State regulators have reached a milestone in their efforts to streamline product regulation, with a centralized approval system for certain life and financial products on the verge of becoming reality. After three years of lobbying, 27 states have signed onto the Interstate Insurance Product Regulation Compact, and it is “good to go,” according to the National Association of Insurance Commissioners. The required number of states was 26.
The compact is supposed to provide insurers and states with a central filing system for life insurance, annuities, disability income and long-term care insurance products, promising to speed up their approval in multiple states. The system does not encompass property casualty products at this time.
Alaska became the 26th state to join, and recently Minnesota became the 27th state to join that met the other requirement of having a total of 40 percent of the national premium volume.
“This is a remarkable result considering the short time frame,” said Wes Bissett, senior vice president, Government Affairs and State Regulation for the Independent Insurance Agents and Brokers of America. “Certainly as more states sign on there will be pressure for others to do so.”
“We are very excited about the success of the compact and commend the legislatures, governors and regulators in all the compacting states for understanding the importance of this cooperative interstate initiative,” said NAIC President and Maine Insurance Superintendent Alessandro Iuppa.
At the same time, Iuppa added, there is still work to be done, putting in “place the operations and processes for making the compact an operational success.”
The NAIC began the process of soliciting volunteer states in 2003 at a national meeting, but states were slow to sign on. State legislatures had to adopt authorizing language allowing the states to sign on to a compact not yet in existence.
“Getting lawmakers to support a legislative concept not yet a reality required a real leap of faith,” Bissett said. He explained that now that the 26th state has signed on, the compact will need to establish an interstate commission that provides the states with the ability to collectively use their expertise to develop uniform national product standards for life insurance products, annuities, disability income and long-term care insurance products.
The newly created multi-state commission would include one member from each member state. The commission would adopt a set of bylaws to govern its activities and a management committee of 14 members that would oversee the daily activities of the compact. The management committee would include one member from each of the six largest states, four members from mid-sized states and one member from smaller states from regional zones. The NAIC hopes that the distribution of management committee members will assure a diversity of rules.
For proponents of state regulation of insurance, the success of creating the compact is a plus because it demonstrates the ability of the states to create a mechanism to enhance products speed to market and approval of filings.
“The compact will establish a central point of filing for these insurance products, enhancing the speed and efficiency of regulatory decisions based on strong product standards and allowing companies to compete more effectively in the modern financial marketplace,” Bissett said.
Politically, with a backdrop of the push for federal regulation, questions arise about creating another bureaucracy. Once the commission is created, an office site will have to chosen, staff hired and a centralized database established. Although the commission will be independent from the NAIC, regulators will make the decisions.
The following states have joined the compact: Alaska, Colorado, Georgia, Hawaii, Iowa, Indiana, Idaho, Kansas, Kentucky, Maryland, Maine, Minnesota, North Carolina, Nebraska, New Hampshire, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, Texas, Utah, Virginia, Vermont, Washington, West Virginia and Wyoming
The Interstate Insurance Product Regulation Commission held a public meeting on June 13, 2006 in Washington, D.C. It was the first meeting of the commission upon reaching its operational goal of 26 states. Shortly after reaching its goal, Minnesota became the 27th state to join, reaching a total of 41 percent of the national premium volume. The commission expected to consider certain items, including formation of an initial management committee, publication of bylaws, an initial budget, staffing requirements and technology considerations.
An agenda was posted to the NAIC’s Web site, www.naic.org for the meeting.
To date, any plans to create a similar compact for property/casualty products and filings have been shelved.
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