NAIC Delays Vote On Compact Draft For Life Product Approvals

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Against a backdrop of concern voiced by some insurance commissioners, consumer groups and trial lawyers, a final vote to adopt an interstate compact that would create a single point of product filing was delayed by the National Association of Insurance Commissioners hours before the scheduled vote.

The NAIC will instead decide on whether a public hearing will be held and will vote on the compact sometime before its winter meeting in December. It is likely that a hearing will be held to provide more opportunity for comment, an NAIC spokesperson says.

Commissioners doubts over the compact first surfaced when the NAICs zone of Western states unanimously expressed concern over points in the draft including pre-emption of authority of state courts and state laws.

Montana Insurance Commissioner John Morrison says “a substantial number of consumer protection laws are in place and legislative and legal battles have been fought to put them in place.” Those gains would be lost, he adds.

However, he adds, the idea of a compact with a single point of filing has promise, particularly if it eliminates desk drawer rules–those rules that have developed by practice over the years.

South Carolina Insurance Director Ernst Csiszar says effective product regulation could be achieved by eliminating prior approval product filing in favor of file-and-use filing with a proper audit function and significant sanctions for violations. The market conduct function could be used to examine products, he adds.

In South Carolina, there is a quick product turnaround, he says, and not belonging to a compact would allow the department the flexibility of either adopting what the compact does independently or not complying with it. Politically, he says, South Carolinas participation in a nuclear waste compact “has not been the most wonderful experience for the state.”

Among Floridas concerns, says Kevin McCarty, deputy insurance commissioner, is that appropriate management authority be given to large states with strong consumer protections. For instance, he adds, Florida has strong consumer protections for senior citizens that it would not want to diminish. He also questions including long-term care insurance in the compact.

Consumer groups also raised concerns over consumer rights in a letter from 26 consumer organizations and all NAIC- funded consumer representatives. The groups include the Consumer Federation of America and Consumers Union, both in Washington. AARP also expressed concern over the compact.

The Association of Trial Lawyers of America, Washington is also weighing in on the issue, stating that the compact is “rife with profound constitutional flaws” and its “assignment of broad powers to a single private agency would violate state constitutional guarantees ensuring the separation of powers.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 4, 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.