Legislators Have Their Say About Adopting An Interstate Compact
Insurance commissioners brought their interstate compact road show here, citing the need to quickly establish a framework for a single point of product filing.
Despite formidable issues such as diminished authority for state legislators and how much oversight authority larger states should have, legislators and regulators see an even more formidable reason for implementing a compact: the specter of federal oversight.
National Association of Insurance Commissioners President Terri Vaughan cited the threat of federal regulation in a press briefing that followed a public hearing during the summer meeting of the organization. She said there was a need to build a system or risk ending up with an entirely different system.
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Vaughan added that although the issue of granting larger states more authority on the proposed compacts management committee is the “subject of some discussion,” most states would agree that “some recognition of big states is appropriate and state participation is important to get the process moving.”
“This is a way of leveraging resources and raising the bar for consumers,” said Jose Montemayor, Texas insurance commissioner.
Vaughan said there are still points that need to be worked out, such as the role of consumer representatives and legislative involvement in the compacts governance structure.
But she said there are other points that have been determined, namely:
- Inclusion of long term care insurance under the compact;
- Targeting life insurance products rather than a wide product array that would include property-casualty products; and
- The possibility of attaining a critical mass of participating states after two years.
The timetable the NAIC has established is to adopt the compact during the fall NAIC meeting and present it at state houses starting next January.
Vaughan said the support of the National Conference of Insurance Legislators, Albany, N.Y., and the National Conference of State Legislatures, Denver, is essential.
Robert Mackin, NCOIL executive director, said, “Our people understand the seriousness of the federal threat.” He added that if a compact is successful, it could take 3-4 years to get it up and running, while a federal option could take 5-10 years.
NCOIL is supportive of the compact as it now stands, but Mackin said that LTC is a developing product and should not be included in the compact at this time. “At this stage it is better to leave it out,” citing the need for consensus builders.
The American Council of Life Insurers, Washington, supports inclusion of LTCI in the compact. But Bonnie Burns, an NAIC funded consumer representative with California Health Advocates, Scotch Valley, Calif., said “the product is evolving and there is no sense of what it will look like 10 years from now.”
Of the compact in general, Burns expressed concern that there was no consumer representation and said “it was another entity much farther down the line from consumers and taxpayers.”
Vaughan said, however, that if a state did not want to participate in a product line, the compact has a mechanism that allows for it.