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Five States Form Mini-Compact

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San Antonio, Texas

Five states are not waiting for national implementation of the Interstate Compact in order to speed up the approval process on product filings.

The states have formed a so-called “mini-compact” that permits participating states to join in a reciprocal insurance product approval process, said Texas Insurance Commissioner Jos? Montemayor in a speech here at a life insurance conference co-sponsored by LIMRA International, LOMA, Society of Actuaries, and American Council of Life Insurers.

Once a product is approved in one of the participating states, the commissioner said, the product is deemed approved for use in the other participating states.

Ten states already have adopted the full interstate compact, and 19 more will consider it this year, Montemayor said. However, he added, since the interstate compact wont be effective until adopted by 26 states or by states representing 40% of premium volume for designated products, uncertainty continues concerning the actual effective date.

But some states have taken a “why wait?” approach to the issue, he said.

Initially 3 of them formed the mini-compactNevada, Georgia and Texasand 2 moreCalifornia and Floridajoined recently. The mini-compact can be viewed as a precursor to the full interstate compact, Montemayor said. “The key for us is that it sets common standards, and it pools our resources in common technologies.”

So far, the mini-compact process has approved 120 products with a turnaround of 60 days or less, he said. Its been “pretty easy,” and “wed like to see this duplicated on a larger scale nationally.”

The mini reflects the same purpose as that of the interstate compactto achieve uniform standards and efficient approvals.

Officially termed the NAIC Interstate Model Act, the full interstate compact lays out a system for approving uniform product filings standards for insurers and efficient approvals using those standards. It is a model of the National Association of Insurance Commissioners, and has the endorsement of the National Conference of State Legislatures and the National Conference of Insurance Legislators.

The Texas department is supporting the notion of the interstate compact, said Montemayor, as well as the mini-compact.

In another conference session, J. Bruce Ferguson, senior vice president-state relations of ACLI, Washington, D.C., predicted that, at most, 15 states will have approved the interstate compact by the end of 2005below the 26 states or 40% of premium volume needed to trigger implementation.

Ferguson described the mini-compactwhich he termed “the MOU Project,” in reference to the Memorandum of Understanding reached by the participating statesas a means of jump-starting the interstate compact. However, he said, “I think MOU will get us only so far.”

MOU is “a non-statutory, non- regulatory, informal administrative agreement,” he explained. Under it, product filings go through an electronic portal to a reviewer in a particular state, and then on to the other states from there. “But it does not have the force and effect of law,” Ferguson said, “and if there is a problem down the road with misrepresentation and design of a product, it wont be viewed as creating legal uniformity.”

A man in the audience added that he doesnt see the need for the mini-compact. “It brought nothing to our table at all, and in some states, we get full approval of our filings in just 2 months” anyhow, he said.

Fergusons comments reinforced that. In two-thirds of the states, he said, “there has been no problem [with filings] at all.”

Then again, he said, “in the other one-third of states, its unbearable.”

Reproduced from National Underwriter Edition, April 15, 2005. Copyright 2005 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.


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