THE  WAY  THE                                                              
CHAIRMAN HAS  OPENED UP THIS DISCUSSION  BY GETTING TO  THE QUICK.                                                              
THE  REASON  THAT  ALL  THESE  STATES  HAVE  MOVED  OUR  POTENTIAL                                                              
CONSUMER  [INDISC] CONCERNED  WHEN THEIR  RATES CHANGE. WHEN  THEY                                                              
HAVE A  DIVORCE, A CATESTROPHIC  MEDICAL OCCURANCE OR  A HAPPENING                                                              
THAT HAD  NOTHING TO DO WITH  THEIR DRIVING RECORD AND  NOTHING TO                                                              
DO WITH  THEIR ABILITY  TO PAY THEIR  PREMIUMS. SO, WE'RE  TALKING                                                              
ABOUT  THESE  RATE  CHANGES  AND  RATE CHANGES  THAT  HAVE  TO  BE                                                              
APPROVED BY THE DIVISION OF INSURANCE.                                                                                          
                                                                                                                                
BECAUSE OF STATEMENTS BY THE INSURANCE  COMPANIES THAT IT'S A ZERO                                                              
SUM GAIN OR ACTUALLY  AT FAULT BECAUSE UNFAIR  DISCRIMINATION IS -                                                              
AS THE  CHAIRMAN INDICATED  - AND THE  BURDEN IS ON  THE INSURANCE                                                              
COMPANY TO INDICATE  THAT IT IS NOT UNFAIR. THAT'S  THE PROCESS IN                                                              
PLACE.  WHAT  THIS  BILL  WOULD  DO IS  PUSH  IT  ALL  BEHIND  THE                                                              
CURTAINS.  WE WOULD  NOT HAVE WHAT  NOW ARE  PUBLIC RECORDS.  THEY                                                              
WOULD BE  CONFIDENTIAL.  THEY WOULD BE  CONSIDERED TRADE  SECRETS.                                                              
THEY WOULD  ALL BE HIDDEN AWAY.  THIS BILL DOES LITTLE  OR NOTHING                                                              
FOR THE  ISSUE THAT THE CONSUMERS,  INCLUDING THE SPONSOR  OF THIS                                                              
BILL, BROUGHT  TO OUR ATTENTION.  AND I  BELIEVE THIS WAS  NOT THE                                                              
MOTIVATIONAL MOVE. THIS  WAS INITIATED AS A BAN  ON CREDIT SCORING                                                              
BY ONE OF YOUR  COLLEAGUES OVER AN INCIDENT THAT  HE KNEW WELL WAS                                                              
TOTALLY  UNGEARED TO  THE PERSON  WITH WHOM IT  WAS INVOLVED.  ONE                                                              
OTHER THING.  THE INSURANCE  COMPANIES CONSISTENTLY  TELL  US THAT                                                              
CREDIT SCORES IS SO STATISTICALLY  ACCURATE THAT IT IS A WONDERFUL                                                              
SUBSTITUTE PREDICTOR  FOR FUTURE LIABILITY. HOWEVER,  WE KNOW THAT                                                              
ONE INSURANCE COMPANY  IS BEFORE THE DIVISION  OF INSURANCE ASKING                                                              
THAT THEIR CREDIT SCORE MECHANISM  BE REMOVED FROM ITS RATE MAKING                                                              
IN THE  AREA OF  FIRE PREVENTION  AND HEALTH.  SO, APPARENTLY,  IT                                                              
WASN'T  [INDISC] LOOSE  MONEY ON  THE DEAL  AND A  GOOD ONE  - THE                                                              
CONSUMERS ARE AFFECTED  BY IT. I WOULD URGE YOU  AT THIS JUNCTURE,                                                              
IF THIS IS THE  BEST WE CAN DO, TO WALK AWAY FROM  THIS BILL. THIS                                                              
BILL  IS  FRUSTRATING  CONSUMERS  WHO SEE  THEIR  PREMIUMS  RAISED                                                              
EXPONENTIALLY  [INDISC].  WE'RE NOT  TALKING  ABOUT  UNDERWRITING;                                                              
WE'RE  TALKING ABOUT  THE  RATES AS  YOU  INDICATED. [INDISC]  OUR                                                              
INSURANCE DIVISION PUT IN A POSITION  WHERE THEY HAVE TO JUSTIFY A                                                              
RATE OVER  A CREDIT SCORE THAT  CAN'T BE ANALYZED BY  ANYBODY ELSE                                                              
WHICH  ESSENTIALLY  GIVES THEM  AN  ALLIANCE  BY NATURE  WITH  THE                                                              
INSURANCE COMPANY.  THIS BILL  HAS LOST WHAT  IT'S INTENDED  TO DO                                                              
AND I  WOULD URGE  YOU AT  THIS LATE DATE  TO LET  IT DIE  IN THIS                                                              
COMMITTEE. THANK YOU FOR GIVING ME THIS OPPORTUNITY.                                                                            
                                                                                                                                
STEVENS: THANK  YOU FOR  YOUR TESTIMONY, MR.  CONN. ARE  THERE ANY                                                            
COMMENTS FROM COMMITTEE  MEMBERS. MR. LOHR, DO  YOU HAVE TESTIMONY                                                              
OR ARE YOU JUST  AVAILBABLE FOR QUESTIONS OR ARE  YOU EVEN ON LINE                                                              
STILL?                                                                                                                          
                                                                                                                                
MR. LOHR:  THANK YOU  MR. CHAIRMAN,  I'M AVAILABLE  TO ANSWER  ANY                                                            
QUESTIONS, I COULD  VENTURE AND ANSWER SOME OF THE  ONES YOU POSED                                                              
EARLIER, BUT THAT'S YOUR CHOICE.                                                                                                
                                                                                                                                
STEVENS:  THANKS YOU.  MR. HAROLD,  I'M SORRY  WE INTERRUPTED  YOU                                                            
PRIOR. DO YOU HAVE TESTIMONY FOR TODAY.                                                                                         
                                                                                                                                
HAROLD: I ACTUALLY WILL NOT, SENATOR.  I'LL LET OUR LOCAL COUNSEL,                                                            
JOHN GEORGE'S TESTIMONY STAND AT THIS POINT.                                                                                    
                                                                                                                                
STEVENS:  MR. KIBBY, ARE  YOU ON  LINE? IF  YOU ARE, PLEASE  STATE                                                            
YOUR AFFILIATION AND GO AHEAD WITH TESTIMONY.                                                                                   
                                                                                                                                
MR. LARRY  KIBBY, REGIONAL  VICE PRESIDENT,  ALLIANCE OF  AMERICAN                                                            
INSURERS:  MY COMMENTS  ARE PROBABLY  SIMILAR TO  MR. GEORGE  WITH                                                              
NEII AND  OTHERS THAT I  HAVE HEARD.  WE HAVE SOME  CONCERNS ABOUT                                                              
THE DRAFT  X OF THE  BILL AS IT  EXISTS RIGHT  NOW. A LOT  OF THEM                                                              
HAVE  BEEN ADDRESSED.  I  HAVE  A COUPLE  OF  OTHERS  THAT I  HAVE                                                              
BROUGHT UP FOR  PURPOSES OF DISCUSSION. NUMBER ONE  HAS TO DO WITH                                                              
THE VERY FIRST SECTION  OF THE BILL, SUB (A) WHERE  AN INSURER HAS                                                              
TO OBTAIN ORAL  OR WRITTEN PERMISSION OF AN APPLICANT  IN ORDER TO                                                              
USE  CREDIT  AND   CREDIT  HISTORY.  WE  BELIEVE   THAT  IS  QUITE                                                              
RESTRICTIVE IN TERMS OF ALLOWING  OUR COMPANIES TO OPERATE BOTH IN                                                              
THE UNDERWRITING AND RATING SIDE  OF THE EQUATION. IN OTHER STATES                                                              
WHERE THE  CREDIT BILLS  HAVE BEEN  TAKEN UP,  THERE IS  A CONCERN                                                              
EXPRESSED IN  A NUMBER  OF THEM AND  IN A  RULE THAT'S  PENDING IN                                                              
OREGON THAT INSURERS  MAKE AVAILABLE THE INFORMATION  TO CONSUMERS                                                              
ON THE APPLICATIONS OR HOWEVER THAT  THEY ARE IN FACT GOING TO USE                                                              
CREDIT. THEN  THE CONSUMER IS  NOTIFIED UP FRONT  AND IT IS  UP TO                                                              
THAT CONSUMER  TO GO FORWARD WITH  THAT COMPANY OR NOT  ONE WAY OR                                                              
THE OTHER.                                                                                                                      
                                                                                                                                
WE WOULD  MUCH PREFER THE  FACT THAT  THE INSURER BE  OBLIGATED TO                                                              
MAKE THAT DECISION KNOWN IF THEY  ARE GOING TO USE CREDIT UP FRONT                                                              
AS OPPOSED  TO HAVING TO RECEIVE  A WRITTEN OR ORAL  PERMISSION OF                                                              
THE CONSUMER IN ORDER TO USE THE CREDIT VARIABLE.                                                                               
                                                                                                                                
ON  THE  OTHER CONCERN  THAT  I  HAVE  AND  IT'S PROBABLY  MORE  A                                                              
QUESTION THAN A CONCERN, BUT IN SECTION  2 ON LINE 30, PAGE 4, THE                                                              
SUB (3)  WHERE WE  ARE NOT ALLOWED  TO USE  THE CREDIT  HISTORY OR                                                              
CREDIT SCORE  THAT RESULTS IN  UNFAIR DISCRIMINATION. I  GUESS I'M                                                              
REALLY NOT SURE EXACTLY WHAT THAT  MEANS. IT'S SOMEWHAT BROAD. SUB                                                              
(2)  ABOVE   IT  SAYS  THAT   WE  CAN'T  USE  METHODOLOGIES   THAT                                                              
INCORPORATE  GENDER,  RACE,  NATIONALITY   OR  RELIGION.  THAT  IS                                                              
SPECIFICALLY  A PROVISION  THAT IS  IN THE  FAIR CREDIT  REPORTING                                                              
ACT. WE RESPECT  THAT AND BELIEVE THAT IS WELL STATED  IN TERMS OF                                                              
THE  DISCRIMINATORY  ACTIVITY  AND   WE  WOULD  CERTAINLY  SUPPORT                                                              
SOMETHING LIKE  THAT. I'M JUST NOT  QUITE SURE WHAT THE  AUTHOR IS                                                              
GETTING AT  WITH SUB(3) THAT WOULD  BE ANY ADDITION TO  WHAT IS IN                                                              
SUB (2).  THOSE ARE THE  TWO SPECIFIC  CONCERNS THAT I  HAVE ABOUT                                                              
LOOKING AT THE  DRAFT OVER AND ABOVE THE OTHER  CONCERNS THAT HAVE                                                              
BEEN  STATED   BY  THE   OTHER  PEOPLE   WHO  HAVE  TESTIFIED.   I                                                              
SPECIFICALLY THINK THAT IT'S PROBABLY  NOT A BAD IDEA IF IT IS THE                                                              
DECISION IN ALASKA TO TAKE A LONGER  LOOK AT THIS WHOLE ISSUE - DO                                                              
A STUDY OF  ALL THE FACTORS  THAT LEAD TO UNDERWRITING  AND RATING                                                              
SPECIFICALLY TO WHERE CREDIT IS GOING.  WE CERTAINLY WOULD SUPPORT                                                              
SOMETHING LIKE THAT. THAT'S MY INITIAL LOOK AT THE BILL TODAY.                                                                  
                                                                                                                                
MR. MARK NIEHAUS,  PROGRESSIVE INSURANCE: I TESTIFIED  BEFORE THIS                                                            
COMMITTEE PREVIOUSLY.  I'M NOT HERE  TO REPEAT MY  TESTIMONY, JUST                                                              
BY WAY  OF BACKGROUND, PROGRESSIVE  HAS USED CREDIT IN  ALASKA FOR                                                              
FOUR YEARS APPROXIMATELY AND I WAS  THE ONE WHO TESTIFIED THAT THE                                                              
ORIGINAL BILL, WHICH WAS AN OUTRIGHT  BAN, WOULD HAVE CAUSED ABOUT                                                              
TWO-THIRDS OF  OUR EXISTING CUSTOMERS  TO GET RATE  INCREASES. I'M                                                              
VERY PLEASED WITH ALL THE WORK THAT  HAS BEEN DONE ON THIS VERSION                                                              
OF THE BILL.  I THINK IT'S WORTH NOTING, IF  PASSED, THIS [INDISC]                                                              
SIGNIFICANT RESTRICTIONS AND NEW  REQUIREMENTS INCLUDING FILING OF                                                              
DETAILED CREDIT MODEL WITH THE DIVISION  OF INSURANCE, WHICH WE'RE                                                              
PREPARED  TO DO BECAUSE  WE HAVE  DATA THAT  JUSTIFIES WHAT  WE'RE                                                              
DOING  AND WE'RE  HAPPY  TO FILE  THAT.  THAT  ALSO PRECLUDES  THE                                                              
DENIAL  OF COVERAGE  SOLELY  BASED ON  CREDIT.  AGAIN, THAT'S  NOT                                                              
SOMETHING  MY COMPANY  DOES, BUT  THAT'S AN  IMPORTANT CHANGE  AND                                                              
LASTLY, IT LIMITS  WHAT CAN BE USED - SOME OF  THE SPECIFIC LIMITS                                                              
ON CREDIT ITEMS  THAT CAN BE USED. I DO NOTE THAT  THIS VERSION IS                                                              
A LOT  BETTER THAN  THE PREVIOUS  VERSION, BUT  HAVING SAID  THAT,                                                              
THERE ARE STILL  SOME ISSUES THAT WE'RE NOT THRILLED  WITH BECAUSE                                                              
THERE ARE LIMITS  HERE IN TERMS OF WHAT CAN BE  USED AND THAT WILL                                                              
REDUCE THE PREDICTIVE POWER OF OUR CREDIT MODEL.                                                                                
                                                                                                                                
HAVING SAID  THAT, WE CAN LIVE WITH  THIS VERSION OF THE  BILL AND                                                              
THIS VERSION WOULD PRECLUDE WHAT  MY EARLIER TESTIMONY WAS THAT WE                                                              
WOULD BE LOOKING AT RATE INCREASES  ON TWO-THIRDS OF OUR BUSINESS.                                                              
THAT WOULD  NOT BE THE  CASE WITH THIS VERSION  OF THE BILL  IN MY                                                              
OPINION. THERE  ARE OTHER CHANGES,  THOUGH, THE ADVERSE  ACTION OF                                                              
THIS.  I REQUESTED  THAT  BE ALLOWED  TO HAVE  REASON  CODES AS  A                                                              
SEPARATE  NOTICE AND  THAT CHANGE  WAS NOT INCLUDED  IN THE  BILL,                                                              
WHICH IS DISAPPOINTING  AND IT WILL INCREASE OUT  COST, BUT AGAIN,                                                              
CAN I LIVE WITH  THIS? YES. I CAN CONTINUE TO  DO BUSINESS WITHOUT                                                              
SIGINFICANT   RATE  INCREASES.   SO   I  AM   PLEASED  WITH   THAT                                                              
DEVELOPMENT.  THAT  CONCLUDES  MY  TESTIMONY  UNLESS  THERE'S  ANY                                                              
QUESTIONS.                                                                                                                      
                                                                                                                                
STEVENS: IN THE SENSE THAT YOU SAY  YOU CAN LIVE WIHTIN THE BOUNDS                                                            
OF THIS  BILL AND IT  WON'T HAVE  SIGINFICANT INCREASES  INTO YOUR                                                              
CUSTOMERS THAT  HAVE GOOD  CREDIT, WHAT  ABOUT THE CUSTOMERS  THAT                                                              
HAVE POOR CREDIT SCORING. WHAT WILL THIS BILL DO FOR THEM?                                                                      
                                                                                                                                
NIEHAUS: THERE ARE LIMITS IN HERE  - SUCH AS YOU CAN NO LONGER USE                                                            
ANYTHING IDENTIFIED  WITH THE MEDICAL INDUSTRY CODE,  FOR EXAMPLE.                                                              
IF SOMEONE  WERE IN THAT  CATEGORY, PRESUMABLY THEIR  CREDIT WOULD                                                              
APPEAR  OTHER THAN  IT  WOULD HAVE  BEFORE  THIS BILL.  WE CAN  NO                                                              
LONGER -  WE HAVE TO  AGGREGATE ALL INQUIRIES  IN A  30-DAY PERIOD                                                              
AND COUNT THEM AS  ONE. SO, ALL OF THOSE THINGS  WILL TEND TO MAKE                                                              
OUR CREDIT MODEL  A LITTLE LESS PREDICTIVE, BUT  HAVING SAID THAT,                                                              
IT'S  STILL GOING  TO BE  USEFUL TO  US AND  IT WILL  ALLOW US  TO                                                              
CONTINUE  TO GIVE LOW  RATES TO  TWO-THIRDS OF  THE CUSTOMERS  WHO                                                              
DESERVE IT BASED ON THEIR [INDISC] BEHAVRIOR.                                                                                   
                                                                                                                                
SENATOR AUSTERMAN: HAVE YOU GOT THE X VERSION IN FRONT OF YOU?                                                                
                                                                                                                                
MR. NIEHAUS: YES, I DO.                                                                                                       
                                                                                                                                
SENATOR AUSTERMAN: ON  PAGE 4 WHEN IT TALKS ABOUT  THE INSURER MAY                                                            
NOT USE THE  FOLLOWING TYPE OF  CREDIT HISTORY AND IT  TALKS ABOUT                                                              
THE ABSENCE IN NUMBER (1), LINE 25  OF THE CREDIT HISTORY. THEN ON                                                              
LINE  26 WITH  THE  NEW  X VERSION,  THEY  HAVE ADDED  THE  LINES:                                                              
"UNLESS THE  INSURER HAS FILED  ACTUARIAL…" WHAT DOES  THAT REALLY                                                              
DO TO THAT SECTION?                                                                                                             
                                                                                                                                
MR. NIEHAUS: WELL, MY READING OF  THAT SECTION IS THAT INSURERS IF                                                            
THEY  PROPOSE TO  TREAT WHAT  WE WOULD  CALL NO-HITS  - THERE  ARE                                                              
PEOPLE WITHOUT  ANY VERIFIABLE CREDIT  HISTORY - WE WOULD  HAVE TO                                                              
FILE  OUR ACTUARIAL  DATA JUSTIFYING  HOW  WE ARE  GOING TO  TREAT                                                              
THOSE  INDIVIDUALS.  AND  AGAIN,   AS  I  STATED  IN  MY  PREVIOUS                                                              
TESTIMONY,  MY  COMPANY  HAS  THE   DATA  THAT  WILL  JUSTIFY  OUR                                                              
TREATMENT OF NO-HITS.  SO WE ARE ACTUALLY OKAY  WITH THAT LANGUAGE                                                              
AND ARE PREPARED TO JUSTIFY IT WITH THE DIVISION OF INSURANCE.                                                                  
                                                                                                                                
SENATOR AUSTERMAN: THANK YOU.                                                                                                 
                                                                                                                                
MR. MARK  SECON: AMERICAN  INSURANCE ASSOCIATION:  I WON'T  REPEAT                                                            
ANYTHING THAT HAS BEEN SAID BEFORE.  I JUST WANT TO MENTION IN THE                                                              
FIRST SECTION -  I THINK IT'S IMPORTANT. THIS IN  ESSENCE ALLOWS A                                                              
CONSUMER TO OPT IN OR OUT OF WHETHER  OR NOT A COMPANY USES CREDIT                                                              
INFORMATION WITH  THEM AND IT'S UNCLEAR  WHETHER OR NOT  THEY WILL                                                              
CONTINUE TO HAVE A RELATIONSHIP WITH  THAT COMPANY. IT IS PROBABLY                                                              
A BETTER FORMAT  TO INSURE THAT THE CONSUMER IS  PROPERLY INFORMED                                                              
THAT   THE  COMPANY   PROVIDES  APPROPRIATE   DISCLOSURE  OF   THE                                                              
INFORMATION THAT CREDIT SCORING IS BEING USED.                                                                                  
                                                                                                                                
EARLIER THERE  WAS TESTIMONY  ABOUT THE IMPACT  ON RATES  AND I'LL                                                              
JUST  GIVE YOU  A COUPLE  FIGURES  WE HAVE  FROM A  COUPLE OF  OUR                                                              
COMPANIES. ONE OF  OUR COMPANEIS WHICH IS A NATIONAL  CARRIER, BUT                                                              
DOESN'T DO A  LOT OF WRITING IN ALASKA, SHOWS  THE CREDIT SCORING,                                                              
BECAUSE  MOST PEOPLE  TEND TO HAVE  GOOD CREDIT,  RESULTS IN  MORE                                                              
PEOPLE GETTING ABOUT  66% LOWER RATES. IN THE STATE  OF UTAH WHERE                                                              
WE HAVE  BEEN INVOLVED  IN LEGISLATION THERE,  THE FIGURE  THAT WE                                                              
GAVE THE DEPARTMENT  IS THAT 53% OF THE PEOPLE IN  UTAH PEOPLE GOT                                                              
LOWER INSURANCE RATES DUE TO THE USE OF CREDIT.                                                                                 
                                                                                                                                
THE KEY  THING IN UTAH  IS YOU HAVE TO  REMEMBER IS THAT  UTAH HAS                                                              
THE HIGHEST PERSONAL  BANKRUPTCY RATE IN THE NATION.  SO, PROBABLY                                                              
LESS PEOPLE IN  UTAH HAVE GOOD CREDIT THAN ANYWHERE  ELSE. THERE'S                                                              
BEEN DISCUSSIONS ABOUT  IT BEING A PREDICTIVE AND  I DON'T KNOW IF                                                              
ANY  OF YOU  HAVE HAD  THE OPPORTUNITY  TO SEE  THE FAIR  [INDISC]                                                              
PRESENTATION OF THE STATISTICAL SIGNIFICANCE  OF CREDIT SCORING IS                                                              
FAIRLY SIGNIFICANT. I'LL ANSWER ANY QUESTIONS.                                                                                  
                                                                                                                                
STEVENS: THAT  CONCLUDES THE PUBLIC  TESTIMONY PORTION OF  YET OUR                                                            
THIRD ATTEMPT TO TRY TO GET SOMETHING….                                                                                         
                                                                                                                                
SENATOR AUSTERMAN:  ON PAGE 4 THE  MAKING OF RATES, WE  PUT IN THE                                                            
WORDS, "IF  REQUESTED BY  THE DIRECTOR".  WOULD YOU EXPLAIN  AGAIN                                                              
WHY THAT WAS PUT IN THERE.                                                                                                      
                                                                                                                                
GROVE: I  BELIEVE I HAD A  DISCUSSION WITH AN INDIVIDUAL  WHO SAID                                                            
IF WE WOULD BE  BOMBARDED BY TOO MUCH INFORMATION  AND IF WE COULD                                                              
GET THIS  INFORMATION ONLY IF WE  NEEDED IT. I SAID,  'WELL, WE'RE                                                              
PROBABLY GOING  TO ASK FOR IT, SO,  IT DOESN'T HURT IT  IF YOU PUT                                                              
IT IN THERE BY REQUEST. SO WE'RE GOING TO ASK FOR IT ANY WAY.'                                                                  
                                                                                                                                
STEVENS: DO YOU GET IT NOW?                                                                                                   
                                                                                                                                
GROVE: BEFORE WE APPROVE A FILING,  THEY DON'T GIVE US INFORMATION                                                            
ABOUT THE  FACTORS THAT  THEY USE  IN THE  CREDIT MODEL  ABOUT THE                                                              
STATISTICAL CORRELATIONS BETWEEN  THOSE FACTORS IF IT HAS NOT BEEN                                                              
APPROVED. WHEN  THEY HAVE  GIVEN US  THAT INFORMATION,  THEN WE'VE                                                              
APPROVED THEIR FILINGS.                                                                                                         
                                                                                                                                
STEVENS: BUT THEY HAVE TO GIVE YOU  THE ALGORITHM FORMULA IN ORDER                                                            
FOR YOU TO APPROVE THEIR FILING, RIGHT?                                                                                         
                                                                                                                                
GROVE: WE  HAVE NOT  ACTUALLY REQUIRED  THE SPECIFIC FORMULA  THAT                                                            
SAYS I ADDED 2% FOR A BANKRUPTCY  AND MINUS 5% FOR SOMETHING ELSE.                                                              
WE  HAVE JUST  ASKED  WHAT INFORMATION  DO  YOU USE  OFF A  CREDIT                                                              
REPORT AND HOW DO YOU USE IT.                                                                                                   
                                                                                                                                
STEVENS:  YOU HAVE NEVER  ACTUALLY ANALYZED  THE ACTUAL  ALGORITHM                                                            
THEY USE WITH THEIR CREDIT SCORING.                                                                                             
                                                                                                                                
GROVE: TWO INSURERS  HAVE ACTUALLY GIVEN ME THE  ALGORITHM ITSELF,                                                            
BUT WE  HAVE NOT  REQUIRED IT.  IF THEY  HAVE GIVEN US  ADDITIONAL                                                              
SUFFICIENT INFORMATION, WE CAN GET SOME IDEA OF HOW IT WORKS.                                                                   
                                                                                                                                
STEVENS:  SO SOME  GIVE IT  UP AND  SOME DON'T  JUST LIKE  ANYBODY                                                            
ELSE…                                                                                                                           
                                                                                                                                
TAPE 02-29, SIDE B                                                                                                            
                                                                                                                              
STEVENS: THERE'S SO  MANY UNCERTAINTIES. I'M A  FIRM BELIEVER THAT                                                            
WE DON'T  HAVE AS A LEGISLATURE,  AN OBLIGATION TO RESPOND  TO THE                                                              
PERSONAL  FINANCIAL  SITUATIONS OF  EVERY  INDIVIDUALS'  PEERSONAL                                                              
CREDIT  HISTORY.  IF  SOME  PEOPLE  HAVE  POOR  CREDIT,  THAT'S  A                                                              
FUNCTION OF  THEIR LIFE AND THEIR  OBLIGATION TO GET  IT STRAIGHT.                                                              
IN  THE SAME  BREATH, IF  THOSE INDIVIDUALS  ARE  BEING PLACED  IN                                                              
UNFAIR CIRCUMSTANCES  IN HOW THEY FALL UNDER THEIR  TIERS, THEN WE                                                              
SHOULD LOOK INTO  IT. THAT'S THE PORTION OF THIS BILL  I DO LIKE -                                                              
IS THE FACT THAT WE DO GET TO LOOK  INTO IT - AND THAT THEY SHOULD                                                              
COME BACK. I  HAVE NOT HEARD ABOUT SENATOR ELTON'S  INQUIRY BY THE                                                              
A.G. WHEN WAS THAT RELEASED?                                                                                                    
                                                                                                                                
SOMEONE MADE AN INDISTINGUISHABLE ANSWER.                                                                                       
                                                                                                                              
STEVENS: WE'RE AT  A CRITICAL POINT WITH THE COMMITTEE.  EITHER WE                                                            
MOVE IT ON. IN  REALITY WE'VE WORKED ON THIS THING  FOR SIX, SEVEN                                                              
WEEKS MINIMUM  AND WE MOVE  IT ON WITH THE  PART THAT WE  TRIED TO                                                              
STRENGTHEN AND  EMPHASIZE THE FACT THAT  WE WANT TO HAVE  A REPORT                                                              
COME BACK OR  ELSE WE LET IT  DIE AND NOTHING GETS  DONE….MAYBE IF                                                              
WE DO NOTHING, THE  A.G. WILL GO IN THERE AND  RIP THEM TO SHREDS.                                                              
WHO KNOWS.                                                                                                                      
                                                                                                                                
SENATOR  TORGERSON:  THE  AMENDMENTS  I  HANDED  YOU  ARE  BY  THE                                                            
DEPARTMENT AND I THINK THOSE ARE REASONABLE AMENDMENTS.                                                                         
                                                                                                                                
STEVENS: SOME OF THEM HAVE ALREADY BEEN INCORPORATED.                                                                         
                                                                                                                                
SENATOR  TORGERSON:  WE  CAN  PASS  IT OUT  AND  I'LL  HAVE  FLOOR                                                            
AMENDMENTS. I DON'T HAVE TIME TO WORK ON IT.                                                                                    
                                                                                                                                
DEAL:  I BELIEVE  THAT THE  SPONSOR WOULD  BE WILLING  TO LET  THE                                                            
A.G.'S  REPORT TAKE  A  LOOK AT  THIS  IF YOU  FEEL  UNCOMFORATBLE                                                              
MOVING  THIS OUT  AND CONTINUE  TO WORK  ON THIS.  THIS IS NOT  AN                                                              
ISSUE HE WILL BE DROPPING, HE HAS  ASSURED ME. IF THAT IS WHAT YOU                                                              
FEEL MOST  COMFORTABLE  WITH, I'M  SURE THE SPONSOR  WILL BE  FINE                                                              
WITH THAT.                                                                                                                      
                                                                                                                                
SENATOR TORGERSON: I  WANT A BILL, NOT SOMETHING  THAT HAS A BUNCH                                                            
OF HOLES IN IT. THIS DOESN'T DO ANYTHING… I'LL PUT KURT ON IT.                                                                  
                                                                                                                                
STEVENS: WE COULD  TRY ONE MORE TIME. WE HAVE TIME  TO GO ONE MORE                                                            
ROUND ON  THIS, BUT IF  WE DON'T COME WITH  IT IN ONE  MORE ROUND,                                                              
I'D SAY IT'S GOING TO BE GONE. [END OF PARTIAL VERBATIM]                                                                        

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