The 1st meeting of the Interim Joint Committee on Banking and Insurance was held on Tuesday, June 26, 2007, at 10:00 AM, in Room 149 of the Capitol Annex. Senator Tom Buford, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative Tommy Thompson, Co-Chair; Senators Dick Roeding, and Dan Seum; Representatives Sheldon E. Baugh, Johnny Bell, Ron Crimm, Robert R. Damron, Mike Denham, Ted Edmonds, Tim Firkins, Danny Ford, Jim Gooch Jr, J. R. Gray, Jeff Greer, Mike Harmon, Jimmy Higdon, Dennis Horlander, Adam Koenig, Rick Rand, Frank Rasche, Steve Riggs, Brandon Smith, Ken Upchurch, Ron Weston, and Susan Westrom.
Guests: Rep. J.R. Gray; Julie McPeak, Executive Director, Kentucky Office of Insurance; Prentice Harvey, State Farm Insurance; David Finney, Kentucky Farm Bureau Insurance; Steve Bolton, American Insurance Association; and Jon Burton, Choicepoint.
LRC Staff: Greg Freedman, Rhonda Franklin and Jamie Griffin.
Sen. Tom Buford, Chairman, called the meeting to order and asked for a roll call. The minutes of the November 28, 2006, meeting were approved.
Rep. J.R. Gray stated that 2007 House Bill 111 would have prohibited a property and casualty insurer from rating a risk based on credit history of the insured or applicant. Rep. Gray stated the he plans to file the bill in the next Regular Session. He also told the committee that research on the bill was available from LRC staff. He stated that 48 states have taken some form of action on this matter and that 12% of Americans are affected by credit scoring.
Rep. Jim Gooch stated that he believes Kentucky already has a statute addressing this subject.
Rep. Gray stated that the statute is very narrow and feels it needs to be amended.
Rep. Rand stated that in his insurance agency this approach has been a good predictor of future losses. He stated it has not caused problems in his agency.
Julie McPeak, Executive Director, Kentucky Office of Insurance, stated that there is a large amount of credit data that is used in predicting loss. She stated that California is the only state that prohibits credit scoring. She stated that prohibiting credit scoring could cause an increase in premiums and availability.
Prentice Harvey, State Farm Insurance, stated that credit scoring has been studied nationally to predict risk and it has found that credit history has a connection to risk/loss. He stated it helps more people than it hurts, but is controversial.
Rep. Rand asked how many personal auto insurers there are in the state of Kentucky.
Ms. McPeak stated that there are 150 active auto insurers at this time.
Rep. Rand stated that there should be a way to reevaluate a score if someone is working to improve their situation.
Mark Treesh, Insurance Institute of Kentucky, stated that the information his association has access to indicates all studies that have been done show that there is a connection between a person's credit score and their claims.
The committee discussed auto insurers issuing insurance to persons who do not have an operator's license, particularly illegal immigrants.
Julie McPeak, Executive Director, Kentucky Office of Insurance, stated that Federal Law states you must have a valid identification. She stated that it complicates things when companies write insurance out of state. She stated that in Kentucky you cannot buy insurance without a social security number, valid driver's license or a visa.
Sen. Tom Buford stated that an individual could obtain auto insurance with a Mexican driver's license and register a car, but may be here illegally.
David Finney, Farm Bureau Insurance, stated that his company's position is that you must have a valid license and prove residency.
The meeting adjourned at 12:00 p.m.