Legislature(2017 - 2018)BARNES 124

04/17/2017 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
Heard & Held
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved HB 195 Out of Committee
         HB 195-INSURER'S USE OF CREDIT HISTORY/SCORES                                                                      
3:20:30 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."                                                                              
CHAIR  KITO noted  public testimony  was  still open  on HB  195.                                                               
After  ascertaining that  no  one wished  to  testify, he  closed                                                               
public testimony.                                                                                                               
3:21:31 PM                                                                                                                    
REPRESENTATIVE WOOL  stated he wanted  to offer an  amendment but                                                               
didn't  have time  and that  he personally  opposes using  credit                                                               
scores  to assess  insurance fees  and  rates.   He related  that                                                               
studies  by  the Federal  Reserve  and  others show  that  credit                                                               
scores disproportionately  affect people of color  and minorities                                                               
who tend to  have poor credit and so get  assessed a higher rate,                                                               
which is his problem with the bill.                                                                                             
REPRESENTATIVE  STUTES said  she doesn't  have affection  for the                                                               
bill  either way.   She  asked Representative  Wool what  type of                                                               
amendment he was considering.                                                                                                   
REPRESENTATIVE  WOOL responded  that  when someone  is offered  a                                                               
policy the  insurance company may  use the person's  credit score                                                               
and  then  after one  year  the  company needs  authorization  to                                                               
continue to use  a credit score.  He said  his understanding that                                                               
"may" use credit score is often  that the company does use credit                                                               
score and  the applicant  doesn't have a  choice.   Therefore, he                                                               
would  like a  possibility to  opt  out.   He surmised  insurance                                                               
companies wouldn't want that because  it is to their advantage to                                                               
have  this  tool  at  their   disposal.    Nowadays  with  people                                                               
undergoing  more  economic  hardship,  studies  often  show  that                                                               
people put  medical expenses on  their credit card and  these are                                                               
people that have insurance but  are incurring medical bills while                                                               
costs are going  up all the time.  As  people incur more balances                                                               
on  more cards,  they have  a lower  credit rating.   He  said he                                                               
wanted to  discuss whether the  option to opt out  entirely would                                                               
be possible.                                                                                                                    
3:24:08 PM                                                                                                                    
REPRESENTATIVE BIRCH  spoke in support of  HB 195.  He  related a                                                               
personal  experience when  his insurance  went  up because  under                                                               
current state  law access to  credit scores is not  permitted for                                                               
purposes  of  policy renewal  for  automobile  insurance.   As  a                                                               
practical matter, he  said, credit score is used  routinely.  For                                                               
example, he  spent nine  years on the  board of  Chugach Electric                                                               
Association where  it was routinely  used instead of  requiring a                                                               
deposit  for determining  whether  someone was  a  good risk  for                                                               
advancing  a month's  worth of  utilities.   It  is a  reasonable                                                               
approach, he  opined.   Credit score is  a mechanism  to mitigate                                                               
risk in  the commercial world.   The use of credit  score in this                                                               
proposal is balanced  and reasonable and is  widely accepted from                                                               
an industry standpoint, and therefore he is a yes vote.                                                                         
3:25:28 PM                                                                                                                    
REPRESENTATIVE STUTES related that  she called the main insurance                                                               
carrier  in  Kodiak  to  ask  about [HB  195],  and  [the  agent]                                                               
responded that of course the  companies he represented wanted it,                                                               
but that he  didn't have a preference.  She  further related that                                                               
when she asked [the agent] how  he would vote on it, he hesitated                                                               
for a while  and then said he  didn't really know.   She said she                                                               
found this  interesting because she  had thought that  being from                                                               
the industry  [the agent] would have  been in favor of  the bill.                                                               
Based  on that  experience, she  said,   I'm not  crazy about  it                                                               
either way.  She stated she is at the will of the chair.                                                                        
3:26:19 PM                                                                                                                    
REPRESENTATIVE      SULLIVAN-LEONARD,     regarding      people's                                                               
consideration of  updating their  information on a  yearly basis,                                                               
remarked  that an  annual  check on  credit  score for  insurance                                                               
renewal  affects  a  person's  score, and  she  said  she  thinks                                                               
 that's where people  have heartburn.   She said if  there were a                                                               
process that  could show that  having the forms  pre-signed ready                                                               
to go  on a  yearly basis  was a  good thing  and may  not affect                                                               
someone personally,  then she may support  it, but she has  a lot                                                               
of questions on that.                                                                                                           
REPRESENTATIVE  STUTES  related  that  she  asked  her  insurance                                                               
carrier that very  question on checking the credit  score and was                                                               
told that it  is called a soft credit check,  which has no effect                                                               
on someone's credit score.                                                                                                      
3:28:12 PM                                                                                                                    
CHAIR KITO  asked whether the  use of credit scores  by insurance                                                               
companies   to  determine   a  person's   insurance  rate   would                                                               
[adversely] effect a person's credit score.                                                                                     
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community,  and Economic Development, State  of Alaska,                                                               
replied that it should not [affect a person's credit score].                                                                    
MS. WING-HEIER  further commented  that after the  committee last                                                               
heard  the  bill,  she  researched   the  matter  brought  up  by                                                               
Representative Wool about the medical  industry or medical codes.                                                               
She found that  Alaska Statute (AS) 21.36.960  would prohibit the                                                               
use of  medical for  credit scoring for  this bill  for insurance                                                               
CHAIR KITO inquired as to  how an insurance company would present                                                               
using credit score for a rate calculation.                                                                                      
MS. WING-HEIER  replied that according to  insurance underwriting                                                               
guidelines the insurance company  would ask [an applicant/client]                                                               
questions  regarding  type  of  auto,  driving  history,  driving                                                               
record, place  of residence,  and distance driven  to work.   The                                                               
insurance company would  also ask and provide in  writing that it                                                               
is going to order  up credit history.  A person  has the right to                                                               
say no and  does not have to  allow the use of his  or her credit                                                               
score, and can  opt out in the very beginning,  although this may                                                               
result  in not  being given  a preferred  rate.   If there  is an                                                               
adverse  reaction   that  the  company  would   take  because  it                                                               
determines  a person's  credit score  is not  positive or  it was                                                               
going to impact the person's  insurance premium, then the company                                                               
is required to advise the  person, in writing, what that decision                                                               
was based on, and that is part of what this bill is doing.                                                                      
3:30:21 PM                                                                                                                    
CHAIR KITO  offered his understanding  that HB 195  would provide                                                               
that a person  could opt out at the beginning  of what is already                                                               
the law.  This bill would say that  if credit score is used for a                                                               
 re-up   and that  changes in  a dispositive  way the  company is                                                               
required to notify the person that that took place.                                                                             
MS.  WING-HEIER  answered that  HB  195  clarifies for  both  new                                                               
business and  renewal business that  [the insurance  company] has                                                               
to tell a person in writing  why he or she is materially impacted                                                               
by the  ordering of  his or  her credit score,  what it  was, and                                                               
that the  person has the  right to appeal  it to the  Division of                                                               
Insurance through the extenuating life circumstances provision.                                                                 
3:31:02 PM                                                                                                                    
REPRESENTATIVE WOOL  offered his understanding that  a person who                                                               
opts out  of the credit  score option  would not get  a preferred                                                               
rate and would be charged more.   He asked whether a person would                                                               
be able  to also look  at what his  or her  rate would be  if the                                                               
company did do a credit score  analysis and then compare the two,                                                               
or would it just be a matter of rolling the dice.                                                                               
MS. WING-HEIER offered her belief that  it would be a roll of the                                                               
dice   a person either allows or  disallows the use of his or her                                                               
credit score.   She added that  once the credit score  was given,                                                               
she doesn't know how it would be taken back.                                                                                    
REPRESENTATIVE WOOL  posed a scenario  where on the first  year a                                                               
person chooses not  to allow the insurance company to  use his or                                                               
her  credit score.   He  inquired whether  upon year  one rolling                                                               
around, and  if HB  195 is enacted,  the insurance  company could                                                               
use the person's credit score without his or her approval.                                                                      
MS. WING-HEIER replied no, at  the time of applying for insurance                                                               
a person  must give the  insurance company permission to  use his                                                               
or her credit  score forever.  Permission either is  given or not                                                               
given.   Upon renewal a  person could go  back to the  broker and                                                               
give permission to begin using  his or her credit score beginning                                                               
now.   But,  if permission  is not  given, the  insurance company                                                               
cannot use a person's credit score at any time.                                                                                 
REPRESENTATIVE WOOL  offered his understanding that  when someone                                                               
initiates an  insurance policy, they  either give  permission for                                                               
use of their  credit score or don't and won't  know whether their                                                               
credit score would  have given them a lower rate.   He asked what                                                               
the formula is  for coming up with the credit  score or insurance                                                               
number and whether  the division is informed of  what the formula                                                               
MS. WING-HEIER  responded that  in some  cases the  division does                                                               
see where the credit  score is, but in most cases,  it is part of                                                               
the insurance company's confidential  underwriting as to where it                                                               
is.  The division  does see where it is put  into the formula for                                                               
underwriting, the  division does  see that they  use it,  and the                                                               
division does  see in  some companies the  percentage of  what it                                                               
qualifies for,  such as  whether it  is a 10,  20, or  30 percent                                                               
determination factor  depending on  the individual company.   For                                                               
example, she continued, Geico doesn't use  it at all at this time                                                               
in  Alaska.   The division  knows that  State Farm,  Liberty, and                                                               
Safeco rely heavily  on it.  So, some companies  use it, and some                                                               
don't, and to say exactly how much  they rely on it as opposed to                                                               
other factors, she would have  to pull the individual filings and                                                               
talk to all the companies that are in Alaska.                                                                                   
3:34:33 PM                                                                                                                    
CHAIR KITO  stated that there  are differences  between causation                                                               
and correlation.  He said one  of the things used by actuaries is                                                               
a correlation  and correlations can be  identified without having                                                               
causation.   Actuaries  run numbers  on statistics  every day  to                                                               
find out what  correlates to higher risk or lower  risk or higher                                                               
expense or  lower expense  and companies  have found  that credit                                                               
score is  not a causative  factor, but a correlative  factor, for                                                               
insurance  risk.   It  might  be  counterintuitive that  using  a                                                               
credit score  can lower a  person's rates, he continued,  but for                                                               
the vast majority of those who are  insured that is the case.  He                                                               
recalled from  earlier testimony  that the  assignment of  a poor                                                               
credit score  does not belong to  any one class of  person - that                                                               
people  with higher  incomes  can have  just as  much  of a  poor                                                               
credit history  as people  with lower  incomes.   That is  one of                                                               
those other  things, he  cautioned, where care  must be  taken in                                                               
utilizing stereotypical beliefs on some of these actions.                                                                       
CHAIR  KITO opined  that in  this  bill, the  department and  the                                                               
governor  have a  vested interest  in  trying to  provide for  an                                                               
insurance  system  that  works  best for  the  vast  majority  of                                                               
Alaskans.   California has not  used credit scores, he  said, but                                                               
he  doesn't know  what the  impact is  on that  state's insurance                                                               
rates.   California creates  its own  weather, he  continued, and                                                               
given its  [large] population costs  can be amortized over  a lot                                                               
broader  expanse  than  Alaska  would  be able  to  do  over  its                                                               
population of 700,000.  So, while  it might not make a difference                                                               
[in California],  he continued,  he believes that  it can  make a                                                               
difference in Alaska and is therefore good policy.                                                                              
CHAIR  KITO stated  he would  like to  move HB  195 forward,  but                                                               
allowed it sounds  like there are going to be  issues with trying                                                               
to get the bill  further along in the system.   He said he thinks                                                               
the committee has  done what it can with the  bill and he doesn't                                                               
see other things that can be  done to alleviate the concerns that                                                               
have  been expressed  so far.   He  offered his  belief that  the                                                               
committee is  at a policy point  where a member either  agrees or                                                               
disagrees with  this policy and  it is time  to move the  bill to                                                               
the next level of scrutiny.                                                                                                     
3:37:46 PM                                                                                                                    
REPRESENTATIVE  BIRCH stated  that the  bill is  good legislation                                                               
and went through both chambers last  year.  The governor had some                                                               
issues with it, he recounted,  but after some tweaks the governor                                                               
brought  it back  before the  legislature.   The bill  is a  good                                                               
effort to square  things up and recognize  reality, he continued.                                                               
While a person doesn't have to  give permission to use his or her                                                               
credit  score,  credit  history  is relevant  when  it  comes  to                                                               
insurance or consumer loans.  He said he supports the bill.                                                                     
3:38:29 PM                                                                                                                    
REPRESENTATIVE  WOOL  agreed  that   California   makes  its  own                                                               
weather  in  that it is the  fifth largest economy in  the world.                                                               
But, he noted, the states  of Hawaii, Massachusetts, and Maryland                                                               
also don't allow  the use of credit  scores.  As far  as the vast                                                               
majority  of people  getting a  benefit from  a credit  score, he                                                               
said  he  thinks  that  in  the act  of  business  if  a  company                                                               
instituted  a policy  that caused  it  to receive  less money  he                                                               
would see  the company as not  wanting to pursue it  and they all                                                               
would go the way California is  going if it saved the majority of                                                               
people money.   He cited a report from the  Federal Reserve Board                                                               
to  the  U.S.  Congress  which states  that  according  to  self-                                                               
reported data on race or  ethnicity, the mean TransRisk Score for                                                               
Asians  is  54.8, non-Hispanic  whites  54,  Hispanics 38.2,  and                                                               
blacks  25.6.   While  he  is  not  saying  it is  causation,  he                                                               
continued, there  may be a  correlation to credit score  and race                                                               
and  ethnicity   and  he  doesn't   think  a  bad   credit  score                                                               
necessarily makes  someone a  bad driver.   He said  he therefore                                                               
categorically opposes this type of legislation.                                                                                 
3:40:22 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON moved to report  HB 195 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
REPRESENTATIVE WOOL objected.                                                                                                   
3:40:38 PM                                                                                                                    
A roll  call vote was  taken.  Representatives  Josephson, Birch,                                                               
Stutes, and Kito voted in favor  of it.  Representatives Wool and                                                               
Sullivan-Leonard  voted  against  it.    Therefore,  HB  195  was                                                               
reported out of  the House Labor and  Commerce Standing Committee                                                               
by a vote of 4-2.                                                                                                               

Document Name Date/Time Subjects
HB222 Fiscal Note DCCED-DCBPL 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
HB 222
HB222 Supporting Document Bev Harper 04.10.17.pdf HL&C 4/17/2017 3:15:00 PM
HB 222
HB222 Supporting Documents-DCCED Letter to Manicurists 4.10.17.pdf HL&C 4/17/2017 3:15:00 PM
HB 222
HB222 Supporting Documents-Fortier and Mikko Letter 4.10.17.pdf HL&C 4/17/2017 3:15:00 PM
HB 222
HB222 Supporting Documents-HLAC 4.10.15 Minutes 4.10.17.pdf HL&C 4/17/2017 3:15:00 PM
HB 222
SB064 Sectional Analysis version J 4.11.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Fiscal Note DNR-MLW 2.24.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Fiscal Note DEC-SPAR 2.24.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Sponsor Statement 4.11.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Supporting Documents - DEC Fact Sheet 4.11.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Supporting Documents - DOD Response 4.11.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Supporting Documents - Uniform Law Commission 4.11.17.PDF HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Supporting Documents-Letter of Opposition 4.11.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Supporting Documents-Letters of Support 4.11.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB093 Sponsor Statement version O 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 93
SB093 Fiscal Note DOL-CIV 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 93
SB093 Sectional Analysis version O 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 93
SB093 Supporting Documents-CDIA Summary Statutes of Select States 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 93
SB093 Supporting Documents-Letters of Support 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 93
SB093 Supporting Documents-Power Point 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 93
SB064 Supporting Documents-DEC Response to DoD Supplemental 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
SB064 Supporting Documents-DoD Supplemental 4.14.17.pdf HL&C 4/17/2017 3:15:00 PM
SB 64
HB222 Supporting Documents-HB131 29th Legislature 4.17.17.pdf HL&C 4/17/2017 3:15:00 PM
HB 222
HB222 Sponsor Statement 4.16.17.pdf HL&C 4/17/2017 3:15:00 PM
HB 222