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Full Plate For NAIC's 'A' Committee

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The National Association of Insurance Commissioners’ ‘A’ committee will tackle a number of issues this year, including reciprocity issues between the states and proposals to better allow life insurers to compete with the secondary market, according to Kentucky Insurance Commissioner Julie McPeak.

Speaking at the American Council of Life Insurers’ annual conference here, McPeak said it has been an “interesting year” for the committee. One of the more “exciting” things, she said, has been getting the interstate compact “up and running” to better allow for product approvals. With the compact, she explained, companies can receive approval for products within 30 days, and potentially less.

Although she acknowledged that the fees involved may be “a little bit steep, I think, for smaller companies,” McPeak said she thought the overall value of being able to obtain multiple state approvals through one filing would be worth it.

On another multi-state issue, producer licensing, McPeak acknowledged that “the industry doesn’t think we’re doing so well at reciprocity.” To fix the problem, she said the NAIC intends to “go in and take a state-by-state look” at the licensing process “from point A to point Z.”

While McPeak said she believed the letter of the law was being followed by states, she speculated that some may be seeking additional information from potential licensees that could be the source of the problems.

Another of the issues that has been passed by the NAIC is the updated viatical model law, which she noted would impose a 5-year ban for “a very limited group of transactions” that the NAIC feels require greater scrutiny. “We all know there are completely appropriate life settlements, completely appropriate premium financing, and completely appropriate life insurance products,” she said, but regulators are only looking to root out those combinations of the three that may cause problems.

So far, she said, 13 states “that we’ve heard from so far” intend to take up the viatical model act in their legislative session.

Kentucky, however, will not be among those states. NAIC rules require commissioners to work to get approved model laws enacted, and while McPeak said the viatical model was among those issues she recommended Governor Ernie Fletcher include in his legislative package, “I don’t make the decision as to what becomes a part of the legislative package.”

The committee, however, is not done with life settlement issues, she said, as an insurance company has filed a request with a state to offer what McPeak described as a “souped up accelerated death benefit” that would allow insurers to compete with the secondary market.

McPeak said she did not think the committee would re-open the viatical model act to address the concept, but would instead form a separate model. Currently, she said, one state is “ready to go” and approve the accelerated death benefit expansion, but as many as 30 others have laws on the books prohibiting companies from making policy loans or giving a policyholder more than the surrender value of the policy.

McPeak said she didn’t feel that creating a model to allow the concept would be difficult, but other issues could complicate things. “I think that the fix is going to be relatively easy,” she said. “What won’t be easy is determining the consumer protections.”

Another issue before the committee is the potential consideration of legal foreign travel on underwriting. McPeak unintentionally punned that “we’ve been all around the world on this one” and said the committee remains divided on the issue.

The committee has drafted two separate approaches to the issue, which McPeak said drew criticism from the industry that having two separate options would not help insurers looking for uniform guidance on the issue.

McPeak said the committee is continuing to work on the issue, and that while she believes it will ultimately come out with one proposal for handling foreign travel, “I don’t think we’re going to have a unanimous vote on the committee.”

Another “extremely important issue” the committee is looking to address, she said, is the marketing of annuity products to seniors and the use of designations.

McPeak said the NAIC’s stance on designations had been essentially allowing them provided they were officially given by an existing body, but that such a position was no longer viable in the Internet age. “There’s a lot designations you can get for $149.99 and an online application,” she said, “and you might even get a book with your name on it that says you’re an expert on senior issues.” Some of the marketing materials that are used by bad actors, she said, even counsel telling seniors not to tell their children about what they’re buying. “It says ‘don’t tell your kids about this product, let me,’ ” she said.

McPeak said the ACLI has provided the NAIC with a proposed set of disclosures to help prevent unsuitable sales.

Given the wide array of life products out there, however, McPeak said the NAIC was considering taking a different approach to disclosure. This approach she said is based “not on uniform disclosures, but on uniform questions to be answered” that would provide the consumer with information they could compare between products.