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State lawmakers are talking about what happens when solvent insurers put customers’ insurance policies or annuity contracts in a “block,” then transfer the block to another insurer.

Members of the Joint State-Federal and International Insurance Issues Committee — part of the National Council of Insurance Legislators (NCOIL) — have put a discussion about a proposed insurance business transfer model law on their committee’s agenda for the upcoming NCOIL summer meeting.

(Related: Regulators Aim to Make Troubled Insurers Work Better)

Doug Wheeler, a senior vice president at New York Life Insurance Company, said at NCOIL’s spring meeting, in Nashville, Tennessee, that lawmakers and regulators have to take great care to put the interests of the policyholders and annuity contract holders first, and adopt insurance business transfer (IBT) laws that include strong protections for the policy and contract owners.

“The IBT process is extraordinary and a dramatic shift in longstanding state law, because a promise the transferring insurer made to the policyholder is essentially being broken when it transfers the policy to another insurer without the policyholder’s consent,” Wheeler said, according to a summary of  remarks he made at the spring meeting, which was included in the document packet for the summer meeting.

“That is not to say that the IBT process should not be allowed, but a careful and deliberate approach needs to be taken,” Wheeler said, according to NCOIL’s summary of his remarks.

Wheeler said any national IBT model law or regulation should require the transferring company to get the consent of the policy or contract holder, and to eliminate any rules that could encourage a stronger insurer to transfer a block of business to a weaker company.

Another concern, Wheeler said, is that insurers could transfer business in ways that could weaken state guaranty association protection for the customers of insurers that fail, and that, in some cases, transfers could be handled in a way that would bankrupt specific states’ guaranty associations.

(Related: How State Guarantees Work For Current LTCI Claimants)

NCOIL has also scheduled discussions about short-term health insurance, health care cost sharing ministries, and health insurance strategies for deciding in advance whether to provide coverage for certain types of care.

A panel discussion about prior authorization will include Dr. Vincent Nelson, the Blue Cross Blue Shield Association vice president for clinical affairs; Benjamin Chandhok, senior director for state legislative affairs at the Arthritis Foundation; and Dr. Jack Resneck Jr., immediate past chair of the American Medical Association board of trustees.

Resources

Links to information about the are available here.

— Read How State Guarantees Work For Current LTCI Claimantson ThinkAdvisor.

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