State Legislators Have Questions On NAIC Compact Proposal
Legislators are beginning to ask questions about a life insurance interstate compact proposal that will start showing up on their legislative doorsteps in the next year.
To date, three states– Alabama, Indiana and Iowa– have the proposal for a single point of product filing for life products before them.
But as more state legislatures begin to examine the compact proposal adopted by the National Association of Insurance Commissioners, questions like the ones raised by members of the National Conference of State Legislatures executive committee task force are likely to surface, to judge from a discussion by legislators here.
Questions during the NCSL task force meeting here started with one about the urgency of adopting the compact proposal. Stating he has heard “woe is us concerns from the industry” for a decade or more, Assemblyman Alexander “Pete” Grannis, D-Manhattan, 65th District, and chair of the Assembly insurance committee, asked how much effort it took for insurers to meet different product requirements in different states.
In response, Iowa Insurance Commissioner Terri Vaughan, a driving force in the adoption of the compact at the NAIC, said the urgency is a new phenomenon resulting from implementation of the Gramm-Leach-Bliley Act.
Banks and mutual funds can now compete with insurance companies, she explained, and deviations in product requirements make insurers less competitive. Those deviations among states range from differences in the type size of fraud notices to variations in the structure of nonforfeiture benefits, Vaughan continued.
Grannis asked whether a critical mass was needed for the compact to become effective. Vaughan responded that at least 26 states or states representing 40% of premium volume would have to participate before the compact became operational.
When Grannis asked about participation by larger states, Greg Serio, New York insurance superintendent, said the six largest states are meeting and seeking commonality without sacrificing protections and standards that already exist in their states.
Serio said roughly half of life insurance product filings are on a speed-to-market basis developed for the New York department.
The American Council of Life Insurers was asked by Alabama Rep. Mike Hubbard, R-79th District, at what point it would stop pursuing a state-based solution and focus on a federal response.
That is difficult to determine because the industry is not unified, explained Gayle Yeomans, chair of the task force on product regulation of the ACLI, Washington. However, Yeomans did say it is not industrys “intention to set one proposal against the other. We have a very strong interest in making the compact work.”
The economic impact on states if the compact did not work and federal regulation was implemented was a concern raised by Hubbard. He noted that in Alabama, for instance, there is a $500 million budget deficit.