NU Online News Service, May 17, 6:10 p.m. – The effort to create a single entity that can accept insurance filings for all states is advancing quickly.
Representatives for three key groups–the National Assocation of Insurance Commissioners, Kansas City, Mo.; the National Conference of Insurance Legislators, Albany, N.Y.; and the National Conference of State Legislatures, Denver–all reacted favorably to a draft compact at a recent meeting, according NAIC President Terri Vaughan, who is the Iowa insurance commissioner.
The meeting included Vaughan; NCOIL President William Larkin, a Republican state senator from New York; and NCSL President Stephen Saland, another Republican state senator from New York.
Other commissioners present included New York Commissioner Greg Serio; NAIC Vice President and Arkansas Commissioner Mike Pickens; NAIC Secretary Treasurer and Illinois Director Nat Shapo; and North Dakota Commissioner Jim Poolman.
“I think that legislators were very interested, given the environment that we are living in right now,” Vaughan adds.
There has been a call by some insurers for Congress to explore an optional federal charter proposal.
Larkin is confident that a compact can be created. “It will not be an easy sell because we are talking about giving up turf,” Larkin says.
But Larkin emphasizes the benefits of creating a compact, including meeting speed-to-market and producer licensing needs. “The idea of a compact has been tried before and is a benefit to consumers,” he says.
At the recent meeting on the compact, “there was no disagreement,” says NCOIL Executive Director Robert Mackin. “It was very positive.”
The interstate compact would create the foundation for a single-point of filing for insurance products. States would sign onto the compact and a product, if approved, could be introduced in all compact states.
The effort is part of an NAIC project, the Coordinated Advertising Rate and Form Review Authority, that has been under way for over a year. The CARFRA project was launched in response to insurers’ criticisms that a slow product approval process was hurting their ability to compete with other financial services providers.
The draft uses language from an existing receivership compact, according to Mackin.
Vaughan says one strength of the compact is that it leaves sovereignty with the states. States can withdraw from a compact if they feel it does not meet their goals.
Some industry observers, however, have expressed concern that a state could withdraw from a compact, and they have also worried about the possibility of creating dual regulatory requirements.
But Vaughan reports that the compact project is moving more quickly than originally anticipated and that it is “very achievable” to meet a September deadline for finalizing the compact, so that the compact can be presented to legislatures starting in January 2003.
The compact draft currently covers life insurance, annuities and disability products. Long-term care insurance is another product that has been discussed, although it is not in the current draft, Vaughan says.
Once a compact is adopted, it would be necessary to go back to legislatures if other products, such as property-casualty products, were to be added to the system, she says.
The draft calls for a commission to oversee the compact and a managing committee that would oversee day-to-day operations.
As currently envisioned, 12 states would be represented on the managing committee, including representatives of six of the largest compact states. A balance was sought to get the large states on board and also continue to give smaller states some say, Vaughan says.