Legislature(2015 - 2016)BARNES 124

04/11/2016 03:15 PM House LABOR & COMMERCE

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03:29:46 PM Start
03:30:00 PM HB234
03:36:52 PM Alaska Workers' Compensation Board
04:20:05 PM HB271
04:32:02 PM SB127
04:49:46 PM SB142
04:54:56 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearings: TELECONFERENCED
- Alaska State Board of Public Accountancy
- Alcoholic Beverage Control Board
- State Board of Registration for Architects,
Engineers, and Land Surveyors
- Board of Barbers and Hairdressers
- Board of Certified Real Estate Appraisers
- Board of Chiropractic Examiners
- Board of Dental Examiners
- Alaska Gasline Development Corporation Board
of Directors
- Alaska Labor Relations Agency
- Marijuana Control Board
- Board of Marine Pilots
- Board of Marital and Family Therapy
- Board of Massage Therapists
- Board of Certified Direct-Entry Midwives
- Board of Nursing
- Occupational Safety and Health Review Board
- Board of Examiners in Optometry
- Board of Pharmacy
- State Physical Therapy and Occupational Therapy
- Board of Psychologists and Psychological
Associate Examiners
- Regulatory Commission of Alaska
- Board of Social Work Examiners
- Board of Veterinary Examiners
- Workers' Compensation Appeals Commission
- Alaska Workers' Compensation Board
-- Public Testimony --
**Streamed live on AKL.tv**
Moved CSHB 234(L&C) Out of Committee
-- Public Testimony --
**Streamed live on AKL.tv**
Moved CSHB 271(L&C) Out of Committee
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
Moved SB 127 Out of Committee
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
Moved HCS CSSB 142(L&C) Out of Committee
-- Public Testimony --
**Streamed live on AKL.tv**
         SB 127-INSURER'S USE OF CREDIT HISTORY/SCORES                                                                      
4:32:02 PM                                                                                                                    
CHAIR OLSON  announced that the  next order of business  would be                                                               
SENATE  BILL NO.  127, "An  Act relating  to actions  by insurers                                                               
based on credit history or  insurance score; and providing for an                                                               
exception to  consideration by  an insurer  of credit  history or                                                               
insurance score."                                                                                                               
CHAIR  OLSON  advised  the  bill  was  heard  previously  and  he                                                               
reopened public testimony.                                                                                                      
4:32:48 PM                                                                                                                    
TED MONINSKI  stated support  for SB 127,  and commented  that if                                                               
credit information  is used to  rate personal  insurance policies                                                               
at the outset, it should continue  to be a factor when the policy                                                               
is renewed.   This  situation does not  exist under  current law,                                                               
and his  understanding is  that consumers  are allowed  under the                                                               
current statute  to request  a waiver  and thereby  authorize the                                                               
insurer  to  use credit  information  at  renewal.   However,  he                                                               
discovered this is not universally  true and described himself as                                                               
one of those consumers who had  his good credit considered at the                                                               
time the  insurance policy  was first written,  and when  it came                                                               
time for  renewal he experienced  a significant  premium increase                                                               
when the effect of his good  credit results were stripped away as                                                               
the law currently requires.  In  2013, he requested in writing, a                                                               
waiver as outlined in the  current version of AS 21.36.460(d)(1),                                                               
and his insurer denied his  request explaining that given the way                                                               
its  rate plan  was structured  and approved  by the  Division of                                                               
Insurance, the subsection (d)(1)  waiver option was not available                                                               
to  him.   The  Division  of Insurance  confirmed  the answer  he                                                               
received from  his insurer.   As a result, his  premiums remained                                                               
dramatically higher  than would have  otherwise been the  case if                                                               
the waiver  option had been allowed.   He urged the  committee to                                                               
take care  to ascertain that its  intent in passing this  bill is                                                               
clear.   Given the deference  given by the Division  of Insurance                                                               
to the insurer's rate plans,  any ambiguity that might exist will                                                               
be resolved in the rate plan process  and may or may not meet the                                                               
legislature's  expectations.     He   also  requested   that  the                                                               
legislature make it  clear how the revised bill  will be applied,                                                               
as insurers may  read the bill to  say that they are  now free to                                                               
consider  credit information  at the  point of  renewal.   If the                                                               
statutory change only applies  to customers initially subscribing                                                               
after the  bill is  enacted, it would  be an  unfortunate outcome                                                               
for existing  subscribers such as  himself.  He pointed  out that                                                               
the relief  in the bill  should apply to all  renewals regardless                                                               
of  whether they  are existing  or new  customers.   It would  be                                                               
fundamentally unfair  to force existing  customers to  start over                                                               
and,  thereby, give  up longevity  discounts  and other  benefits                                                               
earned  over  time  simply  to avail  themselves  to  the  relief                                                               
included in SB 127.                                                                                                             
4:36:40 PM                                                                                                                    
CHAIR  OLSON,  after  ascertaining   no  one  further  wished  to                                                               
testify, closed public testimony.                                                                                               
4:37:15 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community & Economic Development,  read from a prepared                                                               
statement as follows:                                                                                                           
     Over  the weekend  we were  presented  with, I  believe                                                                    
     there were  three questions that were  presented by the                                                                    
     committee.  One was:   How was credit used by actuaries                                                                    
     which   drive  insurance   rates?     The  answer   is:                                                                    
     Actuaries   use   the   credit-based   information   of                                                                    
     applicants and  insureds much like  they use  any other                                                                    
     risk  characteristics  in   developing  rates.    Using                                                                    
     historical  loss  history  data, the  actuary  performs                                                                    
     statistical    tests    to    identify    which    risk                                                                    
     characteristics of  the insured are most  predictive of                                                                    
     the observed  losses, such as the  risk characteristics                                                                    
     that  best explain  the  observed  variation in  losses                                                                    
     amongst the policyholder  in the data set.   This gives                                                                    
     the actuaries  a set of potential  risk characteristics                                                                    
     to  use  as  variables  in the  rating  schemes.    The                                                                    
     actuary then  performs additional testing  and modeling                                                                    
     and ultimately  exercises professional  judgment, which                                                                    
     is -- which  is performed in compliance,  not only with                                                                    
     the  standards, but  in the  professional standards  or                                                                    
     with  --  with  compliance  of the  statutes,  but  the                                                                    
     professional standards  of an actuary to  determine the                                                                    
     final  rate used.   Another  question is:   Why  should                                                                    
     credit have anything  to do with ...  rating a driver's                                                                    
     insurance  rate?    They  have  a  premium  record  and                                                                    
     accident history to assess risk.   Credit-based ... and                                                                    
     again,  this   is  the  answer  --   credit-based  risk                                                                    
     characteristics had been  repeatedly -- been repeatedly                                                                    
     shown  to be  predictive  of future  losses even  after                                                                    
     considering   insureds'   other  risk   characteristics                                                                    
     including  payment record,  accident history,  and many                                                                    
     other risk  characteristics that insurers use  to price                                                                    
     their  insurance products.    Indeed, insurers  provide                                                                    
     most -- most provide  data and documentation to clearly                                                                    
     demonstrate  to  the  Division of  Insurance  that  the                                                                    
     insurers'   proposed    use   of    credit-based   risk                                                                    
     characteristics  accurately  predict  insureds'  future                                                                    
     loss potential.                                                                                                            
4:39:44 PM                                                                                                                    
     The last  question was:   How does -- how  do actuaries                                                                    
     use credit and the black box?   What's in the box?  The                                                                    
     black   box  is   generally,  by   statute,  considered                                                                    
     confidential  under AS  21.39.   However, insurers  are                                                                    
     required   to  follow   their  credit-based   insurance                                                                    
     scoring   models  with   the  DOI,   the  Division   of                                                                    
     Insurance, and  the Division of Insurance  must approve                                                                    
     the  filing  before the  insurer  is  able to  use  the                                                                    
     credit to  calculate premiums.   And, in doing  so they                                                                    
     must have the rates must be  -- they must be fair, they                                                                    
     must  be adequate,  they cannot  be discriminatory.   I                                                                    
     know there  were questions about  red lining  that were                                                                    
     addressed [at the  4/8/16] hearing.  So,  the fact that                                                                    
     when we  talk somewhat about, on  [the 4/8/16] hearing,                                                                    
     of  red  lining in  credit  scoring,  income is  not  a                                                                    
     factor that  is considered.   And, when I  testified on                                                                    
     the  Senate side  that  question did  come  up, and  in                                                                    
     credit  scoring   income  is  not  a   factor  that  is                                                                    
     considered.   And,  in fact,  there  have been  studies                                                                    
     done where there has been  -- looking at low-income and                                                                    
     credit scoring  and there has not  been conclusive data                                                                    
     to say that  low- income in credit  scoring, that there                                                                    
     is a correlation as far as insurance scores.                                                                               
     And, I  don't know if  that answered all  the questions                                                                    
     that were  presented.   I believe  I got  them Saturday                                                                    
     night or Sunday  morning.  And, I will have  those -- I                                                                    
     apologize,  I got  called to  a  hearing earlier  today                                                                    
     when I  was finishing my  letter, but I will  have this                                                                    
     in writing for you for the record.                                                                                         
4:41:32 PM                                                                                                                    
REPRESENTATIVE KITO referred to  the previous testifier and asked                                                               
whether  someone  with  an  existing  policy  benefits  from  the                                                               
"automatic" use of credit for renewal.                                                                                          
MS.  WING-HEIER responded  that they  should be  able to  benefit                                                               
from renewal.  The division received  an email from  the previous                                                               
testifier,  and looked  into the  division's consumer  complaints                                                               
and the  telephone calls  it has received  on credit  scoring for                                                               
the past two  years.  She acknowledged that the  division has had                                                               
[complaints] regarding  the waivers,  but the division  could not                                                               
find where  it had denied  a waiver.   As stated,  some insurance                                                               
companies  do not  use  the  waiver at  all,  and some  insurance                                                               
companies opt  not to use it  on renewal, which is  their option,                                                               
because of the cost to them  or the administrative burden it puts                                                               
on them.   However, the  only thing  found that the  division has                                                               
done,  is that  some insurance  companies have  perhaps stretched                                                               
the definition  of waiver when  it says it  must be done  on each                                                               
renewal;  in fact,  in one  case an  insurance company  was using                                                               
what the division determined was  a power of attorney - Evergreen                                                               
- and the  division stopped it from doing that.   The division is                                                               
enforcing the statute  that says a waiver has to  be used on each                                                               
renewal;  however,  the division  is  not  stopping an  insurance                                                               
company from using  a waiver to give the consumer  the benefit of                                                               
the credit score on renewal.                                                                                                    
REPRESENTATIVE HUGHES requested  clarification that under current                                                               
law the  insurance company  decides whether  to use  waivers, and                                                               
Version W  will remove the requirement  for a waiver.   She asked                                                               
whether  an  insurance company  could  still  choose not  to  use                                                               
credit scores,  as there  is nothing in  the bill  that obligates                                                               
insurance companies to use credit scores.                                                                                       
MS. WING-HEIER  replied correct;  it is still  the option  of the                                                               
insurance company  to use a  credit insurance score, or  not, but                                                               
it would not be required to use a waiver, at all, upon renewal.                                                                 
4:44:09 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON   asked  whether  Ms.   Wing-Heier  had                                                               
testified that  she saw  a study  showing no  correlation between                                                               
financial status and credit scores.                                                                                             
MS. WING-HEIER responded:                                                                                                       
     ...  in  mid-February  I  was  asked  by  Senate  State                                                                    
     Affairs  [Standing  Committee],  and I  then  submitted                                                                    
     back to them  that in 2007, the FTC,  the Federal Trade                                                                    
     Commission   report   found    that   the   individuals                                                                    
     categorized  as  low-income  did  tend  to  have  lower                                                                    
     insurance scores  than individuals categorized  as high                                                                    
     income, though  the correlation was weaker  than in the                                                                    
     case of  race or ethnicity.   Because of  its inability                                                                    
     to  analyze  individual data  on  income,  the FTC  was                                                                    
     hesitant to  reach any  firm conclusions  regarding the                                                                    
     relationship between insurance scores and income.                                                                          
REPRESENTATIVE JOSEPHSON referred  to a report from  the State of                                                               
Missouri, Department of  Insurance - that is a dozen  years old -                                                               
relating to insurance-based credit  scores, which concludes there                                                               
is a  correlation.   He said  he would have  to give  this entire                                                               
issue further  consideration, and asked Ms.  Wing-Heier to repeat                                                               
her statement.                                                                                                                  
MS. WING-HEIER repeated the foregoing statement.                                                                                
4:46:54 PM                                                                                                                    
REPRESENTATIVE  HUGHES  moved  to  report  SB  127,  Version  29-                                                               
LS0529\W  out of  committee with  individual recommendations  and                                                               
the accompanying fiscal notes.   There being no objection, SB 127                                                               
was  reported  out  of  the House  Labor  and  Commerce  Standing                                                               

Document Name Date/Time Subjects
HB234 Draft Proposed CS ver W.pdf HL&C 4/11/2016 3:15:00 PM
HB 234
HB234 Supporting Documents-Email Anne Henry 04-07-16.pdf HL&C 4/11/2016 3:15:00 PM
HB 234
HB234 Supporting Documents Summary of Changes ver A to ver W.pdf HL&C 4/11/2016 3:15:00 PM
HB 234
HB271 Draft Proposed CS ver H.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Supporting Documents DCCED-Committee Follow up.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Supporting Documents-GiftCards - ListofStatesWGiftCardLaws.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Supporting Documents-GiftCards - FTC-gift-cards Consumer Information.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Supporting Documents-GiftCards - Title IV-GiftCards.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Supporting Documents-GreenDot_cardholderagreement_fees.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Supporting Documents-NetSpend-what_it_costs.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Supporting Documents-QCardFees.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Sectional Analysis ver H.pdf HL&C 4/11/2016 3:15:00 PM
HB 271
HB271 Summary of Changes ver A to ver H.pdf HL&C 4/11/2016 3:15:00 PM
HB 271