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PRESIDING CHAIRMAN: Representative O'Connor

COMMITTEE MEMBERS PRESENT:

SENATORS: Crisco, Hartley, Caligiuri

REPRESENTATIVES: Clemons, Witkos, Altobello, Frey,Harkins, Schofield, D'Amelio, Geragosian, Megna, Roldan

COMMISSIONER TOM SULLIVAN: --we look forward to working with you during theremainder of this Legislative session. I'll start first with Raised HouseBill 5159, which is needed to update the statutory fines and penaltiesimposed by the department.

Some of these fines have not been updated since 1902. And most recent wasupdated in 1992. These statutory fines and penalties are imposed when aregulated individual or entity has violated the law enforced by thedepartment under Title 38a.

All fines and penalties imposed by the department are deposited into thestate's general fund. And in 2007, the total amount of fines and penalties,received by the state totaled $1.1 million.

The department determined the amount of findings by adjusting for inflationusing the United States Bureau of Labor Statistics Consumer Price Index.

A chart is attached to our written testimony which lists each fine. Thedate it was last revised. The current penalty or fine, and the amount itwould be raised based on our site CPI recommended change.


We hope the Committee agrees that it's long overdue that we increase thesefines and penalties to reflect the economic changes that have occurred overthe years and further incent lawful behavior by our stakeholders.

The next bill I would like to address is Raised House Bill 5158, whichmakes a variety of technical changes to the insurance statutes. Again, ourwritten testimony outlines each provision.

But I would like to call your attention to three specific changes in ourtechnical revisions bill. I'll point to first Sections 8 and 9, whichattempt to correct language regarding the extension of benefits to childrenup to age 26.

Last year the General Assembly extended this coverage to age 26, but addeda residency requirement. That actually took protections away that werepreviously in place.

An attempt was made to correct this unattended consequence, but the currentlanguage is still inadequate. The department is proposing modifying thelanguage to retain the protections that were in place prior the extensionto age 26.

And I would add that we are working the Association of Health Plans todevelop language that will reflect the concerns of all parties. And we willbe offering revisions to the Committee prior to our JF deadline.

Let me move on to Section 10 of House Bill 5158, which reduces from 40 to20 the number of pre-licensing, and I underline the word pre-licensinghours an insurance producer needs for successful completion of course work.

This requirement applies to each line of insurance for which an agent is


seeking a license. Pre-licensing courses are mandated prior to taking anexamination for licensor.

This change is being made in response to licensing uniformity standardsthat have been developed by the National Association of InsuranceCommissioners.

One of the uniformed standards includes pre-licensing education trainingrequirement requiring 20, rather than that 40 hours of education, whichConnecticut statutes currently require.

It is important to point out that the department is not seeking to changeour continuing education requirements. And, again, I point out that this isfor pre-licensor only.

Thirty states have already modified their pre-licensing education standardsto reflect this 20-hour requirement. And in response to the Federal Gramm-Leach-Bliley Act and the NARAB, which called for standards to enact multi-state licensing reforms.

This is revision is necessary for us to move closer to those uniformitystandards. A reduction in pre-licensing hours doesn't affect the content orthe quality of license examination.

We are not weakening protection to consumers in any way, as licensor isstill subject to exam qualification. The annual exam review process, whichincludes industry experts and department personnel, assures that the examquestions and the exam contents more than accurately test the applicant'sknowledge of insurance products and Connecticut's laws and regulations.

Section 14 of our tech revisions bill would expand the Insurance


Department's current authority to promulgate regs related to sales ofannuities to all annuity products sold to consumers.

The department currently has authority under 38a432a to promulgate regsrelated to the sale of senior annuity products. There are various otherannuity products that may be available for sale to Connecticut individualswho are under the age of 65.

And the department seeks the authority to ensure the protection of allconsumers of annuity products. Not just those over the age of 65.

The third bill I have commentary on is Raised Senate Bill 168, whichexempts risk retention groups, RRGs, from being able to back or ensurewarranty products.

The department has found that many RRGs that back extended warrantyproducts have had financial problems. And some have filed for bankruptcy.

This leaves the company without the ability to pay claims and consumerswithout protect of the extended warranty contracts. Furthermore, there areno solvency products under the state's guarantee fund.

When an RRG becomes bankrupt, and thus, this exposes retailers andconsumers of warranty products. Over the last two years, the department hasreceived 200 complaints from consumers about extended warranty contracts.

Additionally, an RRG out of South Carolina was recently placed intoreceivership, which impacted, almost, 700 customers who held warrantproducts here in Connecticut.

Finally, Raised House Bill 5154 style issues a formal mechanism for non-


adversarial mediation of disputes between an insured homeowner and aninsurer.

This mechanism would allow for a settlement of a claim arising under thehomeowner's policy following the major catastrophe, in which the Governorhas declared a State of Emergency.

The Insurance Department believes that consumers affected by extensive anddevastating damage to their homes, such as following a major hurricane,would benefit from having an option to use such a mechanism.

Mediation would be voluntary for the insured claimants but mandatory forthe insurers. It would require that the amount in dispute be at least $500or more.

It is important to note that if an insurer chooses not to participate inthis program or the parties are unsuccessful in reaching a settlement onthe claim, the insured will continue to have all rights to attempt toresolve the claim.

This includes the right to utilize the appraisal process that is set forthin the policy. The right to pursue litigation or any other disputeresolution procedure available under Connecticut law.

Regulations would first need to be adopted to implement this mediationprogram. In closing, I would like to thank you for the opportunity toappear before you. Once again, thank you for raising the department's bill.And I'd be happy to take any questions.

REP. O'CONNOR: Thank you, Commissioner. I have a couple of questions. Ijust want to start off with. How much does the department collect currently


in fines?

COMM. TOM SULLIVAN: Last year, 2007, we had $1.1 million. And we will beproviding with you a break down of, you know, where we achieved therevenue, separately, in a separate document. Correct?

REP. O'CONNOR: And the other question I have is a follow up to that. Ifthis law were to pass, what would the increase revenue be projected to be,based on the '07 numbers?

COMM. TOM SULLIVAN: You know, I'm going to answer your question with aquestion. That depends on the malfeasance of those people that we fine.

REP. O'CONNOR: I mean, is it based under the fines you had last year. Let'ssay, for instance, it was a $10,000 fine and this you were increasing it to$20,000.

COMM. TOM SULLIVAN: You know, what we may be able to, Representative, istake last year's fine activity and overlay it with what I've proposed.

And I can give you a number. I may be able to do that. My reluctance aroundthat is we don't have real granular data on the breakdown of our fineactively, largely, from what we operate under from a system's environment.

So I do have a little bit of reluctance. We'll give that a swag to see ifwe can get you that kind of information.

REP. O'CONNOR: Okay. That pegs a different question as to why you don'thave the data?

COMM. TOM SULLIVAN: Well, we do a good job of collecting revenue. All


right. We just don't do good job of finding out what all that revenue meansand where it all comes from.

REP. O'CONNOR: I guess that's it--

COMM. TOM SULLIVAN: It'll be a manual undertaking by my office. I could doit.

REP. O'CONNOR: Do you have. I guess, from the Committee's perspective, ifthere starts to be trend within a certain area, like you talked about theextended warranties.

You must have seen a trend. I mean, do you have data that you could pulland say this is being abused? Yeah, this fine might not be strong enough topersuade people from breaking the law.

COMM. TOM SULLIVAN: It's a fair point. I will tell you for us to be able todo what I just proposed, you know, I'll have to look at a lot of, what I'llcall, onesies and twosies.

You know, how we got to that $1.1 million is not uncommon for us to fine alicensee $1,000 for, you know, one very discrete violation of law.

So, you know, I have to bring together all of that data and there'sprobably some better ways. And I have to look at what we do from anaccounting perspective back at the ranch and see if there's an opportunityfor us to have a better and tighter reporting. And I'll let you know whatthat might look like if I--

REP. O'CONNOR: Okay. I pegs the question. Do you have the capability toknow if a certain insurer or entity has more than one fine? I mean, is


there a place to say to that XYZ insurance company has five fines in thelast ten years?

COMM. TOM SULLIVAN: Right. Two answers to that question. When we conductour market conduct activities, where the lion share of fine activity comesfrom, we look at trends, and we alert our colleagues.

Market conduct and consumer affairs are in the same division. Oftentimes,consumer affairs are the first tip off to some behavior in an insurer thatwe need to look deeper at, which will necessitate us sending market conductexaminers to ensure.

So there is a good spirit of cooperation amongst those two operationswithin the department. And we do monitor activity. And also a second point.

We, as part of market conduct activities, if we see a trend in a specificinsurer or a wider trend, then we go out and look for that on future exams.

And as part of our agreement with the licensee, we'll require correctiveaction plans to be put in place so that activity doesn't occur again.

REP. O'CONNOR: Thank you. And then just one question on House Bill 5158, Ibelieve, it was Section 14, with the mini-med plans.

Can you go into a little bit more detail, because I understand that theremight be some confusion with people expecting us to basically overturn thelaw that we passed last year with the mini-med health benefit plans. Do youkind of desecrate some of that fear? Because I understand your point forthe group--

COMM. TOM SULLIVAN: If I may? Can I call up Mary Ellen Breault, who heads


up my--

REP. O'CONNOR: Sure. Mary Ellen, if you could just read your name into therecord please?

MARY ELLEN BREAULT: Mary Ellen Breault. I'm the Director of Life and HealthDivision of the Department.

Basically, the concern with the limitations on the per-service type ofbenefit, technically, most plans have certain types of cautionary. Theyhave what we call inside limits. So even--

REP. O'CONNOR: Could you give an example?

MARY ELLEN BREAULT: An example could be potentially on a service, likephysical therapy. They may have a dollar amount limit for a year orpossibly a limitation on a per-visit type of basis.

But even very comprehensive plans have those types limits. And so to labeleven very comprehensive plans, even something comparable to the stateemployee's plan, that could have potentially some inside limits on, youknow, a given service or two.

That could be just problematic in really getting at the correct of the truemini-med plans. That virtually all plans could end up having thatdisclosure being required on the plan.

REP. O'CONNOR: All right. Thank you. Are there any further questions?Chairman Crisco.

SEN. CRISCO: Thank you, Mr. Chairman. Commissioner, if there's anyway that


we can help in upgrading your systems, then we would like to work with you,you know, to get the data that we all need. [inaudible].

REP. O'CONNOR: Thank you, Mr. Chairman. Representative Schofield.

REP. SCHOFIELD: Thank you, Mr. Chairman. Just a question about the fines,which in scanning through them certainly some of them are extremely old.From the 1950's and look like they're due for an update.

You've just rolled them forward with CPI. Have you actually done anycomparisons with other states to see if ours are low or high relative towhat other states use as fines for similar violations?

COMM. TOM SULLIVAN: Great question. I have. Not I, we. Because you pass thelaws. I enforce them. Right? Connecticut's been criticized by some in themedia because our fines have been deemed to be.

Our fines and penalties are low comparatively speaking to other states. AndI'm sure our friends in the insurance community would like them to staywhere they are.

I think they need to be brought up to be a little bit more contemporary.I'm not a pioneer in this. Although, I was out with [inaudible] before, mycolleague's superintendent.

And then Oliver, in New York, came out with his. But he's doing the verysame thing in New York State, because, similarly, their fines and penaltieshaven't been updated in 10, 20, or in, some of our cases, 100 years.

So it's really just a modernization effort to get us up to where we need tobe. The first part of your question is, where we from a relative


perspective. I haven't studied it, specifically.

But if I believe what people are telling me, we're supposedly on the lowside. You know, when you have states like California and some of the moreaggressive states, they're fine and penalty thresholds are much higher thanConnecticut.

REP. SCHOFIELD: Well, I'm curious. I would assume that we would be on thelow side, given we haven't updated these in decades. But I want to makesure we're somewhat within a reasonable ballpark of other states once we dothis CPI update.

And so it would make sense to me to look at once we go through this updatewill we then still be low or will we be high or I'm sure, in some cases,we'll be a little of both.

REP. SCHOFIELD: Yeah, and I think that would be that answer. It'll probablybe a little bit of both, but I would. I'm speculating here. Speculate thatwe're still probably in the mid to lower range. There are some other stateswhich are much more aggressive. From a fine and penalty perspective thanConnecticut.

MARY ELLEN BREAULT: Because, I would just encourage you to take a look atmore than just CPI as a way of adjusting these. And it would be nice to getthem in a reasonable range, and then index them so that you don't have tocome back every couple years--

REP. SCHOFIELD: That's a fair point.

MARY ELLEN BREAULT: --to do this. And I didn't see that in the bill. Sothat might be something we want to look at.


COMM. TOM SULLIVAN: Well, take that back. That's a great discussion.

MARY ELLEN BREAULT: Thank you.

REP. O'CONNOR: Thank you, Representative. Representative Geragosian.

REP. GERAGOSIAN: Thank you. Commissioner, and I assume that the reasons forthese fines are either punitive or discourage bad behavior in some form ofthat. Would I be correct?

COMM. TOM SULLIVAN: That's what there for. Right? Now, whether or not theyhave the effect of that, you know, one could question. Let me tell you whatwe're doing.

And as you know. And I've spoken to you previously on, Representative, andmade public this. We're actually publicizing what we're doing from a fineperspective, and what we do with our market conduct activities.

Frankly, I would submit to you that that has more of a sentinel affect thanthe fine itself. Because nobody wants to be pardon me in the headlines.Right?

So we're trying to be as absolute transparent as we possibly can in termsof how we regulate. I do not want my office door to be a barrier forinformation that should be out there in a public domain.

And, consequently, we are releasing and putting on our website all of ourmarket conduct activity going forward. So I think that has, frankly, morepower than the fine itself.


REP. GERAGOSIAN: I mean, because it begs the questions that a multi-billiondollar industry received a million or so in fines last year, is it like afly on a elephant's back kind of analogy?

COMM. TOM SULLIVAN: Yes, the local paper here, Hartford Courant, had in aneditorial, I think, categorized a slap on the hand or something to thateffect.

So let me say this. I am not a [inaudible]. I believe that I, as aregulator, have to look at the full perspective of everything that placedbefore me.

I don't report for one second that I would use this modernization of finesas a vehicle to, you know, exact some pain on industry. That's not the waywe operate. We look at the facts of the offense.

We look at what it gives rise to from the impact, and then we use the fineas a measure to correct what is behavior that needs to be corrected. And soI will not abuse my authority. I guess, is my assurance to you.

REP. GERAGOSIAN: All right. I want you to do what you think issued fines asneed be. Now, I'm a Member of the Judiciary Committee too. And we've spenta lot on the criminal side talking about persistent offender statutes.

And, you know, if you have a company, for instance, you see this taking $20to $40 or $100, $5,000 fines, because it's not affecting their position inthe market place.

Might that be some kind of tool that you'd want to use to be able to up thelevies. Up the damage. Double the damage. Triple the damage or some other.


If you see, you know, a pattern of bad behavior in one or two companies incertain areas. I mean, an extra hammer, shall we say.

COMM. TOM SULLIVAN: I don't have that authority. I have to have thatauthority in statute. Right? And so again, I would say. You have to look atthe whole mosaic of what we do from a regulatory perspective.

Fines and penalties are just one lever that we have. So, you know, what wedo from an ongoing examination perspective is another lever. What theNational Association of Insurance Commissioners is doing at a nationallevel with the multi-state efforts that we've undertaken, which the Stateof Connecticut has participated in.

In a case and I sight United Health Care. We as a body of state regulatorshad an historic settlement, because what we saw with United stretched, youknow, across state boundaries.

The same offenses were occurring in more than one state. Had a significantimpact to more than one consumer. In more than one state. And soconsequently 38 or so states endorsed or signed onto that multi-stateexamination, which, you know, had, significant, fines in the millions ofdollars.

But more importantly has as another lever a very strict ongoing monitoringas part of that examination. And we are holding United Health Care toreform.

You know, back to your earlier point. They have to reform their businesspractices and satisfy not only me, but 38 other state regulators. Thatthey, in fact, have cleaned up, what was, their malfeasance.


REP. GERAGOSIAN: And, lastly, do you or the department have the ability towaive or set aside or lower our fines that are levied?

COMM. TOM SULLIVAN: Yeah, we have, you know, discretion, for the most part,up to the ceiling. There's not really a floor.

REP. GERAGOSIAN: You don't have the power to waive fines.

COMM. TOM SULLIVAN: Well, sure. Yes.

REP. GERAGOSIAN: Thank you, Mr. Chairman.

REP. O'CONNOR: Thank you, Representative. Thank you very much for yourtestimony. Next speaker is Representative Al Adinolfi.

REP. ADINOLFI: Let me make sure I have the right one. Senator Crisco,Representative O'Connor, ranking Member Representative Witkos, thank youfor having me here today.

I'm here to speak favorably of House Bill 5513, in AN ACT CONCERNING THERIGHT OF RECOVERY BY THE CONNECTICUT INSURANCE GUARANTEE ASSOCIATION.

The end result of this bill will be to exempt tax exempt organization thatprovide health and social services to the elderly from being required torepay the course of claims do the Connecticut Insurance GuaranteeAssociation.

In a town of Wallingford, Masonic care, which I represent, is one of thelargest charitable, non-profit continuing care residential communities inthe state.


Employing over 2,500 in providing beds in the adult specialty cares and soon for over 400-patients in skilled-nursing care alone.

Their assets were assessed for over $50 million. However, the assessmentsinclude tangibles such as endowment funds, which can't be touches.

Masonic care, like many non-profits, don't have assets to repay insuranceguarantee association for paid claims. What do they do? Sell the beds.Close the hospital.

They're running at a constant loss. For their 85% of their skilled caresection are on Medicaid. They'd lose $100 a day on each Medicaid patient,which is supplemented by fundraisers and charitable contributions that aremade to these endowment funds.

I personally work and volunteer in one of the golf tournaments that they doevery year. We raise a few hundred thousand dollars. So this bill providesthe need of relief and allows them to continue quality care for theirresidents.

The irony of the present situation and the way the present statute iswritten, that funds that have been paid. That they have paid funds in theguarantee fund since 1971.

It's been paid by their insurance companies in their behalf. If you pay itto the fund, you should be able to benefit it. Can a medical insurancecompany deny a valid claim because the insurer has assets worth above acertain amount?

It's just unheard of, in my opinion. The manner in which the eligibilityrequirements of the guarantee fund are set up, totally, unfair. The $50


million asset limit was set up in 1987 and without any consideration ofinflation or whether or not the assets were tangible or not.

This proposed legislation is a good start in correcting a problem thatcould adversely affect many non-profit nursing facilities, within ourstate, now and in the future.

I might add that the previous speaker, the insurance Commissioner, didn'ttalk to it. But you have written testimony from him, I think, in yourpackets there.

Favorably supporting this legislation. And I urge you to move it along andapprove it. And we can get on with things. Does anyone has any questions,before I get to the next bill?

REP. O'CONNOR: Representative Witkos.

REP. WITKOS: Thank you, Mr. Chairman. Good morning, RepresentativeAdinolfi. Question. These trusts are what are being considered assets byvirtue of their price tag. Sonic care can't use that for whatever they wantto--

REP. ADINOLFI: No, generally the money is tied. Somebody might make like $1million to be used now and forever to buy bath robes for every patient thatis need or something like that. Usually, the money is tied.

Some of it goes into the general fund. And they're willing to use theinterest from these endowment funds as an asset. But their willing to workwith us in that area. But this is one faculty that is affected now, but itcould affect many in the future.


REP. WITKOS: Absolutely.

REP. ADINOLFI: That's why I'm looking to, you know, see if we can dosomething about this.

REP. O'CONNOR: Thank you, Representative.

REP. ADINOLFI: The other bill I want to speak to came up last year and wasspoken about very, very favorably. And I'm not going to read the whole.

But basically what it is here, if you look at your insurance card, yourmedical insurance card, you have a primary physician on your card.

If you go to an emergency room or you go see a specialist, they have yourprimary physician's name there that if they want to contact him and findout what medications your on or any past history on a particular aliment.

They can do that. With some of the insurance plans you don't have to bereferred where they get all that. You can just walk in, such as ours.

Also, you'll find in that area it could also help prevent fraud. Somebodycan go and see a doctor. Get a prescription. And go the emergency room andget another prescription, perhaps, to feed a habit.

So cut that out. As recent as last week, I attended the Waterbury MedicalAssociation Meeting in Waterbury, and quite a few doctors there hadmentioned that this is important and would be a benefit to them.

Just about every doctor you can talk to would tell you that this isimportant information to have. It can help the patient. It can preventfraud and cut down and save money in the long-term.


So I really hope you consider this. And I suggest you talk to your owndoctors and see what they think of it. I believe last year. I don't know ifthey're going to do this year.

But last year, the New Haven Medical Association came here and spoke infavor of this bill. So if we can move this along and get it done.

It's no cost to the state. Virtually, no cost to the insurance companies toadd a name on a card. And they will get some benefit from it. Thank youvery much.

REP. O'CONNOR: Thank you, Representative. There's a question byRepresentative Witkos.

REP. WITKOS: Thank you, Mr. Chairman. You wouldn't be opposed say if thiswill were to pass for a temporary. If there's a changing of your primarycare physician to, much like you do with a driver's license.

Get a little sticker and put it on the top until your card is renewed. Andthen you can at that time have the name changed. No opposition to that?

REP. ADINOLFI: No.

REP. WITKOS: Thank you.

REP. ADINOLFI: Thank you.

REP. O'CONNOR: Thank you, Representative. Next speaker is Tom Gaffey fromthe Probate Administration.

TOM GAFFEY: Good afternoon, Co-Chairs and Members of the Committee. I'm Tom


Gaffey. I'm chief counsel of the Office of the Probate Court Administrator.

And I'm here, this afternoon, to testify concerning Raised Senate Bill 165.This bill concerns the calculation of probate fees and decedents of states.

A number of problems arose in connection with that statute in 2005, whenthere was another statutory change. This bill attempts to correct thoseproblems.

And we support the efforts of this bill to do so. We do feel, however, thatit needs to go somewhat further in some respect. Probate fees and decedentsof states have been connected for at least the last 40-years to a statetaxation.

Until 2005, the basis for calculating probate fees was the grossest statefor Connecticut's succession tax purposes. And that is the grossest statewould be plugged into a statutory formula that then resulted in the probatefee in that state.

In 2005, the succession tax was appealed. And so the basis for cost in mostdecedents of states now is the gross taxable estate for Connecticut estatetax purposes.

And this is where the issues have arisen. That change has resulted innumber of alterations to the way that probate fees are calculated. Andthese alterations, we believe, have been inadvertent.

They have resulted in the inclusion of various assets that were notpreviously included in the calculation of the fees. And, of course, theresult has been additional fees to the public without any change in theservices provided.


This has caused a considerable dismay in the part of the public and Membersof the Bar and the Probate Judges who are inquired to issue these bills.

Two of the more significant changes that are the additional assets that arenow included in the calculation of fees that were not previously.

Are life insurance and certain property owned by the decedents, but locatedoutside the State of Connecticut. This bill attempts to correct both ofthose.

As regards to life insurance part of, we believe, it does so quiteeffectively. However, as to the out-of-state property part of it, webelieve, more is required.

There are two possibilities here. You can have a Connecticut decedent whoowned a property outside the State of Connecticut. And here we're talkingabout essentially real property or tangible personal property that'slocated outside the state.

Therefore not subject to taxation in Connecticut. And not within thejurisdiction of the Connecticut Probate Court. None the less, under thecurrent law.

That out-of-state property would be included in the calculation of theprobate fee. This bill would eliminate that. And we agree with thatelimination.

The problem that we see is with the reverse of that situation, however.That's where you have a non-resident who owns certain property in the Stateof Connecticut.


Again, that is a real property or tangible personal personality. Thefailure that we see in this bill, is it doesn't deal with the intangibleproperty of that non-resident of Connecticut.

Now, let me give you an example of that. And this is, perhaps, one of themore severe examples that I have encountered. We had an estate of severalmillion dollars of a decedent you resided in New York, I believe, it was.

The only property that that individual owned in Connecticut was a boat-slipon the Connecticut shoreline. That, therefore, required probate inConnecticut to deal with that boat-slip.

And in so doing, that brought in the entire estate from New York. The whole$10 million or whatever it was, for purposes of calculating the probatefee.

So in order to correct that problem. There has to be distinction madebetween residents and non-residents. And we have to eliminate, from thecalculation of our fees, all of that out-of-state property for non-residents that is not subject to our jurisdiction, and not subject totaxation here.

We have submitted a bill that is currently before the Judiciary Committee.That, we believe, accomplished that. It didn't address the issue of lifeinsurance.

But, we believe, in terms of the out-of-state property and the other issuesinvolved that the language that we have proposed offers a morecomprehensive fix to the various problems that are inherent in the currentversion of 45a107.


And we would urge this Committee to adopt that language with the additionof the life insurance. I thank you for hearing me this afternoon. And I'dbe happy to answer any questions you might have.

REP. O'CONNOR: Thank you, Tom. I appreciate that. Any questions? Thank youvery much.

TOM GAFFEY: Thank you.

REP. O'CONNOR: Now, we'll be moving on to the public portion of the PublicHearing. And we're going to do Senate Bill 279. Is Paul Gerckens hereplease?

UNIDENTIFIED SPEAKER: That's Pat.

REP. O'CONNOR: I'm sorry. Pat.

PAT GERCKENS: Okay. Good afternoon, Senator Crisco, RepresentativeO'Connor, ranking Members Caligiuri and Witkos, and Members of theInsurance and Real Estate Committee.

My name is Pat Gerckens. I'm an AARP driver's safety program instructor aswell as an advocacy volunteer. And I'm from Derby, Connecticut.

And I have a couple of colleagues. Bob Rodman from, Avon, and FrankContanto from North Haven.

REP. O'CONNOR: Actually, would you guys like to join Pat or would you liketo come up separately? It's up to you.

PAT GERCKENS: Yes, the more the merrier.


REP. O'CONNOR: It's a good photo-opt too.

PAT GERCKENS: I thank you for allowing me to testify here today on RaisedSenate Bill 279, AN ACT CONCERNING AUTOMOBILE INSURANCE DISCOUNTS.

I would ask you to support Raised Senate Bill 279. This would amend section38a-683 of the general statutes to require that drivers' successfullycomplete an approved Internet accident prevention course to qualify forautomobile insurance discounts that already apply to classroom courses.

The newly designed AARP drivers safety program online course offers analternative to classroom instructions and an attempts to reach thosepeople, including seniors that remain active in the workforce.

AARP believes the benefits of offering the course in an online deliveryformat are many. Including, it allows the consumer to learn at their ownpace, and in the convenience of their own home, office, or local computeraccess clients such as libraries, senior centers, or other communityorganizations.

It provides expanded capacity to residents living in rural areas who maynot have access to a trained instructor. It contains mechanisms to verifyparticipant identity and to measure participant success.

AARP believes that covering the same material as is covered in theclassroom format, while providing the many benefits associated with anonline course, will enhance their ability to assist the members and otherswho are looking either to improve their driving skills or refresh theskills they already possess.


It will also give those wishing to take a course a new option that may makeit more convenient and accessible for them, while still maintaining AARP'shigh standards for driver safety programs.

Other states have seen a 30% increase in the amount of drivers completingdefensive driver courses as a result of the inclusion of this onlineoption.

Such an increase and the benefits associated with more educated drivers arethe road can't be denied. Typically, very few individuals are completingdefensive driving courses each year.

In Connecticut, statistics show that less than 2% of licensed driverscomplete a defensive driver education class per year.

The more individuals that can be encouraged to take these courses, whichcan happen by making them more convenient, the greater the increase indriver knowledge and driver safety.

Those are some of the reasons why we and AARP encourage your support forRaised Senate Bill 279. Thank you.

REP. O'CONNOR: Thank you. I have a quick question of you, Pat. One of theconcerns, in the reason why after we passed the bill last year, the finalbill didn't have this language is.

Is that there was concern within the Committee Members that, let's say, ason or daughter might actually take the test for you. That there would beno oversight to, actually basically detail who was taking the test.

Who was studying. And how does this bill basically alleviate that kind of


situation and make sure and verify the person taking the class truly is asenior?

PAT GERCKENS: Okay. Somebody, graciously, wrote me a paper on this.Examples of the multiple choice questions would include. Which of thefollowing addresses is one where you have lived previously.

Which is the year you graduated high school. What year was your most recentauto loan established.

USI has created a method to look up this information with the help of afraud protection platform, SMP, developed by Acsinium and TransUnion. Andas a further explanation of how the website works it's small. Do you wantto hear it?

REP. O'CONNOR: I guess, just to follow up to that comment. Then you canstate the next version. What's, again, to say that, you know, someone mightbe sitting next to them and feed the person answers to those questionsabout the year you graduated, the policy number? That could be someonewho's friendly or a relative who is taking it.

FRANK CONTENTO: Pardon me. I'm Frank Contento.

REP. O'CONNOR: Could you use the mic please?

FRANK CONTENTO: Yeah, I'm Frank Contento. I'm a [inaudible] coordinator onthis program. The answer to your question is, hopefully, that they callthis out-of-wallet questions.

Its questions that you can't pull you license numbers, things of thisnature. Its questions that their looking at that they would ask, that


wouldn't be there available to someone sitting next to you.

It would be no different really than if you were to take a college courseonline. How do verify that the person taking the college course online?

These are well established ways of verifying who's taking the course. Andas I mentioned, that the questions that are being asked sometimes areunexpected even for the person taking the course. So I hope that answersyour question.

REP. O'CONNOR: I appreciate that answer.

PAT GERCKENS: Just a comment from me. Why would anybody want to jip use ofthis little amount of money and give the wrong information or do it forsomeone? It doesn't make too much sense.

REP. O'CONNOR: Thank you. Any other questions? Thank you very much for yourtestimony.

PAT GERCKENS: Okay. Thank you.

REP. O'CONNOR: Susan Giacalone.

SUSAN GIACALONE: Good afternoon Chairman O'Connell, Chairman Crisco,Members of the Insurance and Real Estate Committee. For the record, my nameis Susan Giacalone.

I'm here on behalf of the Insurance Association of Connecticut. We're herein opposition to Senate Bill 279. Actually, for the very reasons echoed inthe questions asked by the previous speakers by Representative O'Connor.


You're mandating a discount to be provided for someone who takes the courseover the Internet, but how are those courses going to be policed. It verywell could simply be just that.

Somebody sitting next to them and helping them to provide the answer. Oreven better they provide the information into the system and say heygrandson, I just took this test on the Internet on my driving skills.

I bet you I can do better than you. Why don't you try taking it. When theperson didn't complete the test and someone else could very well sit downand take the test for them.

There's no control there to guarantee the person getting this discount isthe one actually taking this test. And there's no correlation showing thatthe person taking this test, over the Internet, is getting the benefit ofan in course test.

So, therefore, for those reasons we oppose the proposal that's drafted. AndI do note it's been rejected in some other states that have been looking atit.

REP. O'CONNOR: Thank you, Susan. Are there any questions? I have one quickquestion. Actually, in our discussion in a previous testifiers.

Is what would happen if they were to take the class by the Internet, buthave to physically show up to take the test? Would that alleviate yourconcerns?

SUSAN GIACALONE: Again, it's with the contents of the class. One of thecomments made earlier was about the online colleges. And I understand that


is exactly how they do that.

If you take some course online, you have to the test in person. I think,there, at least, you're still having the authority over seeing thevisibility of those tests, administering the tests, the DMV.

REP. O'CONNOR: So you agree to that or support it?

SUSAN GIACALONE: I would have to look into that, because we haven'tcontemplated that. But it's a stronger proposal than what's being proposedhere.

REP. O'CONNOR: Thank you. Any other questions? Representative Witkos.

REP. WITKOS: Thank you, Mr. Chairman. I don't have a question. I guess,I'll just make a statement. You know, I think we're operating from thepremise in the discussion here that our senior population is going to bedeceitful and fraudulent and they're going to try anything they can do justto get the 15% discount.

You know, I was raised better than that from my parents. And, you know, I

applaud those who are moving into the 21st century that want to dosomething online.

It took me along time just to get my parents to buy a computer. To goonline. To see what it's like. To say that we're going to use the computer,now, as a device to be deceitful and gain an advantage is wrong. And I'lljust end there. Thank you, Mr. Chairman.

REP. O'CONNOR: Thank you, Representative. We're not trying to imply herethat our seniors are going to cheat the system overall, but we just want to


protect the integrity of the online courses. Any other questions? Thankyou, Susan.

SUSAN GIACALONE: Thank you.

REP. O'CONNOR: Paul MaGaril.

PAUL MAGARIL: Good morning. My name is Paul MaGaril, regional manager incounsel for PCI. The Property and Casualty Insurers Association of America.

Thank you for the opportunity to appear before you. PCI has seriousconcerns relative to the provisions in this bill. Providing accidentprevention courses to the Internet presents significant opportunities, asyou've heard, for fraud and abuse.

Under the existing classroom system there are ample opportunities forindividuals who wish to study accident prevention issues to take the coursein a classroom setting and is not necessary or prudent to offer accidentprevention study through the internet.

As a matter of policy, PCI opposed mandatory discount legislation. Webelieve that the private market place should determine when a discountshould be given for auto insurance, and how much of a discount should begiven.

When statutes dictate the amount of a premium discount, market place andinnovation are reduced. For example, insurers may decide to forego otherdiscounts they might otherwise offer because they have to provide theGovernment mandated discounts.

And auto insurers readily provide discounts in the absent of Governmental


mandates. [Gap in testimony. Changing from Tape 1A to Tape 1B.]

PAUL MAGARIL: --studies show that people who complete these courses do nothave lower accidents rates than people who didn't take courses.

Nonetheless, existing Connecticut statutes make a discount available fordrivers age 60 and over who complete the course. According to statistics toinsurance institutes for highway safety, these are the safest drivers onthe road.

They are involved in fewer fatal crashes then any other age group.Therefore, it would seem that drivers age 60 and over are least in need ofaccident prevention courses.

And it appears that even if they complete such courses, it doesn'tsignificantly impact accident rates, since these drivers are alreadyinvolved in so few accidents.

Therefore, where are the cost savings then to auto insurers and theirpolicy holders. For these reasons PCI urges you not to advance RaisedSenate Bill 279. Thank you.

REP. O'CONNOR: Thank you, Paul. Just to pose the question I asked theprevious speaker. Would you agree to a situation in which they were to takethe online course, but physically be present in a classroom setting for thetest?

PAUL MAGARIL: As I said, and we would certainly take a look at any otherlegislation, we have concerns with any of these discount programs or any ofthese mandatory discounts.


But, clearly, as you have under current law, the classroom setting is farpreferable. But any expansion of that would be problematic for us. Butcertainly we would take a look.

REP. O'CONNOR: Thank you very much. And other? Representative Witkos.

REP. WITKOS: Thank you, Mr. Chairman. Last year when we reduced the agefrom 62 to 60 for the premium, do you have any idea of how many additionalpeople that fell within that 60 to 62 age bracket took advantage of theclass?

PAUL MAGARIL: Not off hand, but I can try to find out for you.

REP. WITKOS: Okay. That would be great. Thank you.

REP. O'CONNOR: Thank you, Representative. Any other questions? Thank youvery much for your testimony.

PAUL MAGARIL: Thank you.

REP. O'CONNOR: Moving on to House Bill 5154. Bob Kehmna. And actually Bobright after you do that one. You can stay up for Senate Bill 167.

BOB KEHMNA: Thank you Representative O'Connor, Senator Crisco, Members ofthe Insurance and Real Estate Committee. My name is Bob Kehmna, presidentof the Insurance Association of Connecticut.

I'm here today to speak about House Bill 5154, AN ACT ESTABLISHING ADISPUTE RESOLUTION MECHANISM FOR HOMEOWNERS FOLLOWING MAJOR CATASTROPHES.

This bill would establish a mediation program for disputes involving


homeowner insurance claims involving, quote, a catastrophic event for whichthe Governor has declared a state of emergency, unquote.

It is not clear as written what, exactly, the trigger is for the program.What is this state of emergency? We assume the intent is that the event bea major statewide catastrophe.

If you will, Katrina like event, such as a severe hurricane. House Bill5154 states that the insurer shall bear all costs in conducting themediation regardless of the outcome.

Do this mean that we're paying for the insurer's attorney fees? What otherfees would be subject to paying for? The insurer's incentive to come to areasonable agreement in the process is reduced by the fact that he or shehas no skin in the game.

It is also not clear what the $750 fee in sub-section c2 refers to. It isnot clear what standards, if any, are going to be set for who are going tobe mediators in this program and what the qualifications would be for thoseindividuals.

As written, a claim could be brought to mediation, under House Bill 5154,if the amount in dispute is only $500. If this program is to go forward, wewould strongly suggest that the monetary threshold be increased to a higheramount in order to prevent misuse and the unnecessary incurring ofadministrative costs by insurers.

As the bill, itself, acknowledges, the standard homeowners' policy haswithin it an appraisal process. If the insurer and the insured fail toagree on an amount of all, either party may demand an appraisal of the


loss.

Each party chooses an appraiser. And then appraisers then choose an umpire.The decision made by two of those three is binding on the parties.

This is the most efficient and fair way to resolve disputes over damageamounts. We strongly believe that any mediation program, establishedpursuant to this bill, not resolve coverage issues.

Interpretation of insurance contracts to determine coverage issues needs tobe consistent and is promptly a matter of the courts, as it as always been.

Leaving coverage interpretation to the discussion of a mediator will onlyserve to create a confusing and unfair range of interpretations regardingthe same insurer's contract.

Mediation should be limited to disputes over how much is to be paid. Thatbeing said, the IC would welcome the opportunity to work the Committee andthe Insurance Department on House Bill 5154.

REP. O'CONNOR: Thank you. Bob, there are a couple questions from theCommittee on this bill. So before you go on to the next one.

I guess, what some of this stems from is in response to what happened downin Louisiana, Mississippi, where policy holders, first of all, it was toughto locate.

Tough to get there, I understand. But at the same time, they're facing amajor crisis and the process was much slower.

We're feeling that this could expedite it and make it more efficient as far


as processing claims and basically moving the process so people could getback to living their lives. Go ahead and tell me if you wish.

BOB KEHMNA: You're right. The Louisiana situation was a very difficultsituation for all involved. But as I recall, and I don't have the stats infront of me right now, within a year of that event over 95% of claims weresettled.

And that's in a circumstance where the adjusters couldn't get to the siteof the loss for months on end, because of lack of roads. Where the claimanthad moved out of state because of the realities facing him or her in thatparticular state.

Physical realities. Practical realities. There are a whole host ofproblems, practical problems, in processing claims. Yet, they industryworking with their insurers' did resolve 95%, I believe, of claims within ayears span.

Now, one delayed is one too many. I understand that. But efforts wereundertaken. In many cases, Herculean efforts to make sure that people gottheir money when they should have.

We're afraid that, if as structured, this could actually be a delay to theresolving of claims. There's already an appraisal process in contract.

And that appraisal process provides, as I've said, for each side to appointone person. For the two to appoint a third. And the decision is binding ondamage issues.

So that exists right now, in contract. That's standard contract procedure.Adding this additional could put, especially with the insured not having


any dollars in the game, could put an additional step in that process thatmay actually for some claims, delay the ultimate resolution of the claim.

REP. O'CONNOR: Thank you. And I guess before I ask another question.Representative Witkos.

REP. WITKOS: Thank you, Mr. Chairman. I would concur that probably $500 isa little low for a level to reach. Especially, if it's declared emergencyby the Governor. What would be a good dollar amount?

BOB KEHMNA: It's been suggested to be that $2,000 would be more realistic.

REP. WITKOS: $2,000? I was thinking in the $10,000.

BOB KEHMNA: I like your idea.

REP. WITKOS: Aren't we dealing mostly with homes rather than dollaramounts. You get a ding on a car and there's $500.

BOB KEHMNA: This is a homeowner's issue. This is a dispute as to the amountof damages actually incurred.

REP. WITKOS: Right. Okay. So it's the difference between what you've agreedwith. What the homeowner states the policy is and what the insured says thedifference is between the two?

BOB KEHMNA: Both sides agree that there is coverage. It's just a questionof what the damages were, and what should be paid to cover those damages.

REP. WITKOS: Okay. Thank you. Thank you, Mr. Chairman.


REP. O'CONNOR: Thank you, Bob. Representative Megna.

REP. MEGNA: Thank you, Mr. Chairman. Bob actually I'm speaking fromsomebody who has been through the appraisal process many times. And I'veworked catastrophes internationally and around the states.

The appraisal process can be very time consuming and very costly for boththe policy holder and the carrier. The bills could be in the thousands andthousands of dollars.

Let me back up. I agree with you to the extent that it's probably theyshouldn't be decisions of coverage. The department. But decisions on valuein a speedy process, an inexpensive process, could be a real benefit toboth the carrier and the policy holder, because there will be a tremendoussavings.

And the policy holder would be encouraged for a more timely, less costlyprocess to resolve a claim. Assuming the department is going to have aprocess set that is timely.

Even though it's a state department. If you could comment on, do youbelieve there could be a cost savings to carrier for a speedy process priorto the appraisal process under the policy?

BOB KEHMNA: We don't know if there would be any cost savings. As Imentioned, the fact that the insured has no dollars in this game andthere's, apparently, a limitless cost that that may incur that the insurerwould cover, as drafted, gives us pause.

We aren't saying that we reject the idea. We understand the point made bythe Commissioner early. We understand the point of your question.


But if this Committee is to go forward with a program like this, there arecertain things, that I tried to outline, that I think we have to becognitive of in trying to make this thing work so it's in everyone'sbenefit. Recognizing the fact that if it's overused it doesn't do what it'sintended to do.

REP. MEGNA: When you say overused, it resolves disputes on value say. Notnecessarily coverage.

BOB KEHMNA: Right, but also what triggers this.

REP. MEGNA: Meaning the value of the claim?

BOB KEHMNA: No, the value of the claim, but also the event. This istriggered by a declaration of a state of emergency.

REP. MEGNA: Yeah, I understand that.

BOB KEHMNA: That really has to be better defined or we're opening up,truly, a delaying process to an awful lot of claims.

REP. MEGNA: Yeah, I understand that. All right. Thank you, Bob. Thank you,Mr. Chairman.

REP. O'CONNOR: Thank you, Representative. If you could go onto yourtestimony for the next bill

BOB KEHMNA: Oh, sure. Sorry about that. Senate Bill 167. For the record, myname is Bob Kehmna from the Insurance Association of Connecticut.


I'm here to oppose Senate Bill 167, AN ACT REQUIRING A STUDY OF THEFEASIBILITY OF ESTABLISHING A STATE CATASTROPHE FUND.

Although, there is certainly some disagreement among IAC membership, theclear majority of our members believe there is no need to create such astate fund.

As a property and casualty reinsurance market place a sufficient capacityto address the needs of insurers relative to managing their naturalcatastrophe risk.

In fact, numerous reinsurance arrangements have been established recentlyto expand and solidify the availability of reinsurance. Private reinsurancespreads risk across a global market place.

Three-quarters of the reinsurance paid, due to losses from Katrina, Rita,and Wilma, were paid by global re-insurers. A state catastrophe fund,especially in a small state like Connecticut, will not be able to broadlyspread those risks.

The risk of loss would rather be focused on the state's insurers andtaxpayers. As you've heard, Florida is the only state with a state runcatastrophe fund.

When Florida's fund incurs catastrophic losses greater than it's balance,the fund issues bonds. The bond that is not paid by insurers' that purchasethe reinsurance from the fund rather it's paid by assessing or taxing allof Florida's residents.

Individuals and businesses far away from the coast are paying for the costassociated with the short-falls in the fund. When a state fund artificially


under prices a private reinsurance market, business will likely flow to it.

Not only will this serve to unfairly displace the competitive reinsurancemarket place, it will place a massive counterproductive tax burden on thestate's citizens when the ultimate bills become due. I'd answer anyquestions.

REP. O'CONNOR: I appreciate it, Bob. Any questions? Senator Caligiuri.

SEN. CALIGIURI: Thank you, Mr. Chairman. Bob, aren't those, ultimately, allreasons why we shouldn't establish a fund as opposed to why shouldn't studythe feasibility of it?

In other words, one way this could play out is if we had the study. Thosecould all be documented reasons why at the end of the day establishing afund wouldn't be right for Connecticut.

And, I guess, I wonder if there's value in going through that exercise justso that we can document issues, like the ones you've raised, and otherthings.

BOB KEHMNA: I guess, I might be violated one of the first rules of[inaudible]. You never argue against the study. Right. But this issue hasbeen studied and studied.

And we have Florida as exhibit A of the reality of what happens. And thento try and compare Florida with Connecticut, you just can't do. The size ofthe state is just so completely different.

So, frankly, all I'm trying to present to you all is the fact that majorityof my membership thinks the state fund is not the way to go.


SEN. CALIGIURI: Thank you. Thank you, Mr. Chairman.

REP. O'CONNOR: Thank you, Senator. Any other questions? Thank you, Bob.

BOB KEHMNA: Thank you.

REP. O'CONNOR: Get some rest. Drink plenty of fluids.

UNIDENTIFIED SPEAKER: Bob, do you have your doctor's physicians name onyour ID card?

REP. O'CONNOR: Thank you. John Murphy, please.

JOHN MURPHY: Good afternoon, Mr. Chairman, Members of the Committee. Myname is John Murphy. I'm regional vice-president for the American InsuranceAssociation or AIA.

AIA is a national property and casualty trade association with about 350-members. Many of whom are right here in Connecticut, and our members rightabout 40% of the homeowners' market.

I'm here to testify, as Mr. Kehmna did, in opposition to the idea ofestablishing a cap fund. And I had a lovely 25 or 30 minute presentation Iwas going to make for you today, but since all the speakers from thismorning and those you have proceeded me have covered every major point thatcould be made from our perspective, I will spare you that.

Especially, in recognition of your long list of bills that you have to gothrough today. But I did want to reiterate that AIA is opposed to thesemechanisms, and, ultimately, we believe that the private market will show


the resilience, as it has, to address these issues in the most efficientand clean and quick manner.

And we would be opposed to the creation of an entity involving theGovernment and, ultimately, the taxpayers funding it. When there really isno need for that.

Also, to underscore a point that was made before earlier this morning. Thatfor many of our members, many of whom are large carriers that writenationally and internationally, a single state cap fund really doesn't goto the point of helping reduce their overall reinsurance cost and with theidea that that will, ultimately, benefit the consumers.

So, in fact, for some carriers, as was pointed out this morning, mayactually increase their costs marginally rather than decrease them.

So for all those reasons and the ones you heard this morning, AIA would beopposed to the creation of this fund. I'd be happy to answer any questionsyou might have.

REP. O'CONNOR: Thank you, John. A question regarding the reinsurance. And Idon't know if any of your members are some of the small mutual companies.

But they seem to be the ones that are having a more difficult time andgetting a lot of downward pressure from both the rating agencies and thenthe reinsurance companies just because of the, you know, regionaljurisdictions by which they, typically, insure. How do we keep them viablewithin this market place?

JOHN MURPHY: Well, most of my members, as I mentioned, are of the largersort. So I'm really not going to be able to speak authoritatively for the


middle and lower end of the market.

But I do know from my experience in some other states that it is some ofthese smaller companies that are the ones that are advocating for these capfunds, because they believe it will be a cheaper form of reinsurance forthem.

I guess, my point from the outset is, let the market function, becauseover-time the prices do tend to stabilize. We did have a spike inreinsurance cost, dramatically, after the hurricanes of 2004 to 2005.

And despite those dramatic increases in insurance cost, they've come down.And I think, you know, in the market places where those carriers willprobably find the best results.

Not from creating a fund. Which, frankly, if you were to do that and itwere to even benefit that segment of the market, it disadvantages others.You really want to have a leveled playing field. Not a favored one.

REP. O'CONNOR: Thank you. Any questions? Thank you, John.

JOHN MURPHY: Thank you very much for your time.

REP. O'CONNOR: Next bill is Senate Bill 275. Kenneth Gear.

KENNETH GEAR: Thank you. Again, my name is Kenneth Gear. I am vicepresident of Pulty Homes. Pulty is one of the biggest home builders in thecountry.

We build in 27-states, including Connecticut. And we've built over 450,000homes over our 58-year history. I appreciate the opportunity to testify out


of order.

And I will be very brief. I'm here to testify in support of Raised SenateBill 275. Essentially, what it does, it allows Connecticut customers' toget information about new home properties in other states.

Currently, under existing Connecticut law, we are unable to send customers,or potential customers, information about our properties in other states.

So if a Connecticut resident happens to be in Florida, for instance, sees aPulty community, is interested in a second home or moving there, they getback to Connecticut and call us and say, can I have some more informationon that community.

We have to say no. Sorry, we can't send it. And this is because of a lawthat was passed back in the '60s, which basically says we have to beregistered in order to make offers of property in the state.

The problem with the existing regulatory framework and the statute is thatit's a very cumbersome registration process that makes it very difficult toregister.

And not only to we have to register the community. We have to register eachsub-division that we build in. And for our company that's over 700 sub-divisions, today.

So it makes it impossible to comply with the law and keep our registrationsupdated. I'll just mention that 30 other states have adopted what is afederal exemption to this law.

And that's what we're proposing under this bill to provide an exemption for


new homes and properties where a new home is about to be built within twoyears.

So it's a real customer issue for us. It's difficult. Customers in this dayof age of Internet just don't understand why we can't send them informationwhen they call.

And they're perplexed. Our sales people are perplexed. And I think I wouldsuggest, respectively, that it's time to change the law. So I'll stop thereand answer any questions.

REP. O'CONNOR: Thank you, Kenneth. I guess a question is, and I think youanswered it previously, but I just want to clarify. Is this already goingon in the market place? I mean, are most people not complying?

KENNETH GEAR: Most builders do not register their properties inConnecticut. It's because of the process, and the difficulty of keeping theregistrations current.

Essentially, we'd have to submit every marketing piece, advertising piece,for every single sub-division in the country to keep ourselves current.

And that's just impossible to do, because those change, you know, weekly.So for instance, we have a few communities registered, but the,overwhelming, majority aren't.

REP. O'CONNOR: Okay.

KENNETH GEAR: And most builders don't.

REP. O'CONNOR: And, you know, there might be some concern, among community


members, that the law was put in place in the '60s.

Granted, there is a lot of time that has gone by and how information isdelivered has changed. But what are some of the consumer protections thatwe may be foregoing?

KENNETH GEAR: Well, we would still be under the same consumer protectionsthat are available in all the other states. When the law was passed. It waspassed for really the target was sales of, sort of, unapproved land.

The 20 acres in the Florida Everglades, for instance. That there was nobuilder there. There was no person to go to if you had a problem.

On home builders, we have communities. We're physically there. We'resubject to all the consumer protections law, both of Connecticut and of thestate where the property is.

We also we continue to sell property to Connecticut residents to registeredConnecticut brokers. And they have a whole litany of consumer protectionsbuilt-in, subject to the consumer protection unfair and deceptive tradepractices active in Connecticut. So those all stay in place under thisbill.

REP. O'CONNOR: Yeah, I guess, I was trying to figure out what the reachmight be for Connecticut. Let's say from a Florida developer. You know, howeffectively can they enforce the law?

KENNETH GEAR: The buyer, the Connecticut resident, would have theavailability to prosecute their rights with the local jurisdiction of wherethe property is located. That's, typically, the way real estate law works.


REP. O'CONNOR: Okay. So they would have to go down to Florida and go totheir consumer protection equivalent?

KENNETH GEAR: Unless it's a issue with the broker or fraud ormisrepresentation. Then they would go through the Connecticut based brokerthat they're dealing with.

So questions of Pulty. If you were wanting to buy one of our properties inFlorida, we would have our Connecticut based licensed broker involved inthat transaction. So that would be a point of contact, as well, for you orrecourse.

REP. O'CONNOR: Great. Any other questions? Thank you very much for yourtestimony. Bill Kara, please.

BILL KARA: Thank you, Chairman. I'm William Kara. I'm president ofConnecticut Underwriters. And we ask that House Bill 5520 be passed thisLegislative session as it's, presently, written.

Right now, as an independent wholesaler, we issue 90% of the policies wewrite. And by the law, right now, we have to stamp each and every policy inred ink that the policy is not covered by the Connecticut guarantee fund.

By having the word red in there, it's cost prohibitive from us using highvolume printers for red ink for just these, specific, Connecticut policies.

Due to advances in technology, these policies can. Excuse me. However, dueto the requirement for red wording, each policy still must be manuallystamped as the cost of multi-colored printers, for us, is prohibited.

In this electronic age where electronic signatures are legal and binding,


we are unable to electronically send these policies to retail agents orpolicyholders because of the requirement of the red ink.

The change in color will not, in anyway, be prejudicial to thepolicyholder. All the insurers must sign is a surplus lines affidavit,which states that the insurance being purchased is not procurable fromlicensed insurers.

Three license carriers, as required by law, must decline coverage in orderto placed in the surplus lines market. Since the insurers are not able tosecure coverage from licensed carriers, the insurers really don't have anoption in that the policy must be placed through us.

The change from red to black ink will not be detrimental to the customer.The wording is still in ten point bold type on the policy. We are lookingfor a business friendly solution which will fully notify the consumer thatpolicy is now protected by the guarantee fund.

REP. O'CONNOR: Thank you, Bill. As far as the, you said 90% of yourpolicies are, you know, you have to basically hand stamp. If this were tobe eliminated, but the language is still there, obviously.

How many will you be processing, you know, by the email or some electronicform? And will it change your business practice? Will it make it moreefficient?

BILL KARA: It would, definitely, make our business practice more efficient.Right now, we have to supply three copies of policies. One to the company.One to the agent. And one to the insurer.

And we have to hand separate each one of these, right now, just to comply


with the red ink statute. We process, approximately, 15,000 to 18,000policies in Connecticut, which this will have an affect on.

Therefore, we could just run these through our machines, and we don't haveto have a person touch them. And right now, we're just looking for ways tobe more economical.

We're being requested by a lot of agents, at this point in time. I couldn'tgive a number on how many. That they want these policies to be sentelectronically.

And, eventually, they're going to be able to look at this on the extranet.We're going to have a site up where they can go in and we don't even haveto send the agent the copy. Where they can go online and look at this.

REP. O'CONNOR: Thank you. Chairman Crisco.

SEN. CRISCO: Thank you, Mr. Chairman. Would you take in considerationchanging the size of the point requirement, say, like from 10 to 14 orsomething? Just let us know. You're not in a position to, you know,obviously--

BILL KARA: We wouldn't be in opposition to that.

SEN. CRISCO: Okay. Thank you.

BILL KARA: Really, the issue is the red.

SEN. CRISCO: So 20 point, 30 point?

BILL KARA: Then we might be a little bit.


REP. O'CONNOR: Thank you, Mr. Chairman. Representative Megna.

REP. MEGNA: Thank you, Mr. Chairman. I think it's important a point on asee not stamp them. I'm familiar with that stamp. The stamp is on thedeclaration sheet. Am I correct?

BILL KARA: That's correct.

REP. MEGNA: The declaration sheet is given to the policyholder after theybuy it or before they buy it?

BILL KARA: The would bind the request coverage to be bound. We'd issue thepolicy. And then they would receive it.

REP. MEGNA: Yeah, so, it's not until after they've already purchased theproduct that they see the stamp.

BILL KARA: That's correct.

REP. MEGNA: Yeah, so, I mean, they're supposed to. I'm assuming most peopleread their policies. The red ink.

BILL KARA: Probably, doesn't make that much of a difference at that pointanyway because they've already purchased the policy.

REP. MEGNA: I mean, it creates a flag, in a sense.

BILL KARA: But they've already bound coverage and purchased the product.

REP. MEGNA: Yeah, and the entire policy is there, and that point we'regoing to assume they're going to read it, which most people don't. But they


would come across this information that you're proposing here.

BILL KARA: Correct.

REP. MEGNA: Yeah. Okay. Thank you. Thank you, Mr. Chairman.

REP. O'CONNOR: Thank you, Representative. Any other questions? Thank you,Bill

BILL KARA: Thank you.

REP. O'CONNOR: The next speaker is David Lowell. And we're on to House Bill5155.

DAVID LOWELL: Thank you, Senator Crisco, Representative O'Connor, andMembers of the Insurance and Real Estate Committee. I'd like to thank youfor the opportunity to speak today.

My name is David Lowell. And I'm representing the Association ofConnecticut Ambulance Providers. We're comprised of the six largestcommercial ambulance providers in the state.

Covering emergency and non-emergency ambulance services and medicaltransportation services throughout corners of the State of Connecticut. I'dlike to first thank you for raising House Bill 5155, AN ACT INCLUDINGAMBULANCE PROVIDERS IN THE PROTECTION AFFORDED BY THE CONNECTICUT UNFAIRINSURANCE PRACTICES ACT.

Insurance companies, much like emergency departments of hospitals, have tostaff and prepare to respond to all types of emergencies without regard tothe patient's ability to pay.


Like all other health care providers, ambulance companies must be fairlyand equitably reimbursed for the, essential, services that we do provide tothe beneficiaries that use our services.

And really, simply and briefly, this bill. What we believe this does iscorrect an oversight by inserting the statutory references to emergencymedical service providers, which would then include us as a health careprovider and afford us the same protection as other health care providersunder the act.

I'd like to thank you, again, for your consideration. I'm available toanswer any questions.

REP. O'CONNOR: Thank you, David. Are there any questions? Thank you verymuch.

DAVID LOWELL: Thank you.

SEN. CRISCO: I appreciate it. We'll continue now to House Bill 5512,viatical settlements. Jack Kelly.

JACK KELLY: Good afternoon, Mr. Chairman, and thank you. My name is JackKelly. I'm here for the Institutional Life Markets Association. TheInstitutional Life Markets Association is a trade association of theworld's leading institutional investors in the longevity market place.

Earlier I have submitted copies of my testimony so I'll prefer that therecord reflect that information, and I'll speak from other issues. Allmembers of our association include, Bayer Sterns, Credit Suis, GoldenSacks, Mahoozoo International, Westel Bee, and UBS.


Joining me today is Chris McKinsey, a member of the board of ILMA, and alsoa managing director for fixed income, at UBS, from Stamford, Connecticut.

UBS, in Fairfield County, has over 4,000 employees, including itsheadquarters for its life settlement operation. Its trading floor, which isover two football fields sizes, trades over $1 trillion a day in themarkets, including life settlements, premium finance, and longevitytransactions.

Other players, who are not members of ILMA, but players in this marketplace, are the Royal Bank of Scotland, RBS. Another Connecticut company.

Mr. Chairman, I'm appearing here in regard to Senate Bill 316. Thelegislation, you have before you today, is a significant step in pursuingconsumer protection in the life settlement market and to curve impropertransactions.

While we support many of the contents of this legislation, we havereservations with certain provisions. Specifically, our greatest concernrelated to--

SEN. CRISCO: Excuse me, Jack. You know, you're not testifying on House Bill5512?

JACK KELLY: I'm sorry. I apologize Mr. Chairman. We have two bills that arecross-bills. I'm speaking on House Bill 5512 then. I'll speak to that.

In relevance to that bill, we support many of the concepts of that bill.That bill contains two provisions which speak to the definition to a fiveyear provision and then the so called end coil definition as it relates to


STOLIs.

One of the counter stones that ILMA was founded on was transactionaltransparency in the market place. What this really is about in themarketplace is consumers.

And we hear today, and we'll hear people talk today about, so called,stranger owned or stranger originated life insurance, STOLIs. Today, we'llhear from people from the life settlement markets.

We'll hear from people from the insurance industries. We will hear peopletoday talk about STOLIs and stranger owned and initiated life.

ILMA and the members of ILMA in the market place and members of this marketplace in the institutional businesses, strongly and adamantly opposesstranger originated life or these, so called, STOLI transactions.

These manufactured transactions. They are, if they are truly manufactured.Thank you, Mr. Chairman. And I'll continue with that. To summarize, we areopposed to STOLIs.

We think that are ways to deal with it. We don't think that the five yearban that's raised is the proper way. We think a definitional solution isanother solution, Mr. Chairman.

SEN. CRISCO: Any questions? Thank you very much. Bill Fisher.

BILL FISHER: Thank you, Mr. Chairman and Members of the Committee. I'm BillFisher, corporate vice president and associate general counsel forMassachusetts Mutual Life Insurance Company also located here, at least, inpart of Connecticut.


I'm here to testify, today, in opposition to House Bill 5512, AN ACTCONCERNING VIATICAL SETTLEMENTS. As Mr. Kelly indicated, in recent yearsthere have been abused in the life where viatical market place.

And those abuses have included, amongst other things, the, so called,stranger originated life insurance. Stranger originated life insurance, orSTOLI, is basically the initiation by an unrelated stranger of the issuanceof a life insurance policy on the life of a senior citizen, usually, aged70, 75, or older, with the purpose of having that policy sold off in arelatively short period of time, a few years, into a secondary investormarket place. The, typical, transactions include

SEN. CRISCO: Bill, could I just interrupt you for a second?

BILL FISHER: Yes.

SEN. CRISCO: Are you opposed to House Bill 5512 or are you--

BILL FISHER: I am opposed to House Bill 5512.

SEN. CRISCO: Okay. All right.

BILL FISHER: The typical transactions include premium finance loans, whichreally means effectively there's no cost to the insurer for engaging thesetypes of transactions.

It is also quite common for the insured to receive some hundreds ofthousands of dollars, in many cases, just for engaging in the transaction.

These problems have caught the attention of Legislators and regulators.


And, in fact, there are two model acts on the very issue of STOLI and lifesettlements.

One developed by the National Association of Insurance Commissioners lastyear and the second one adopted by the National Conference of InsuranceLegislatures last December.

And in that regard, Chairman Crisco, we thank you for your participation inthe end process on that issue. Proponents will, undoubtedly, count HouseBill 5512 as providing strong protections against STOLI, as Mr. Kelly haskind of indicated.

In fact, we believe, it does exactly the opposite. It is based, to someextent, upon the NCOIL model, but it changes some of the provisions of theNCOIL model in a very critical way.

And in other places it simply doesn't bring some of the strong positions ofthe NCOIL model, which took a year of careful deliberation to develop.

We have many objections to the bill, but I'd like to just touch on some ofthe key ones. The first is, that the definition of STOLI has been modifiedin a way that doesn't protect against STOLI, but, in fact, permits STOLI.

Secondly, there is a provision in the bill which effectively means thatConnecticut citizens who have $1 million or more of net worth, which ismany of our citizens, will not receive the protections of the bill at all,because they are exempted from it's ambit.

Third, the bill doesn't include important reporting protections, I willwrap up, Mr. Chairman, that are found in the NCOIL model that are aregulatory tool designed for regulators to identify and enforce against


STOLI transactions.

It is for those reasons that my company is opposed to House Bill 5512, andwould support another Bill, Senate Bill 316, which will be heard shortly.Thank you for this opportunity to comment.

SEN. CRISCO: Thank you, Bill. Any questions? Thank you very much. Iappreciate it. Jerry Flowers.

JERRY FLOWERS: Good afternoon. Thank you for your time. My name is JeraldFlowers. I'm with NAIFA, the National Association of Insurance andFinancial Advisors.

And I'm speaking against House Bill 5512. This issue is a tough issue foryou to handle. And I really want to try to put some framework for you, interms of, you know, the two opposite ends of the world.

One end I'm an insurance agent. I have a client who is 79-years old andgoing into a nursing home and bought a policy three or four years ago andwants to sell it with the most genuine of interest.

Under these bills, that's going to be fine as long as they haven't financedthe premiums. Financing is an alternate way to pay for insurance. It's avery valid way.

Libor, which is the base rate on this, is at a very attractive rate forindividuals to have real estate and other fixed assets. It's a method.

They choose to do it. The problem is, there's a stranger owned initiatedinsurance market out there that has been rampant. And they are doing it inany way you can think of inducing individuals to buy a policy so that they


can receive, as you heard earlier, hundreds of thousands of dollars.

And this is clearly an insurability issue. The clients really didn't everhave insurability interest when they bought that policy. And so how do yougo about creating a statute that's going to help give some framework forthis issue.

And you're going to hear about Senate Bill 316, in a few minutes, which isanother bill which is, again, not perfect. And I'll talk about that later.

But on House Bill 5512, my primary concern is there's just not enough teethin this bill to allow us to stop the stranger owned transaction. Much of ithas value to it, but we think that there needs to be more. And I'll commentfurther when I get to Senate Bill 316.

SEN. CRISCO: Thank you, Jerry. Any questions? Thank you very much. KateMiratore. Kate, is it Joyce who is also from your company?

KATE MIRATORE: Is it who?

SEN. CRISCO: Joyce.

KATE MIRATORE: No.

SEN. CRISCO: Or Cayce. I'm sorry

KATE MIRATORE: Cayce. I don't believe he is here.

UNIDENTIFIED SPEAKER: He is.

KATE MIRATORE: Oh, he is here.


SEN. CRISCO: Do you want to testify both of them together or? Begin,please.

KATE MIRATORE: Senator Crisco, Representative O'Connor, Members of theCommittee, we appreciate the opportunity to testify here in support thisbill that prohibits STOLI transactions.

My name is Kate Miratore. And I'm the chief compliance officer at IntegritySettlement Provider, here in Hartford. And like I said, we support thisbill, which prohibits STOLI transactions.

We feel that any agreement that allows the third party to arrange with acitizen of Connecticut to purchase a life insurance policy and thentransfer the policy back to that third party so that the third party can,ultimately, benefit from the proceeds when the consumer dies, is a badtransaction and should never be allowed.

As a life settlement provider our aim is to help a consumer realize abenefit that otherwise would be unavailable to them. And prohibiting STOLItransactions will allow the life settlement market to provide greatopportunities, primarily, for older consumers to obtain competitive cashoffers for their unwanted or unnecessary life insurance policies.

For policies that a consumer can no longer afford in effect. The lifesettlement market is a very competitive market that benefits the consumer

The more competitive the market comes, the more the consumer will benefitfrom high market values. STOLI transactions have no place in this market,and, therefore, I, once again, urge you to support passage of thislegislation. Thank you.


SEN. CRISCO: You're welcome. Cayce, do you want to make some comments?

CAYCE AWE: Yeah.

SEN. CRISCO: This is my grain of funny face. Just put it on.

CAYCE AWE: Oh. Okay. Thank you. I guess not. My name is Cayce Awe. I'm theCEO of Integrity Settlement Provider, here in Hartford. And I just want toreiterate what Kate was saying.

Roughly, that I think we've provided a valuable service for Connecticutconsumers. We are not, in any way, affiliated with the STOLI transaction.

We don't purchase those types of policies. And we, too, are looking forways to rid the market of STOLI. However, we don't think some of these overreaching bills are necessary in order to do that.

SEN. CRISCO: Thank you, Cayce. Any questions? Yes, Sir.

REP. HARKINS: I just have a couple of questions. The more I'm listening tothe whole STOLI product, or what's going on, it almost sounds like some ofthese things are scams.

That's a concern I have. It just seems wide open for abuse. I canunderstand that some people can, clearly, benefit from t

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