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Life Health > Life Insurance

NAIC Ponders Product Filing Compact Vote

By Jim Connolly

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NU Online News Service, Nov. 12, 8:13 p.m. – A working group at the National Association of Insurance Commissioners, Kansas City, Mo., may postpone a vote on a key “product filing compact” proposal.

The measure would create a single body that would accept product filing information from life insurers.

Originally, supporters had hoped the full NAIC would vote on the draft next week, but consumer advocates, trial lawyers, regulators and a representative for the Minnesota attorney general’s office talked today at a public hearing about concerns about state constitutional rights and protection of the interests of women, children and the elderly.

NAIC officials now want to decide on the next step in the process by the end of this week, according to Michigan Insurance Commissioner Frank Fitzgerald, who is heading the NAIC product filing working group.

The working group has been developing a model draft of an interstate product filing compact in an effort to streamline the regulatory process. Insurers, regulators and consumers have supported the concept of more streamlined product filing and even a compact filing structure.

However, the compact filing mechanism is now being described as a “new body,” and the participants in the debate are disagreeing about the details.

Consumer advocates said today that lack of representation and questions about compact standards raise serious concerns about the protections afforded consumers.

The American Council of Life Insurers, Washington, noted that it wants to see consumers protected, but it said it would have to reconsider its support for the proposal unless the NAIC brings the language in line with a Sept. 27 draft that the ACLI board has formally supported.

The strength of standards for long-term care insurance was raised by Bonnie Burns, an NAIC-funded consumer and director of consumer education with California Health Advocates, Scotts Valley, Calif.

LTC insurance is intended to stay in place for the rest of a policyholder’s life and to be in place if that contract holder is no longer insurable, she said.

Consequently, the “highest possible standard” needs to be in place, and the NAIC model that would be used as the compact’s standard is five to seven years behind standards in states like California, Burns said.

Burns also said that, during the draft’s development, some parties worried that states would hurt uniformity if they had the right to easily opt out of decisions about particular product lines. But, she said, little mention has been made about a company’s right to opt out of the compact and file with a state if it wants.

Alice Weiss, director of health policy with the National Partnership for Women and Families, Washington, said women and their families could be hurt if regulators do not give more thought to the final form of the compact.

Weiss said some “critical flaws” could affect women who have ailing parents, spouses or children who need high-quality long-term care insurance products or who outlive spouses and depend on strong standards for life insurance products.

Brendan Bridgeland, director with the Center for Insurance Research, Cambridge, Mass., talked about what he said was an expansion of the compact’s duties as evidenced by an amended title to cover product regulation, and not just product approval.

Regarding earlier comments by a commissioner, who said consumers who were not satisfied with a product or an insurer’s regulatory affairs efforts could “walk with their feet,” Bridgeland noted that life insurance is meant to be held for life and “abandoning a policy can have serious consequences.”

Van Ellet, a senior legislative representative with the AARP, Washington, emphasized the importance of the issue of pre-emption of compact decisions, citing its “critical importance to us.”

And Cathy Steinberg, Georgia’s consumers’ insurance advocate, called for a more thorough review, saying, “the last time I sped, I got a ticket.”

She said that “pre-emption was never well received in a state like Georgia.”

Prentiss Cox, an assistant attorney general in Minnesota, also urged that the compact be “more seriously studied” given “its unprecedented nature” and “very troublesome questions” that are being raised.

Ned Miltenberg, senior counsel with the Center for Constitutional Litigation, Washington, which counts the American Trial Lawyers Association as one of its constituents, questioned the compact’s constitutionality.

He said the compact draft was “virtually without precedent” and “rife with constitutional flaws.”

The potential to limit access to courts as well as the legislative authority the compact would have would create “primary violations of the separation of powers doctrine,” Miltenberg said.

Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, urged more representation for consumers through a consumer oversight body. Insurers have government relations offices and trade groups to represent them, and consumers also need representation, he said.

Last week, the working group debated a proposal to provide $600,000 for a body that would represent consumers in compact activities.

Birnbaum repeated earlier arguments that the budget would be small in comparison with insurers’ financial resources.

Life insurers sell more than 33 million individual and group life contracts, and the cost of the compact consumer representation budget would amount to less than 2 cents per contract and less than two one-millionths of their total annual revenue of $362 billion, Birnbaum said.

The ACLI finds language granting a stay to states that are going to opt out of a product standard acceptable, but it has general concerns about a trend for later compact drafts to make it easier for states to opt out, said Patricia Parachini, ACLI senior director-office of the general counsel.

The compact draft exempts states that are going to opt out of a standard from conforming to that standard while the opt-out process is being implemented.

On the issue of pre-emption, the ACLI believes that courts would retain jurisdiction, she added. Consequently, Parachini said, the ACLI is urging that the draft leave out new language that would list types of jurisdiction that the courts would have, such as jurisdiction over cases dealing with various causes of action or the compact’s effect on state laws relating to the interpretation of policy language. Rather, she said, the language should simply state that the compact would not abrogate or restrict a person’s access to the courts.

But Montana Insurance Commissioner John Morrison asked whether merely referring to access to courts and cutting out specific examples would be sufficient to preserve state civil remedies.

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