Committee hears testimony on SB132 omnibus insurance; concerns about depreciation provision and controlled insurance programs

Senate Labor and Commerce met March 20 in Juneau to take public testimony on Senate Bill 132, an omnibus bill to update Title 21, Alaska's insurance statutes. Witnesses told the committee the measure contains technical updates but that a proposed depreciation provision could limit consumer choice; construction- industry representatives urged restoring language to permit Controlled Insurance Programs used on large projects.

Conrad Jackson, staff to Senator Jesse Bjorkman and the committee's bill presenter, opened with a brief recap saying SB132 makes multiple technical cleanups to align state law with National Association of Insurance Commissioners model language and to refresh references to federal statutes. Deputy Director Heather Carpenter of the Division of Insurance was available to answer sectional questions.

Christian Rataj, representing the National Association of Mutual Insurance Companies (NAMIC), testified in opposition to a depreciation provision he described as unnecessary and harmful to consumers. "Why change the current law and deny insurance consumers the right to make the personal financial decision to have an actual cash value policy," Rataj said, urging the committee to preserve consumers' option to purchase actual cash value (fair market value) coverage alongside replacement-cost coverage.

Lynn Seville, an insurance broker with IMA, urged the committee to support language in section AS 21.36.475 (identified in the bill as section 40) restoring what she called Controlled Insurance Programs, or SIPs. Seville said the provision is "crucial to enabling contractors to manage cost of risk effectively" and that SIPs have been used successfully on major Alaska projects. She told the committee the current statute (and the bill as proposed) imposes a $50,000,000 project threshold for SIPs and asked the committee to consider lowering that limit so multi-owner residential projects such as condominiums could use SIPs.

Committee chair Senator Jesse Bjorkman told the room public testimony would remain open and that the committee planned to set the bill aside pending further industry feedback. No formal vote was taken on SB132 at this hearing.

Why it matters: The depreciation language affects whether insurers may apply depreciation (including labor and materials) when paying claims and therefore whether consumers retain the option of purchasing lower-premium actual cash value coverage. The SIP language affects the ability of contractors and owners to place owner-controlled or contractor-controlled project insurance on large construction projects; the $50 million threshold was identified as a barrier by industry witnesses.

The committee kept public testimony open and announced it would continue the hearing next week on Insurance Day; the committee set the bill aside pending additional stakeholder input.