SENATE COMMITTEE ON BUSINESS AND ECONOMIC DEVELOPMENT

 

 

February 17, 2005                                                                                                   Hearing Room B

1:00 P.M.                                                                                                                     Tapes  24 - 26

 

MEMBERS PRESENT:         Sen. Rick Metsger, Chair

                                                Sen. Bruce Starr, Vice-Chair

                                                Sen. Ryan Deckert

Sen. Laurie Monnes Anderson

 

MEMBER EXCUSED:          Sen. Jason Atkinson

                                               

 

STAFF PRESENT:                 Theresa Van Winkle, Committee Administrator

James Goulding, Committee Assistant

 

MEASURES/ISSUES HEARD:

                                                Informational Meeting – Building Codes Division Overview

                                                SB 116 – Public Hearing

 

 

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 24, A

003

Chair Metsger

Calls the meeting to order at 1:03 p.m.  Notes that they have opened as a subcommittee.  Opens an informational hearing on building codes division overview.

INFORMATIONAL MEETING – BUILDING CODES DIVISION OVERVIEW

010

Mark Long

Department of Consumer and Business Services (DCBS), Building Codes Division (BCD) Administrator.  Submits and presents his written testimony regarding the operation of the BCD (EXHIBIT A).

040

Long

Talks about the ways they are improving customer service at the department.

085

Chair Metsger

Asks if the BCD has received more demands for inspections.  Observes a full committee is now present.

095

Long

Replies that their role is changing.  Discusses the changes in responsibility for inspections.  Outlines various building issues across the state.  Offers an outlook on the role of the division.

110

Sen. Monnes Anderson

Wonders about people complaining about the codes and being able to obtain building permits.

120

Long

Replies that they set the standards of the code so they are the same across the state.  Offers that permit issues are handled at the local level.

135

Sen. Monnes Anderson

States that builders in her area have been voicing complaints with the permit process.

140

Long

Voices that they can influence decisions made at the local level, but they cannot directly change them. 

160

Sen. B. Starr

Mentions large projects being a “relief valve”.  Wonders where the cutoff should be for project size.

167

Long

States that if he recalls correctly, the projects affected would be over 100,000 square feet that are traded sector projects among others.

180

Sen. B. Starr

Recalls the 2003 legislation that moved responsibility for manufactured structures from Department of Motor Vehicles to their division.  Asks how the transition is going. 

190

Long

Discusses the transfer of titles within the data system is proceeding very smoothly.  Relates some of the difficulties involved in reaching the deadlines.

210

Sen. B. Starr

Responds with his interest to keep informed on the progress.

215

Long

States additional transition issues that may require some clean up work.  Voices his appreciation for Sen. Starr’s continued interest.

220

Chair Metsger

Thanks Mr. Long for his presentation.  Closes the informational meeting.  Opens a public hearing on SB 116. 

SB 116 – PUBLIC HEARING

230

Joel Ario

Administrator, Department of Consumer and Business Services, Insurance Division.  Submits written testimony to the committee (EXHIBIT B). 

235

Chair Metsger

Takes a moment to comment on Mr. Ario’s reputation and expertise in his field.

240

Ario

Thanks Chair Metsger for his comments.  Presents his testimony in favor of SB 116. 

275

Ario

Notes that this has been a good year for insurance.  Discusses some of the negative issues affecting the industry such as medical malpractice suits.

310

Ario

Observes communication problems within the industry and how to address them.

345

Ario

Outlines the setup for a market assistance program.  Discusses proposed amendments they are working on.

395

Chair Metsger

Asks if they are the same as the -1 amendments to Senate Bill 116 the committee has received (EXHIBIT C).

410

Ario

Assumes they are the same ones proposed by the department.

420

Theresa Van Winkle

Committee Administrator.  Clarifies that the -1 amendments did come from the Insurance Division, and are the ones Mr. Ario was referencing.

430

Ario

Continues testimony in regards to SB 116.

TAPE 25, A

005

Ario

Continues his testimony in favor of SB 116 and the -1 amendments.  Urges adoption of the amendments and moving SB 116 to the Senate floor.

025

Sen. Monnes Anderson

Asks for an example of when a joint underwriting association would come into play.

030

Ario

Offers that contractor liability is where this generally occurs.  Presents an example of how claims would be dealt with.

045

Sen. Monnes Anderson

Relates the concerns of her constituents.  Asks if this would help solve their problems with liability.

050

Ario

Responds that it will solve some problems, but not all.

055

Sen. Monnes Anderson

Asks which entities would be the underwriters.

057

Ario

Replies it would continue to be insurance companies. 

070

Sen. Monnes Anderson

Wonders why insurance companies would want to take on this liability.

075

Ario

Responds insurance companies do not desire to take on this liability, but could be required to by the legislature.

080

Chair Metsger

Asks for comparison of the language in SB 116 with other insurance markets.

090

Ario

Compares it to statues involving several other markets such as workers compensation and home owners insurance.

105

Sen. B. Starr

Comments on the difficult relationship between the regulator and the regulated.  Questions how valuable their 2004 public hearings were.

125

Ario

Responds that public hearings are very helpful in demonstrating that not all issues are clear cut.

135

Sen. B. Starr

Remarks on their industry workgroups, asks if the insurance industry exhibited any resistance.

140

Ario

Offers that it took longer than he felt it needed to.  Relays the conversations that took place. 

165

Sen. B. Starr

Wonders about the role of the contractors in the process.

170

Ario

Describes the strong showing of contractors in the public hearings.

180

Sen. B. Starr

Voices his concern over the idea of creation of a Market Assistance Program (MAP) without a public hearing.  Wonders why they would forego the public process.

195

Ario

Replies it is a matter of communication and that not all issues require a full public hearing.

215

Sen. B. Starr

Asks about the creation of a Joint Underwriting Association(JUA).  Wonders about the State of Oregon being further involved in the insurance business. 

235

Ario

Expounds upon the scenario mentioned. 

245

Sen. B. Starr

Wonder why they would skip the MAP process before creating a JUA.

250

Ario

Replies they would not skip the MAP step if it had utility in the scenario they were looking at.  References the medical malpractice marketplace.

265

Sen. Deckert

Asks why the public hearing requirement is being dropped.

267

Ario

Points out they retain the public hearing requirement for the joint underwriting process.  Clarifies that a public hearing isn’t always held when they have to move quickly with the MAP process.

273

Sen. Deckert

Feels there is still a place for a public hearing in the creation of a MAP.

275

Ario

Offers they wouldn’t oppose it if that were an amendment to the bill.

277

Chair Metsger

Discusses the value of the public hearing.

295

Jack Munro

American Insurance Association.  Testifies in opposition to SB 116.  Outlines the options before them and problems associated with the process as it is.  Feels the existing process is more effective than the changes proposed in the bill. 

TAPE 24, B

005

Munro

Continues testifying in opposition to SB 116. 

030

Munro

Details the significant problems the state is setting itself up for.

060

Sam Sorich

Vice President, Property Casualty Insurers Association of America (PCI).  Testifies in opposition to SB 116.  Offers reasons for opposing SB 116.  Notes some of the changes proposed in the -1 amendments are positive. 

095

Sorich

Talks about the need for rates to be actuarially sound.  Offers that fundamental problems in liability are what need to be addressed.

130

Sen. Monnes Anderson

Comments that insurance companies do not want to insure industries with perceived risk.  Observes a problem with contractor liability. 

150

Sorich

Points out there is a mechanism to address this already.

155

Sen. Monnes Anderson

Feels the mechanism isn’t working.

160

Munro

Explains that there is only so much risk relative to the amount of surplus.  Predicts that there would be a contraction of the insurance market. 

185

Sen. Monnes Anderson

Points out they are spreading the risk.

187

Munro

Replies that if they want to solve this issue they need to address the larger underlying problems.

195

Sen. Deckert

Responds that he agrees with points on both side of the argument.  Feels an agreement can be reached.   Asks about affordability and rate setting issues.

215

Sorich

Disagrees with his assessment of affordability.  Notes that affordability is subjective.  Offers that rates are based on the insurance company costs.

235

Sen. Deckert

Asks if there is a situation where they could make a type of insurance available, but at such a high rate that it would not be affordable.  Wonders if that would meet the test of availability.

250

Sorich

States that an insurance company cannot simply set any rate they want.  Observes they have to set rates based on level of risk. 

260

Sen. Deckert

Hypothesizes that if they do not pass SB 116, insurance companies might not have enough incentive to enter into a MAP.

275

Munro

Comments on Mr. Ario’s testimony.  Observes they have to deal with the administrator on almost a daily basis, and feel their interactions have been helpful.  Offers that there is already enough leverage to bring insurance companies to the table. 

290

Sen. Deckert

Tries to understand what the insurance companies incentive would be to voluntarily provide coverage to risky markets.

305

Munro

Reiterates there is already sufficient leverage available. 

335

Munro

Discusses the complications regarding insurance liability and the legislative attempts to address it.

355

Sen. B. Starr

Asks if there is any opportunity for improvement of the statute.

367

Munro

Observes very few problems with the process itself, only some difficulty learning how to navigate through it. 

390

Sen. B. Starr

Notes a number of areas in SB 116 that address subclasses of insurance.

400

Munro

Feels they are targeting the delivery mechanism.

405

Sorich

Discusses the elimination of protection from JUAs imposing losses on other insurance companies.  Notes his concern over sending a message to insurance companies that they will be liable for the JUA’s losses.

420

Munro

Details the specialty areas in insurance and the risks of requiring companies to cover areas outside of their expertise.

TAPE 25, B

005

Chair Metsger

Notes that SB 463 will not be heard as they are running low on time.  Asks those testifying to summarize their testimony.

020

Janet Arenz

Executive Director, Oregon Alliance for Child Advocacy.  Presents written testimony in favor of SB 116 (EXHIBIT D).

050

Arenz

Details recent insurance premium increases among non profit organizations.

095

Chris Bouneff

Trillium Family Services.  Testifies in favor of SB 116.  Outlines the importance of the bill in assisting insurance consumers. 

120

Bouneff

Mentions the importance of affordability and availability in the industry.

140

Chair Metsger

Summarizes Ms. Arenz comments on affordability.

145

Arenz

Reiterates the considerations she has to address.

165

John Powell

Representing State Farm Insurance, Liberty Northwest, and others.  Offers testimony against SB 116. 

200

Powell

Submits and discusses an article regarding local contractors struggling with insurance rates (EXHIBIT E).

240

Lana Butterfield

Presents written testimony in opposition to SB 116 (EXHIBIT F).  Submits written testimony on behalf of Richard Hayes in opposition to SB 116 (EXHIBIT G).

265

Jon Chandler

Oregon Home Builders Association.  Testifies in favor of SB 116.  Outlines the negative impacts of the insurance rates on home builders. 

295

Chandler

Points out the troubles of homebuilders being required by law to have insurance, but being unable to afford it.

345

Steven Kafoury

Oregon Remodeling Association.  Testifies in favor of SB 116.  Reiterates the issue of affordability.

380

Kafoury

States that high insurance rates can force people out of the industry. 

410

Chair Metsger

Remarks that this issue will generate further conversation and questions. 

TAPE 26, A

003

Chair Metsger

Continues his remarks and asks for some additional data.

007

Kafoury

Asks that the committee look at the insurance policies being created.

010

Sen. B. Starr

Remarks on the comments and his frustration that they are running out of time.  Discusses his experiences with his contracting insurance being canceled and the rate hike he had to endure to get his insurance back.  Observes there are a number of issues to address.

030

Sen. Monnes Anderson

Notes her desire to get the best data possible before making a decision.

035

Sen. Deckert

Expresses his interest in addressing the root causes.

043

Chair Metsger

Notes this issue will be brought up again at another time.  Makes additional comments on addressing issues of this nature. 

071

Chair Metsger

Closes public hearing on SB 116.  Adjourns the committee at 3:02 p.m.

 

 

EXHIBIT SUMMARY

 

A.     Building Codes Division, Written Testimony, Mark Long, 3 pp                      

B.     SB 116, Written Testimony, Joel Ario, 3 pp

C.     SB 116, -1 Amendments, 1 p

D.    SB 116, Written Testimony, Janet Arenz, 2 pp

E.     SB 116, Article, John Powell, 1 p

F.      SB 116, Written testimony, Lana Butterfield, 3 p

G.    SB 116, Written testimony of , Lana Butterfield,  1 p