NAIC Will Be Tackling Tough Issues In The Big Easy

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Regulators will be tackling high-visibility consumer issues during the fall meeting of the National Association of Insurance Commissioners this week in New Orleans.

Leading the list will be a decision by commissioners to advance or kill the Life Insurance and Annuities Suitability model act and model regulation. The models seek to establish guidelines for companies and producers for suitable recommendations of fixed life insurance and annuity contracts.

Updated guidelines for corporate-owned life insurance will also be addressed. Public concerns have been raised there is no disclosure to employees and their spouses that life insurance policies have been taken out on their lives by their employers.

The COLI working group, spearheaded by North Dakota Commissioner Jim Poolman, is addressing the disclosure issue. Discussions suggest that going into the fall meeting, there is general agreement employees should be informed if an insurance policy is being taken out on their lives. But details, including the consent of an employee, are still being reviewed.

Another consumer issue with which regulators continue to grapple is learning how insurers search for multiple policies when a policyowner dies. When the issue is examined in New Orleans, the focus will be on a survey sent to companies to determine how they conduct such a search at the request of regulators.

New York, South Carolina and Texas are among states advancing their own efforts to make sure policyholders are fairly treated.

For instance, in Texas, data from a second survey measuring small face amount policies is now being compiled, according to William Goodman, special litigation counsel with the Texas insurance department. The department, at the behest of the state legislature, is preparing a report set to be released at year-end 2002.

Market conduct and interstate compact efforts will also receive much regulator attention.

Concern over the confidentiality of data provided to states was again raised when several states including Arizona, Maryland and California said they were still studying whether confidentiality of data could be preserved. Those states did not say data provided for a pilot project could not be preserved, but rather, that further investigation was needed to ensure it could be kept confidential.

A series of yes/no answers is also being prepared so life insurers can provide further detail on questions concerning replacement activity.

The concept of the project is good, says Linda Lanam, vice president and deputy general counsel with the American Council of Life Insurers, in Washington. However, Lanam asks if information such as the total number of complaints and total number of replacements, while interesting, will be of use in regulating market conduct activities.

On suitability, Lanam says most complaints relate to disclosure and lack of consistency and that these concerns can be addressed by seeking better adoption rates of existing models in state legislatures.

A project ACLI will be following is the creation of an index for crediting rates in insurance contracts to allow for more reasonable interest rates in this low interest rate environment, she adds.

Separately, a new draft of an interstate compact, released on Sept. 4, will be discussed at the meeting.

Michigan Insurance Commissioner Frank Fitzgerald says the latest draft includes a management committee of 14 states, including the six largest states by premium volume.

The compact will have the power to establish advisory groups and the intent is to include consumer groups and representatives through this means, he adds.

Fitzgerald says that although regulators are willing to listen to additional comments on issues such as the right of states to opt out of participation in the compact draft, the vast majority of issues should be settled at this point. Changes, at this point, should consist of tweaking, he adds.

Possible amendments to the Privacy of Consumer Financial and Health Information model regulation will also receive an airing in New Orleans. Among the concerns expected to be discussed are the cost of reopening a model regulation that is currently in place in 37 states.

COLI disclosure, small face amounts, interstate compacts and market conduct surveys are on the agenda


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 9, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.