SENATE COMMITTEE ON

TRANSPORTATION AND ECONOMIC DEVELOPMENT

 

March 12, 2003                                                                                                       Hearing Room C

8:00 AM                                                                                                                         Tapes 52-53

 

MEMBERS PRESENT:         Sen. Rick Metsger, Chair

Sen. Bruce Starr, Vice-Chair

Sen. Ryan Deckert

Sen. David Nelson

 

STAFF PRESENT:                 Jim Wiles, Committee Administrator

Annastasia Suess, Committee Assistant

 

MEASURE/ISSUES HEARD: Invited Testimony – SAIF

                                                           

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 52, A

002

Chair Metsger

Calls the committee to order at 8:04 a.m. and opens an informational hearing.

INFORMATIONAL MEETING

005

Bill Conerly

Economist, Conerly Consulting. Begins discussion on SAIF corporation. Provides written testimony (EXHIBIT A).

100

Conerly

Continues discussion:

·         Market comparisons

·         Risk profiles

·         State comparisons

·         SAIF reserves and surplus

TAPE 53, A

010

Conerly

Continues discussion:

·         Suggestions for the future of SAIF

·         Concludes discussion

075

Chair Metsger

Inquires about the SAIF issue of lowering premiums outlined on page 9 of the written testimony.

089

Conerly

Responds.

105

Chair Metsger

Asks for a viewpoint of SAIF providing the capitol for the use of economic development.

120

Conerly

Responds.

125

Vice Chair B. Starr

Inquires about the corporate welfare portion of the report and asks how SAIF as a state agency picks winner and losers.

140

Conerly

States he believes SAIF picks and chooses whomever they wish to insure.

155

Vice Chair B. Starr

Inquires if SAIF were a private corporation, would the manner in which SAIF does business be altered and would they be liable to income tax..

160

Conerly

States he believes yes the business practice would change, and that SAIF would have to pay a corporate income tax.

200

Sen. Deckert

Asks about the recommendation to sell SAIF.

212

Conerly

Responds.

230

Sen. Deckert

Asks why SAIF’s growth is negative.

235

Conerly

Answers.

255

Sen. Nelson

Asks which study was referred to in testimony.

260

Conerly

Answers.

265

Sen. Nelson

Inquires about reserve estimating.

270

Conerly

Responds that reserve estimating is not reliable.

300

Sen. Nelson

Inquires about the risk based standard used by national insurance companies.

320

Conerly

Responds.

350

Sen. Nelson

Asks for the preferred standard.

355

Conerly

Responds and elaborates.

400

Sen. Nelson

Inquires about increasing the market competition, when there is over 60 competition insurers that insure over a million dollars.

TAPE 52, B

020

Conerly

Responds and elaborates on numbers of businesses.

030

Sen. Nelson

Asks if Cascade Policy Institute truly is insured by SAIF.

035

Conerly

Confirms.

040

Sen. Deckert

Asks if the use of one time use of funds is advantageous to Oregonians.

045

Conerly

Provides an opinion.

080

Greg Chaimov

Legislative Counsel. Inquires about the recent dropping of SAIF’s ratings.

085

Conerly

Responds.

090

Chaimov

Asks if there is a way to insure that money’s from the industrial accident funds would only come before 1982 funds.

100

Conerly

Comments.

115

Charlie Cheek

Legislative counsel. Inquires about the condition of Oregon in the early 80’s, and asks for an estimate of how many competing insurers are private organizations.

130

Conerly

Responds and elaborates.

140

Cheek

Asks how the risk factors of insurance will be impacted by the sale of SAIF.

150

Conerly

Provides and opinion.

170

Cheek

Asks for the difference for a one time fund from the sale of SAIF, versus the idea of annual assistance to the legislature with monies set aside for economic development.

195

Cathy Pollino

Director of Audits Division, Secretary of the States office.  Summarizes the 2002 Audit of SAIF.

200

Nancy Young

Audit Administrator, Secretary of the States office. Begins discussion on the auditing reports of SAIF, and provides written testimony (EXHIBIT B).

230

Young

Continues discussion:

·         Statutory accounting of SAIF December 2001

·         Financial Position of SAIF December 2001

·         Actuarial reviews

·         Financial viability review of SAIF December 2001

·         Concludes discussion

290

Chair Metsger

Inquires about statutory accounting.

300

Young

Responds and elaborates.

305

Chair Metsger

Inquires about reserve differences.

325

Young

Responds.

345

Sen. Nelson

Asks what the definition is of non-admitted assets.

350

Young

Responds.

375

Joel Ario

Insurance Administrator, Department of Consumer and Business Services (DCBS). Begins discussion on the financial regulation of SAIF and provides written testimony (EXHIBIT C).

TAPE 53, B

020

Ario

Continues discussion:

·         Rate and form review

·         Market regulation

·         Other oversight

·         Concludes discussion

105

Chair Metsger

Inquires about the market share increase for SAIF and asks for confirmation of numbers of competing business provided in earlier testimony.

115

Ario

Responds and elaborates.

125

Chair Metsger

Inquires about the ORS stature of withholding information.

130

Ario

Answers.

140

Chair Metsger

Inquires about permanent disability claims (PDD) and asks why the trend in decreases PDD’s.

170

Ario

Answers.

180

Chair Metsger

Inquires about workers benefits, and what SAIF’s denial rate is over a five year period.

200

Ario

Comments and offers to provide an answer at a later date.

215

Vice Chair B. Starr

Asks if SAIF pricing strategy information available to DCBS.

225

Ario

Responds.

240

Vice Chair B. Starr

Asks if it is legal for SAIF to offer some business lower rates than others.

245

Ario

Comments and elaborates.

255

Vice Chair B. Starr

Asks for definition of less than zero or lower than cost.

260

Ario

Answers.

275

Sen. Nelson

Inquires about policy holders claims handling.

285

Ario

Offers to provide statistics to committee members.

300

Sen. Nelson

Inquires about the ratio of policy holders in Oregon and if SAIF has more than their fair share.

310

Ario

Responds that he believes SAIF has approximately 38% of the market.

335

Chair Metsger

Closes the informational hearing and adjourns the committee at 9:47 a.m.

 

EXHIBIT SUMMARY

 

A – Informational, written testimony, Bill Conerly, 43 pp

B – Informational, written testimony, Nancy Young, 1 p

C – Informational, written testimony, Joel Ario, 2 pp