Legislature(2017 - 2018)BARNES 124

04/05/2017 03:15 PM LABOR & COMMERCE

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          HB 195-INSURER'S USE OF CREDIT HISTORY/SCORES                                                                     
3:23:25 PM                                                                                                                    
CHAIR KITO  announced that the  first order of business  would be                                                               
HOUSE BILL NO. 195, "An Act  relating to insurer actions based on                                                               
credit history and insurance scores  at insurance policy renewal;                                                               
and providing for insurer consideration  of consumer requests for                                                               
exceptions of credit history or insurance scores."                                                                              
3:24:08 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community, and Economic  Development (DCCED), on behalf                                                               
of the  administration introduced HB  195.  She noted  that using                                                               
credit  history  or  insurance  scores  to  rate  personal  lines                                                               
insurance  is a  complex  matter, whether  the  insurance is  for                                                               
legislators or their constituents.   There is a misconception, or                                                               
people tend  to think, that  credit scores are  discriminatory or                                                               
not a true indicator of a  risk when writing an insurance policy.                                                               
The policies  being talked  about today  are personal  lines, she                                                               
explained, such  as auto  and homeowner's  policies, motorcycles,                                                               
and recreational  vehicles (RVs).   For  commercial lines,  it is                                                               
common for insurers to ask for financial statements.                                                                            
MS. WING-HEIER  stated that Alaska's  current statutes  allow for                                                               
the use  of credit  scoring, or  insurance scores,  when applying                                                               
for new  business.  So, anyone  going into a local  broker in any                                                               
community in the state is asked  to allow their credit history or                                                               
insurance score [to be used]  and, based on that insurance score,                                                               
the person  may receive  a preferred  risk.   The worst  that can                                                               
happen, she  said, is  that people without  a credit  history are                                                               
given a neutral score.                                                                                                          
MS. WING-HEIER said one reason for  bringing forth HB 195 is that                                                               
Alaska statute does not allow for  the insurance score to be used                                                               
on renewal unless the insurance  broker or insurance company asks                                                               
for, and  receives from the  person, a waiver upon  each renewal.                                                               
This  is time  consuming and  costly, she  pointed out.   Another                                                               
reason  for  the bill  is  that,  like legislators,  many  people                                                               
travel  for their  work because  they are  fishermen, miners,  or                                                               
North  Slope workers.    The waivers  come in  the  mail and  are                                                               
either  disregarded or  not returned  in a  timely manner.   Then                                                               
someone suddenly receives his/her  insurance bill or notices that                                                               
his/her homeowner's [insurance]  has been paid out  of escrow and                                                               
the premium  has doubled  because the  credit score  or insurance                                                               
score  was not  applied to  the renewal.   It  is a  cost to  the                                                               
insurance brokers  to ensure that  everyone is sent  the waivers,                                                               
and it is  a cost to consumers when they  realize they would have                                                               
qualified for  a preferred rate.   But,  she continued, to  get a                                                               
preferred rate, Alaska statute requires  that this piece of paper                                                               
be signed  every renewal,  which could be  annually or  every six                                                               
months depending on the policy.                                                                                                 
3:27:26 PM                                                                                                                    
MS. WING-HEIER addressed the question  of whether [credit history                                                               
or  insurance scores]  could have  a negative  and answered  yes.                                                               
Bad  credit  will  be  a   negative  implication  on  a  person's                                                               
insurance premiums, she said.   Studies have proven that there is                                                               
a correlation  between credit history  or insurance scores  and a                                                               
person's likelihood  to file an  insurance claim.  Perhaps  it is                                                               
because those  people who  keep good credit  and pay  their bills                                                               
also take  care of  their homes and  their autos,  she continued.                                                               
Perhaps they are the ones  least likely to have speeding tickets.                                                               
There  is  a correlation  between  the  insurance score  that  is                                                               
derived and an insurance risk.                                                                                                  
MS. WING-HEIER reiterated  that the use of an  insurance score is                                                               
already allowed in new business and  that HB 195 would be applied                                                               
for renewals.  In addition,  she noted, Governor Walker has asked                                                               
that  the bill  contain some  important provisions.   First,  the                                                               
governor  is asking  that the  consumer  be notified  of what  is                                                               
called an  "adverse action".   If  someone's credit  or insurance                                                               
score  is going  to result  in  the person  having a  detrimental                                                               
policy premium, the person must  receive written notices from the                                                               
insurance  company.   Additionally,  that  notice  must tell  the                                                               
person as a consumer, a  policyholder, that they are qualified to                                                               
go  through an  appeals process.    Part of  the appeals  process                                                               
would be based on extenuating  life circumstances, she explained,                                                               
which are  outlined in Section  5 of  the bill and  which include                                                               
things  like medical,  job loss,  death of  a spouse,  deployment                                                               
overseas,  and  other  conditions  that a  prudent  person  would                                                               
consider an extraordinary life circumstance.   The consumer would                                                               
have to appeal the insurance  company within 60 days of receiving                                                               
this adverse action.   The insurance company would  then make the                                                               
first  determination.   Second,  she  continued, Governor  Walker                                                               
didn't  like that  last year's  Senate Bill  127 said  that after                                                               
this  appeals  process went  through,  the  final decision  maker                                                               
would be the  insurance company.  So, HB 195  has been changed to                                                               
reflect that  the final  decision maker will  be the  director of                                                               
the Division  of Insurance through processes  and procedures that                                                               
[the division]  already has established for  handling other types                                                               
of appeals for consumer compliance.                                                                                             
MS.  WING HEIER  summarized  by  stating that  HB  195 is  about:                                                               
allowing for credit  scoring to be used for  renewal; defining an                                                               
adverse  action  and  what  an insurance  company  must  do  upon                                                               
determination that there is an  adverse action on a policyholder;                                                               
and providing  an appeals  process that goes  to the  director of                                                               
the Division  of Insurance for  adjudication if  the policyholder                                                               
doesn't  like the  [insurance company's]  decision  on an  appeal                                                               
filed in regard to extenuating life circumstances.                                                                              
3:31:19 PM                                                                                                                    
REPRESENTATIVE  BIRCH related  that  he recently  had a  personal                                                               
impact where his insurance company was  going to ramp up the cost                                                               
of his  car insurance  because he needed  to sign  something, but                                                               
because  he  is in  Juneau  and  not home  there  is  a delay  in                                                               
receiving his mail.   He said HB  195 is great as  well as timely                                                               
and he appreciates that the bill is being brought forward.                                                                      
3:32:15 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  offered  his understanding  that  when                                                               
there has  been no insurance  policy issued an  insurance company                                                               
can use credit scoring, but not for renewals.                                                                                   
MS. WING-HEIER  replied that during the  original application the                                                               
applicant  still must  give permission,  but  yes, the  insurance                                                               
company  can use  the applicant's  credit score  to determine  an                                                               
insurance score.   She added that when a person  doesn't sign the                                                               
form  it sometimes  ends up  becoming what  is called  "churning"                                                               
because  the  person  always  wants  to be  a  new  customer,  an                                                               
applicant, as opposed to a renewal.                                                                                             
REPRESENTATIVE  JOSEPHSON asked  what happens  if in  the initial                                                               
application the applicant declines to give permission.                                                                          
MS. WING-HEIER  qualified she  is unable  to speak  for insurance                                                               
companies, but that in most  cases the applicant would be treated                                                               
as neutral, meaning not given a preferred rate.                                                                                 
3:33:26 PM                                                                                                                    
REPRESENTATIVE  KNOPP noted  Senate Bill  127 passed  both bodies                                                               
last year before being vetoed by  the governor.  He further noted                                                               
that the  language in  Senate Bill  127 and  HB 195  is identical                                                               
except for  the small tweaks  mentioned by Ms.  Wing-Heier, which                                                               
he thinks  are good.   He asked  whether a  homeowner's insurance                                                               
policy  that  is wrapped  into  the  policyholder's mortgage  and                                                               
automatically  paid  each month  is  looked  at annually  by  the                                                               
insurance company and subject to renewal every year.                                                                            
MS. WING-HEIER  answered that  that would be  subject to  HB 195,                                                               
and even though it is  paid through escrow the policyholder could                                                               
end up  with an  increased premium if  the policyholder  does not                                                               
sign   and   allow   the  insurance   company   to   obtain   the                                                               
policyholder's credit history to determine an insurance score.                                                                  
REPRESENTATIVE  KNOPP stated  he  isn't clear  on the  difference                                                               
between an insurance  score and a credit score.   He inquired how                                                               
they vary  and how the  insurance score is derived;  for example,                                                               
whether  the credit  score  is used  to  establish the  insurance                                                               
score.   He  further inquired  whether  a new  credit history  is                                                               
pulled up every  time the policy comes up for  renewal or whether                                                               
the insurance score is used.                                                                                                    
MS.  WING-HEIER replied  that a  credit score  is a  part of  the                                                               
insurance score.  The overall  insurance score may include things                                                               
that are already allowed, and which  are not changed in the bill,                                                               
such as where the policyholder  lives, the number of miles driven                                                               
to work, the kind of car,  and age.  Responding further, she said                                                               
HB 195 requires that an  insurance company order a policyholder's                                                               
credit  score at  least every  24 months.   The  administration's                                                               
intent is  that if  anyone were  to have a  poor credit  score or                                                               
insurance score  that the person is  allowed to improve it.   The                                                               
bill  also asks  that  the  insurance company  not  use a  credit                                                               
report or  credit history that is  more than 90 days  old so that                                                               
the data is current.                                                                                                            
3:36:34 PM                                                                                                                    
REPRESENTATIVE  WOOL  offered his  understanding  that  if a  new                                                               
homeowner  applies for  homeowner's insurance,  the homeowner  is                                                               
not required  to submit  a credit  score and  so might  be deemed                                                               
neutral.    He asked  whether  the  credit score  requirement  is                                                               
waived when  a year  later the  policy renewal  comes up  and the                                                               
policyholder signs something.                                                                                                   
MS.  WING-HEIER  responded  that  what is  being  waived  is  the                                                               
statute  and   allowing  the  insurance  company   to  order  the                                                               
policyholder's credit score upon renewal  because right now it is                                                               
not  allowed upon  renewal.   In  other words,  she continued,  a                                                               
person signing  as a new  insurer is only allowing  the insurance                                                               
company to order it once, the  company cannot do it twice without                                                               
getting another signature,  and the third year  the company would                                                               
need to get yet another signature from the policyholder.                                                                        
REPRESENTATIVE WOOL  stated he has  a fundamental problem  with a                                                               
person's  insurance  rate  being determined  by  their  insurance                                                               
score which  is somewhat  based on  a credit score.   He  said he                                                               
understands  insurance is  based on  actuarial [science]  and the                                                               
likelihood of having  to pay out for a claim,  but he pointed out                                                               
that  things can  happen to  alter a  person's credit  score that                                                               
don't necessarily mean the person is  more likely to have a house                                                               
fire.  People  might lose a job or become  divorced causing their                                                               
credit  score to  go  down,  but in  his  opinion that  shouldn't                                                               
negatively affect  them.  He  noted that  when buying a  house, a                                                               
person's credit score  will determine if the bank  will approve a                                                               
loan, but it won't determine how  much the house costs.  He asked                                                               
whether  there are  other things  where the  amount of  charge is                                                               
dependent upon a person's credit score.                                                                                         
MS. WING-HEIER answered that she  considers insurance a financial                                                               
product,  not a  service.   She  said  she is  not  aware of  any                                                               
service,  such  as a  contractor,  where  one's credit  score  is                                                               
looked at  for performing the  service.  However,  she continued,                                                               
most  financial  products  do  look   at  a  person's  credit  to                                                               
determine whether to  extend the credit, how much  credit will be                                                               
extended, and the rate.                                                                                                         
REPRESENTATIVE WOOL stated he would  call a bank loan a financial                                                               
product for  which a person's  credit score is evaluated  and the                                                               
bank determines  whether it will  make the  loan as well  as what                                                               
the  interest rate  will be.   But,  he continued,  once that  is                                                               
established it  remains stable  and the  bank doesn't  do another                                                               
credit check and raise the interest  rate if the credit score has                                                               
3:41:09 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  offered his assumption that  when it is                                                               
said  that  the  [director]  will   make  a  determination,  [the                                                               
director] doesn't  have a  file that  is looked  at but  rather a                                                               
system is used and [the director] delegates it to a subordinate.                                                                
MS. WING-HEIER  confirmed she  would as director  assign it  to a                                                               
staff  member to  gather the  information and  give her  a report                                                               
that it either  did or didn't meet the  determination or criteria                                                               
for  an  extenuating  life  circumstance.     She  would  not  be                                                               
personally obtaining the information and making a determination.                                                                
3:42:11 PM                                                                                                                    
REPRESENTATIVE  WOOL surmised  that insurance  companies probably                                                               
like this  because it  must bring  them more  revenue with  a net                                                               
result  of more  people paying  more money.   He  asked why  some                                                               
insurance brokers  have said  they don't  like this  credit score                                                               
being used.                                                                                                                     
MS.  WING-HEIER answered  she thinks  it  could be  controversial                                                               
because  some see  it  as  a negative  and  don't understand  the                                                               
positives of how this can  positively impact consumers.  Is there                                                               
a negative?  Certainly, she said.   If someone has poor credit it                                                               
may  result in  a poor  insurance  score.   It is  one factor  in                                                               
determining the  insurance score.  The  statute specifically says                                                               
that insurance  companies cannot just  use the credit  history to                                                               
assign  an insurance  premium.   They must  use other  factors or                                                               
risk characteristics, such as age,  where the policyholder lives,                                                               
kind of vehicle driven, and driving  history.  In some cases, she                                                               
continued, it is perhaps a  misunderstanding of how much has been                                                               
put into  this bill to  protect consumers  to ensure there  is an                                                               
appeal process if they feel  that they've been improperly graded,                                                               
and how  much it is to  administer the renewals for  consumers to                                                               
sign the waiver.                                                                                                                
3:43:52 PM                                                                                                                    
CHAIR KITO  stated that the  use of age  as a criterion  for what                                                               
someone's insurance  rate might be  is something he  went through                                                               
before age  25 and having  to pay a higher  premium.  He  was not                                                               
necessarily  a  higher  risk,  he  said,  but  was  in  that  age                                                               
category,  which  means  he  was  an  individual  that  met  that                                                               
statistic.  That is accepted  because nobody can change their age                                                               
and it  is accepted that there  is a correlation between  age and                                                               
risk, but  that doesn't mean everybody  who is under 25  is going                                                               
to be driving  more poorly.  Therefore,  [the legislature] cannot                                                               
change the  use of age to  establish a credit or  insurance score                                                               
because everybody  does.   He said  he doesn't  think correlation                                                               
means causation,  but to find  ways to decrease the  overall cost                                                               
of insurance, companies look to  try to find risk characteristics                                                               
that correlate to actual things that can be measured.                                                                           
3:45:15 PM                                                                                                                    
CHAIR KITO opened public testimony on HB 195.                                                                                   
3:45:39 PM                                                                                                                    
KRISTIE  BABCOCK,  Agent,  State  Farm  Insurance,  testified  in                                                               
support of  HB 195.  She  said she employs eight  individuals and                                                               
markets  insurance and  financial  services  to fellow  Alaskans.                                                               
She  recalled   that  last  year   a  similar  bill   passed  the                                                               
legislature by  a large margin  but was  vetoed.  She  stated her                                                               
customers see  the impact  of the  current law  every day.   They                                                               
hear about  the impact of the  current law when her  agency calls                                                               
them and  lets them know  that the  rate they received  two years                                                               
prior  when  their policy  was  originally  written is  going  to                                                               
dramatically change.   Her agency lets them know  the rate change                                                               
isn't  because of  anything they've  done.   It is  not a  simple                                                               
conversation, she advised.  Her  agency must explain that current                                                               
law allowed  the use  of their credit  history in  their original                                                               
rate but  after two  years that credit  history must  be stripped                                                               
out.   Her agency then explains  that there is an  option for the                                                               
customer  to give  specific permission  to use  their credit  for                                                               
that  policy  for  the  coming   year  and  hopefully  avoid  the                                                               
increase.  If her agency  is successful in reaching them, getting                                                               
the form  to them, getting  the form back  from them, and  all in                                                               
time to avoid  the increase, then there won't be  a rate increase                                                               
for a year.  Then the next year comes.                                                                                          
MS. BABCOCK  said her agency has  been doing this for  many years                                                               
now and  she has one team  member who exclusively deals  with the                                                               
difficulty  that this  current  law presents  for her  customers.                                                               
Customers are  hard to reach and  are busy, and they  ask her why                                                               
she can't just  charge them the rate they deserve.   They further                                                               
tell her that  they shopped around for their  insurance when they                                                               
first came to  her and that's why they chose  her.  Customers ask                                                               
why they  must get  a phone  call or letter  every year  on every                                                               
policy  just to  ensure that  they don't  get over-charged.   She                                                               
noted she  has customers of  all demographics, of all  ages, that                                                               
have tried  hard to  keep their credit  strong and  their driving                                                               
record  strong.   She would  like to  charge them  the rate  they                                                               
deserve and  that is what  HB 195 is about.   Alaska is  the only                                                               
state currently that  makes the insurance companies  take out the                                                               
credit  component on  the policy's  renewal and  it creates  this                                                               
frustrating consumer experience.                                                                                                
MS. BABCOCK  stated she  doesn't see a  public purpose  served by                                                               
the  current system  and urged  that the  committee help  fix it.                                                               
She related  that some people have  asked her what the  impact of                                                               
HB  195 on  the  public would  be.   First,  she  said, it  would                                                               
alleviate the dramatic swings in  rates, which to customers seems                                                               
like  bait  and  switch  when  their  starting  rate  changes  at                                                               
renewal.   Second,  HB 195  would eliminate  the frustrating  and                                                               
cumbersome  process of  getting a  manual waiver  signed, thereby                                                               
automating the  renewal process.   Lastly, she continued,  HB 195                                                               
would allow  customers to shop  with confidence knowing  there is                                                               
stability in both the initial and renewal rating factors.                                                                       
3:49:46 PM                                                                                                                    
REPRESENTATIVE WOOL  asked whether the majority  of Ms. Babcock's                                                               
clients would pay less if credit scores were allowed.                                                                           
MS.  BABCOCK  replied  correct, the  majority  of  Alaskans  have                                                               
favorable credit characteristics that  would give them a decrease                                                               
over the base rate, rather than just paying the base rate.                                                                      
REPRESENTATIVE  WOOL inquired  whether insurance  companies would                                                               
be losing money if credit checks were allowed.                                                                                  
MS.  BABCOCK responded  it might  be thought  about as  insurance                                                               
being  a zero  sum.   Insurance  companies are  going  to try  to                                                               
collect the  correct premium to take  care of the claims  for the                                                               
risk  pool  that  they  represent.    One  of  the  ideas  behind                                                               
insurance is  to try to charge  the correct rate for  each person                                                               
for the  risk they present.   Rates  are always changing  and the                                                               
risk  of the  consumer  base  that a  company  insures is  always                                                               
changing.  So, she reiterated, the  idea is to charge the correct                                                               
rate for each  risk and the insurance company on  the backend has                                                               
the duty  to make sure it  is charging the overall  right rate so                                                               
that it is able to pay future claims.                                                                                           
3:51:08 PM                                                                                                                    
REPRESENTATIVE KNOPP  expressed his appreciation for  Ms. Babcock                                                               
talking about customer dissatisfaction.   He said Ms. Babcock has                                                               
been his  insurance agent for 15-20  years and he insures  5 or 6                                                               
personal vehicles with  her and has both  commercial and personal                                                               
policies.   He shared that  he is a  customer who has  called Ms.                                                               
Babcock's office to  complain about all the forms  he receives in                                                               
the mail all the time and asking  why he can't just have his rate                                                               
left alone and the  bill sent to him, so he can pay  it.  This is                                                               
an important component of HB 195, he said.                                                                                      
3:52:13 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
3:53:26 PM                                                                                                                    
ARMAND FELICIANO, Esq.,  Property  Casualty Insurers  Association                                                               
of America, testified  in support of HB 195.   He stated that his                                                               
association  is part  of an  insurance  coalition supporting  the                                                               
bill  that   includes  members  such  as   Alaska  USA,  American                                                               
Insurance  Association, and  the National  Association of  Mutual                                                               
Insurance  Companies.   In the  coalition's  collective view,  he                                                               
related, HB  195 is a  reasonable middle ground that  would allow                                                               
consumers to see  the full benefits of credit scoring  and put in                                                               
place an  equitable process to  solve credit disputes.   The bill                                                               
would  address the  unnecessary market  construction inherent  in                                                               
existing  statute, which  removes  credit  scoring upon  renewal.                                                               
Also,  he continued,  the bill  would broaden  extraordinary life                                                               
circumstances and authorize the  Division of Insurance to resolve                                                               
credit disputes.  He added that  HB 195 is a commonsense approach                                                               
to fix Alaska's existing credit scoring rules.                                                                                  
3:54:41 PM                                                                                                                    
REPRESENTATIVE WOOL  observed that Mr. Feliciano  is calling from                                                               
California and  inquired whether California allows  credit scores                                                               
for insurance assessment.                                                                                                       
MR. FELICIANO replied  that California is one of  two states that                                                               
doesn't allow for  a credit score.  About 23  other states follow                                                               
the national model,  he said, and about half of  the other states                                                               
follow a variation of the national model.                                                                                       
REPRESENTATIVE WOOL  asked whether there  is a lack  of insurance                                                               
companies  in  California  due to  being  disallowed  from  using                                                               
credit  scores.   He further  asked whether  it is  hard to  find                                                               
insurance in California.                                                                                                        
MR.  FELICIANO  responded  no,  and said  California  is  a  very                                                               
competitive market  with lots  of insurance  companies, so  it is                                                               
not an issue.                                                                                                                   
3:55:47 PM                                                                                                                    
DANIEL  LYNCH testified  in  opposition  to HB  195  and said  he                                                               
believes in  privacy and logic.   He  stated that in  his 20-plus                                                               
years  on  the  Kenai  Peninsula there  are  now  more  insurance                                                               
companies, and none  have gone out of business  because of credit                                                               
scores.   He  maintained  that credit  scores  are irrelevant  to                                                               
insurability.    An insurer  can  go  to  the Division  of  Motor                                                               
Vehicles (DMV)  and get a  person's complete driving  history for                                                               
$10.  An  insurer can go to  Google Earth and plug  in a person's                                                               
address to find  the distance to a fire station,  flood plain, or                                                               
beetle-killed forest.   He noted that in 1978 he  cut up his last                                                               
credit card and  that his last loan from  a financial institution                                                               
was in 1975.  Other than  three seatbelt violations he hasn't had                                                               
a ticket  or accident in  over 35 years.   He is  free  money  to                                                               
the insurance  company, he said.   What does the  committee think                                                               
his credit  score is?   Why do his  premiums go up  every renewal                                                               
when the values  of his vehicles are less, he  is retired, and he                                                               
drives fewer miles?                                                                                                             
MR.  LYNCH  stated  that  vehicle insurance  in  Alaska  is  like                                                               
"Obamacare" [the Affordable  Care Act].  Residents  are forced to                                                               
purchase  from  a private  entity  or  else  they can  be  fined,                                                               
incarcerated,  and their  vehicle impounded.   Yet  the insurance                                                               
company can  cancel, increase rates,  or refuse  coverage  willy-                                                               
nilly  with no  logical reason.  He pointed out  that Wells Fargo                                                               
opened  two  to  three  million  new  accounts  without  customer                                                               
request, which affected the people's credit scores.                                                                             
MR. LYNCH  noted that  the previous witness  is also  involved in                                                               
new financial  investment opportunities  that have nothing  to do                                                               
with insurance.   He said  the governor's transmittal  letter for                                                               
the  bill talks  about the  insurance code  and the  director and                                                               
that from  last year to this  year [the bill] adds  many consumer                                                               
protections.   But, he continued, requesting  a life circumstance                                                               
exception is  his business.   He asked  whether he would  need to                                                               
hire a secretary and/or attorney to  file an appeal and said this                                                               
would be cumbersome  for the consumer, especially  for people who                                                               
travel and  might miss the paperwork  and who would then  have no                                                               
recourse.  He  questioned the final judge being  the director [of                                                               
the Division of Insurance] because  it is not an elected position                                                               
and because  a previous  director was a  20-year employee  of the                                                               
insurance  industry.   He further  pointed out  that if  a person                                                               
shops around  for insurance and  goes to six  different companies                                                               
that would mean  six hits against the person's  credit scores and                                                               
a loss in points with each hit.                                                                                                 
MR. LYNCH  stated that if  the legislature  would like to  pass a                                                               
law to  help insurance companies,  citizens, and all  drivers and                                                               
pedestrians, then  it could  eliminate all  cell phone  use while                                                               
driving.  He  closed by asking whether committee  members went to                                                               
Juneau to represent  the citizens of Alaska  or corporate America                                                               
and lobbyists.  He urged that HB 195 and SB 98 not be passed.                                                                   
4:00:51 PM                                                                                                                    
REPRESENTATIVE BIRCH asked whether Mr. Lynch has insurance.                                                                     
MR. LYNCH answered correct.                                                                                                     
REPRESENTATIVE BIRCH  inquired as  to how  an insurer  could best                                                               
size up Mr. Lynch as an insurable party.                                                                                        
MR. LYNCH replied that if it  were for driving insurance it would                                                               
be through his driving record.                                                                                                  
REPRESENTATIVE BIRCH offered his  understanding that credit score                                                               
is a  pretty good indicator  for insurance companies  to validate                                                               
how good a  credit risk someone is or how  reliable someone might                                                               
be for  taking care of their  possessions.  He asked  whether Mr.                                                               
Lynch objects  to the insurance  companies having access  to that                                                               
MR. LYNCH  suggested that if  he pays  his bill every  six months                                                               
that establishes  his credit, and he  usually pays cash.   If one                                                               
has nothing  to do  with the other,  he continued,  the insurance                                                               
company can go to the DMV and see  that he hasn't had a ticket or                                                               
an accident in 35 years and  he will voluntarily tell the company                                                               
that he doesn't use  a cell phone while in his  vehicle.  One has                                                               
nothing to do with the other  to make it convenient for insurance                                                               
companies.   "Who are  we going  to make  it convenient  for next                                                               
time?"  he asked  in conclusion.  "Fred Meyer,  a sporting  goods                                                               
4:02:53 PM                                                                                                                    
REPRESENTATIVE KNOPP  offered his appreciation that  Mr. Lynch is                                                               
probably  a person  for whom  the bill  would have  a neutral  or                                                               
negative  effect as  far as  using Mr.  Lynch's credit  score for                                                               
rating purposes.   He noted  that about 15 years  ago legislation                                                               
was  approved  to allow  the  use  of  credit scores  for  rating                                                               
clients.   However,  he continued,  that is  not what  HB 195  is                                                               
about, it is about consumer  protection.  Since the industry uses                                                               
credit reporting as  a method to rate people, not  passing HB 195                                                               
would be  detrimental to consumers  because if [a  signed waiver]                                                               
is not received by the insurance  company it will err on the side                                                               
of  caution.   Compared  to Senate  Bill 127  of  last year,  the                                                               
adjustments made  in HB 195  make it a consumer  protection bill.                                                               
He reiterated that  the issue here isn't using  credit scores for                                                               
rating a person as that issue was addressed 15 years ago.                                                                       
MR. LYNCH  responded he  has been testifying  on these  bills for                                                               
the last  four or  five years  because it  comes back  every year                                                               
with a change here or there.  He recounted Director Wing-Heier                                                                  
stating that HB 195 is  about individual policies, not commercial                                                               
customers,  and asked  why they  are not  treated the  same.   He                                                               
further recounted Director Wing-Heier  stating that the bill does                                                               
have  potential  negative consequences  if  a  person has  a  bad                                                               
credit score,  or, as in  his case, no credit  score at all.   He                                                               
reiterated  his  question as  to  whether  committee members  are                                                               
representing the citizens of Alaska or corporate America.                                                                       
4:05:46 PM                                                                                                                    
CHAIR KITO ascertained no one else wished to testify on HB 195.                                                                 
4:06:02 PM                                                                                                                    
REPRESENTATIVE STUTES inquired whether  HB 195 is also applicable                                                               
to medical insurance.                                                                                                           
MS. WING-HEIER answered  that it is not applicable.   She said it                                                               
is  personal lines,  such as  auto, homeowners,  motorcycles, and                                                               
recreational vehicles.  It is  not commercial insurance, workers'                                                               
compensation,  property  insurance   on  a  commercial  building,                                                               
general  liability, commercial  auto, or  any type  of health  or                                                               
life insurance.                                                                                                                 
REPRESENTATIVE STUTES asked whether there  is a reason this isn't                                                               
affecting commercial insurance.                                                                                                 
MS. WING-HEIER  replied that financial  statements are  asked for                                                               
in most commercial accounts.   The commercial insurance companies                                                               
will look at  Dun & Bradstreet (D &  B) reports.  Or, if  it is a                                                               
larger company, they will look at  Moody's or S&P and those types                                                               
of reports, which  in essence are a credit report,  and then that                                                               
would be factored into an insurance score.                                                                                      
REPRESENTATIVE STUTES,  regarding the process for  appeals, noted                                                               
that the industry  would be judging its own  appeals, rather than                                                               
an  independent  body determining  whether  an  individual had  a                                                               
valid appeal.   The  industry, which stands  to profit,  would be                                                               
making the determination, she said.                                                                                             
MS. WING-HEIER  responded that  that is one  reason the  bill was                                                               
vetoed last  year.  Regarding extenuating  life circumstances and                                                               
the appeal  process, [under  HB 195]  the consumer  would present                                                               
written documentation  to the insurance company  stating why they                                                               
think  they  qualify,  and  if the  consumer  doesn't  receive  a                                                               
favorable   response,  they   bring  it   to  the   [Division  of                                                               
Insurance].  The  division director has the final  say in whether                                                               
the consumer  qualifies through the  appeal for a  preferred rate                                                               
and if the  consumer should be given a waiver  for an extenuating                                                               
life circumstance.   So,  she said,  the [Division  of Insurance]                                                               
becomes the third party.                                                                                                        
4:08:45 PM                                                                                                                    
REPRESENTATIVE KNOPP offered his  understanding that under HB 195                                                               
something related  to medical on  a person's credit  report could                                                               
not be  used to negatively impact  the person's rating as  far as                                                               
MS.  WING-HEIER  answered  that  medical  circumstances,  medical                                                               
bills, for the person or family  member is one of the extenuating                                                               
life  circumstances that  can be  appealed for  why the  person's                                                               
credit  score has  taken a  turn and  why the  person deserves  a                                                               
better rate.                                                                                                                    
4:09:45 PM                                                                                                                    
REPRESENTATIVE  WOOL  posed a  scenario  in  which he  has  large                                                               
medical  bills  and  misses  a payment  to  a  hospital,  thereby                                                               
affecting his  credit score  and in turn  his insurance  score so                                                               
that he  is then assessed a  higher [insurance] fee.   He offered                                                               
his understanding that this would be  the point at which he would                                                               
have to go through the appeal process.                                                                                          
MS. WING-HEIER replied  that if the medical bills were  to such a                                                               
point that they impacted a  person's credit score, then, yes, the                                                               
person  could ask  for an  appeal.   That  would be  part of  the                                                               
extenuating life circumstances that are defined in the bill.                                                                    
4:10:36 PM                                                                                                                    
CHAIR KITO held over HB 195.                                                                                                    

Document Name Date/Time Subjects
HB195 Fiscal Note DCCED-DOI 3.28.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 195
HB195 Sectional Analysis ver A 3.28.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 195
HB195 Supporting Documents-Letter of Support 3.28.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 195
HB195 Supporting Documents-Side by Side 3.28.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 195
HB195 Transmittal Letter 3.28.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 195
HB171 Fiscal Note DOC-IDO 3.31.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 171
HB171 Sponsor Statement 3.21.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 171
HB171 Supporting Documents-Letters of Support 4.5.17.pdf HL&C 4/5/2017 3:15:00 PM
HB 171