If the interstate compact proposal is to gain any traction and have a chance at becoming a reality, state legislators are the ones who will have to embrace it and move it forward in their legislatures.

Not surprisingly, therefore, legislators had some questions for state insurance regulators at a recent get-together to discuss the compact.

Ideally, the compact proposal developed by the National Association of Insurance Commissioners would create a single point of filing for life insurance products.

The theoretical advantages of this for life insurers are obvious. Product filings in the 50 states are maddeningly inconsistent, insurers say, and in some states it can take an inordinate amount of time to bring a new product to market. At a time when competitors in other areas of financial services can bring products to market much more quickly, insurers feel at a competitive disadvantage under the current system.

There has never been difficulty identifying the problem. The rub has always been whether the compact is the best solution.

One of the strongest forces propelling the compact idea is the spectre of federal regulation of insurance and what that would mean for the states and state regulation.

Among some of the issues that legislators will have to consider in this regard are the possible loss of premium tax revenue under a federal scheme, the impact on insurance departments in their states and what having to respond to a federal agency would mean to insurers domiciled in their state. These issues would tend to convince legislators to take a positive view of the compact.

On the other side is the natural reluctance of any state to cede regulatory power or turf to an outside body.

Time will tell, of course, what the ultimate fate of the compact is. But the dialogue between regulators and legislators is a necessary and salutary step in the process.


Reproduced from National Underwriter Edition, April 14, 2003. Copyright 2003 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.