LTCI Rule Sparks South Carolina Withdrawal From Interstate Insurance Compact

What You Need to Know

South Carolina is the first state to withdraw from the compact, which now includes the District of Columbia and 45 states.
New state LTCI rate review rules now conflict with the compact LTCI rate review process.
The withdrawal could affect life and annuity filing reviews as well as LTCI filing reviews.

South Carolina — one of the leaders in the effort to create the Interstate Insurance Product Regulation Compact — has withdrawn from the compact because of a conflict over long-term care insurance rate increase application reviews.

Members of the Interstate Insurance Product Regulation Commission, the body that oversees the compact, voted in December 2021 to keep a rule that lets the compact review and approve requests for LTCI rate increases under 15%.

The rule conflicts with a new South Carolina law that requires the director of the South Carolina Department of Insurance or a director designee to review and rule on all LTCI rate filings.

What It Means

The Interstate Insurance Compact (IIC) reviews a wide range of filings, including filings for life insurance and annuity products.

South Carolina’s withdrawal from the compact means that some new income-planning and risk-management tools could take longer to show up than in other states, and that its product and pricing trends could end up looking different than in other states.

The History

State insurance commissioners began setting up the IIC in the early 2000s. Its goals were to increase the uniformity of state insurance product and rate reviews, cut red tape costs for insurers, and reduce the risk that federal regulators would get control over insurance regulation.

Ernst Csiszar, South Carolina’s insurance director at that time, was active in efforts to create the compact, but he also noted that South Carolina had previously had a bad experience with a compact related to nuclear waste.

The commission in charge of the IIC was formed in 2000, and the compact itself came to life in 2006. South Carolina joined the compact in 2008.

In recent years, regulators in South Carolina have clashed with regulators in other states about how to handle LTCI rate increase requests. While some regulators have emphasized the need to increase uniformity and simplify reviews to help struggling LTCI issuers survive past pricing problems, regulators in South Carolina and other states have suggested that they may be going too easy on the insurers.

The Withdrawal

Michael Wise, who has worked for the South Carolina department since 2009, is now the acting South Carolina insurance director and is in charge of the return to a state-based filing review process.

Wise noted in a withdrawal that South Carolina may reapply for admission to the IIC later.

The withdrawal affects only filings filed on or after May 16, which is the date South Carolina’s compact participation statute was officially repealed. Wise told insurers to file any filings that were pending with the IIC as of May 16 directly with South Carolina.

Compact officials noted new IIC filings can no longer include South Carolina as a compact state.