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