Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 5th Meeting

of the 2003 Interim


<MeetMDY1> October 28, 2003


The<MeetNo2> 5th meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Tuesday,<MeetMDY2> October 28, 2003, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Senator Tom Buford, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Representative James Bruce, Co-Chair; Senators Lindy Casebier, Ernie Harris, Daniel Mongiardo, R.J. Palmer II, Albert Robinson, Larry Saunders, Dan Seum, and Tim Shaughnessy; Representatives John Adams, Sheldon Baugh, James Comer, Ron Crimm, Robert Damron, Mike Denham, Ted "Teddy" Edmonds, J. R. Gray, Dennis Horlander, Don Pasley, Steve Riggs, Arnold Simpson, Roger Thomas, Tommy Thompson, Ken Upchurch, Susan Westrom, and Rob Wilkey.


Guests:  Prentice Harvey, State Farm Insurance, Greg Kosse, Kentucky Farm Bureau, Jeffrey Skelton, Choicepoint, Dr. Rice Leach, Commissioner, Kentucky Department for Public Health, and Commissioner Janie Miller, Department of Insurance.


LRC Staff:  Greg Freedman, Rhonda Franklin, and Jamie Griffin.


Greg Kosse, Kentucky Farm Bureau Insurance, addressed the committee regarding rating and underwriting of homeowner’s insurance.  He stated that in the past 6 years Kentucky Farm Bureau has not increased premiums, although the company has experience a $91 million dollar loss in the last 11 years.  He stated that the loss has been due to several reasons, such as large storms containing hail and damaging winds in several areas of Kentucky in 2001, 2002 and 2003.  He stated that the terrorist attacks on September 11, 2002, hurt the economy and investments.  He stated that the insurance market is experiencing a rate correction due to the events of the last several years.  He stated that he feels the insurance market is competitive and growing.


Prentice Harvey, State Farm Insurance, stated that he agreed with Mr. Kosse regarding the reasons for losses.  He stated that during the 1990’s State Farm grew too quickly and in the Fall of 2002 had to stop writing new homeowners’ policies in many states to curb its growth.  He stated that they have resumed taking new business in Kentucky and Indiana.  He stated that he feels the Kentucky market is sound and the rates are below the national average.


Jeffrey Skelton, Choicepoint, Atlanta, Georgia, stated that his company acts as a conduit to contract insurance in 50 states.  He stated that it makes it easier for people to buy insurance at a cheaper rate.  He stated that his company has a database that almost all insurance companies contribute to, that can provide loss history reports.  He stated that insurance companies can access the database to check prior claims history.  He stated that carriers have been using the database for 10 years.  He stated that in regard to insurance scoring all consumers are treated equal and the database is an objective tool.  He stated that Choicepoint’s system is open to inspection by regulators.  He stated that the system shows how consumers meet their financial obligations, paying on time, payoff debts, bankruptcy, and claims frequency and severity.


Representative J.R. Gray asked if State Farm or Kentucky Farm Bureau use insurance scoring.  Mr. Harvey stated that State Farm does not use insurance scoring with homeowner’s insurance, they do use insurance scoring with auto insurance.  Mr. Kosse agreed.


Representative Tommy Thompson stated that he has noticed a trend of  insurance companies coupling of lines to insure homes and autos for clients.   Mr. Kosse stated that Farm Bureau encourages accounts and likes to write all of a client’s business.


Representative Sheldon Baugh stated that he is an independent insurance agent and it has been his experience that insurance scoring has been positive rather than negative.  He said that insurance scoring will sometimes help to write a new customer.  He stated that he likes the system.


Representative Ron Crimm stated that he gets calls from constituents and feels that both the positive and negative needs to be studied by the committee.


Representative Bob Damron asked if someone obtained a credit card and did not use the card, what effect would that have on the insurance scoring report.


Jeff Skelton stated that if the credit card was obtained through a promotional campaign, it would not effect it the consumer’s report.


Senator Tom Buford commented that before legislation is drafted to make changes to this system, it is important to make sure all sides are considered and it is the right thing to do.


Representative Jim Bruce asked Commissioner Janie Miller if the Department of Insurance has their legislative package prepared for the 2004 Regular Session.  Commissioner Miller stated that the Department of Insurance is working on the legislative package which will include codification issues to insure that the Department of Insurance is NAIC accredited and the interstate compact system.


Dr. Rice Leach, Commissioner, Department for Public Health, addressed the committee regarding Kentucky’s public health status and public funding.  He stated that Kentucky’s general health status has declined and has experienced many changes over the last 20 years.  He stated that Type II diabetes and obesity has doubled since 1985.  He stated that adolescent smoking has shown some improvement, but adolescent lifestyles have become more sedentary.  He stated that diets are too high calorie and there are too many people smoking.  He stated that obesity leads to many other diseases such as; diabetes, heart disease, arthritis, cancer and kidney failure.  He stated that the costs to take care of the diseases has risen greatly.  He showed the committee a comparison of obesity trends among U.S. adults from 1985 to 2001.  He stated that there are over 800,000 Kentuckians that are considered obese.  He stated that the public health status has a great impact on public funding.  He stated that lifestyle changes are the only way to control the serious problem of obesity.  He stated that we need to work together to take better care of ourselves and that kids need to be taught better eating and exercise habits.  He stated that if changes are not made, there will definitely be more increases in healthcare costs.


Senator Dan Seum stated he feels that the health care status of Kentucky can be changed through education.


Representative Susan Westrom asked Dr. Leach his opinion on junk food in the schools.  Dr. Leach said that a little junk food now and then is not bad, but, people are eating, drinking and smoking themselves into horrible shape.


With no further business, the meeting adjourned.