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December 15, 2002 at 07:00 PM
By
San Diego
An interstate compact that would allow life insurance products to be filed through a single body rather than through 51 jurisdictions was adopted despite misgivings of many insurance commissioners, unified opposition from consumer advocates and questions from 44 attorneys general.
The division among insurance commissioners became obvious during a discussion just prior to the 37-13 adoption of the Interstate Insurance Product Regulation Compact at the winter meeting of the National Association of Insurance Commissioners here.
The model was to be reviewed by the insurance committee of the National Conference of State Legislatures, Denver, when it meets on Dec. 11, although Cheye Calvo, an NCSL representative, said much of 2003 would be spent educating NCSLs 7,382 state legislators about the compact.
The National Conference of Insurance Legislators, Albany, N.Y., said it is supportive of the concept and intends to start an educational effort with a February panel on the compact.
The compact would regulate life, disability, and long-term care insurance as well as annuities.
Indeed, outgoing NAIC president Terri Vaughan, who has led the effort to forge a compact, said the effort to enact it would not be an all-out push, but rather, a more gradual process of education and feedback. But, she added, legislators had said that a final product needed to be delivered before they would introduce the plan, and consequently, NAIC membership needed to adopt the model.
Some commissioners questioned adopting a compact that they said was not a finished product. During a special executive and plenary session, they recommended delaying adoption until groups including the National Association of Attorneys General felt more comfortable with the compact.
For instance, Harry Low, California insurance commissioner, said that “until there are strong indications of what the standards are, we wouldnt be comfortable voting for a work in progress. We need a final product that we are comfortable with.”
Commissioners also expressed concerns that their authority to protect consumers in their state would be minimized because of broad language in the compact that would reduce their authority.
One instance raised by Maryland Insurance Commissioner Steve Larsen was the required authorization by the compact commission before a commissioner could bring action for an advertisement not approved by the commission.
But Oregon Insurance Administrator Joel Ario urged commissioners to look at “big picture considerations.” He said the concept would be good for consumers and that a deferral would be used by opponents to suggest the compact is fundamentally flawed.
Frank Fitzgerald, Michigan insurance commissioner, said failure to move forward with the compact would put insurers at a disadvantage in the financial services world.
And, Connie OConnell, Wisconsin commissioner, noted the threat of federal preemption of insurance regulation, saying “it would be a race to the bottom.” Consumer advocates had used the term to describe the “regulatory arbitrage” that would pit federal and state regulation against each other.
Still, commissioners including Chuck Cohen, Arizona director, said that “based on the content and reality of this compact, I dont believe it is sound, accountable and an appropriate form of regulation it is too disassociated from the citizens of Arizona and other states.”
