Establishes the interstate insurance product regulation compact to regulate certain insurance products among member states

a. to promote and protect the interest of consumers of individual and group annuity, life insurance, disability income and long-term care insurance products;

b. to develop uniform standards for insurance products covered under the compact;

c. to establish a central clearinghouse to receive and provide prompt review of insurance products covered under the compact and, in certain cases, advertisements related thereto, submitted by insurers authorized to do business in one or more compacting states;

d. to give appropriate regulatory approval to those product filings and advertisements satisfying the applicable uniform standards;

e. to improve coordination of regulatory resources and expertise among state insurance departments regarding the setting of uniform standards and review of insurance products covered under the compact;

f. to create the interstate insurance product regulation commission; and

g. to perform such other related functions as may be consistent with the state regulation of the business of insurance.

Summary of provisions

Section 1 of the bill provides legislative findings.

Section 2 adds a new Article 88 to the Insurance Law entitled the "Interstate Insurance Product Regulation Compact" (hereinafter referred to as the "Compact"). This Article consists of seventeen new bill sections: Sections 8801-8817.

The bill creates an Interstate Insurance Product Approval Commission (hereinafter referred to as the "Commission") and provides the statutory framework for states to enter into an interstate insurance product regulation compact.

The Compact would establish a single point of filing for certain insurance products and rate filings which would be subject to uniform national standards. Those states that are members of the Compact would develop the uniform standards that apply to products filed with the Commission. Product standards would be developed through a rulemaking process which would require the approval of two-thirds of the commission management committee and two-thirds of the commission members. Unless a state opts-out as described below, approval of a

product by the Compact would be the same as approval by a member state. The bill would, however, allow companies the option to continue to file products in the individual states through the existing form filing processes.

The bill also provides that individual states will continue to regulate market activities and allows for coordination among states and the Commission to determine instances of violations of uniform standards subject to the final order of the Commission.

If a state disagrees with a product standard developed by the Commission, it may opt-out of the uniform standard either by regulation or legislation. For long-term care insurance, states may opt-out at the time of the joining the Compact ("front-end" opt-out). In order to opt-out by regulation (a state must show that the uniform standard does not provide reasonable protections to the citizens of the state and that the needs of the state outweigh the Legislature's intent to participate in and receive the benefits of the Compact.

The Compact would become effective when two states enact compact legislation. The Commission becomes operational (that is adopting uniform standards, receiving products and giving approvals/disapprovals) if twenty-six states or states representing forty percent of the premium for life (disability income insurance and long-term care join the Compact.

Operations of the Commission would be financed initially through contributions and other sources of funding and over time through the filing fees paid by insurers.

All donations, grants of money, equipment, supplies, materials or services, purchases, gifts, donations, conveyances, mortgages, pledges, leases and exchanges, received by or on behalf of the Commission will be limited to the direct funding of the lawful and authorized operations of the Commission.

In addition, the Commission is solely responsible for its liabilities unless otherwise specifically provided in the Compact. However, in no event shall the obligations of the Commission be the debt of the State of New York nor shall any revenues or property of the State of New York be liable therefor.

All states joining the Compact would be involved in setting up and over-seeing the activities of the Compact, including developing product standards and the rules and operating procedures of the Commission.

The Commission would make an annual report to the legislature and governor of each state joining the Compact. In addition to opting out of particular product standards, each state has the right to withdraw from the Compact, by enacting a statute repealing this bill.

Section 3 of the bill provides for a January 1, 2015 effective date, with an expiration date of December 31, 2017.

Justification

In general, interstate compacts are used to establish the framework for cooperative solutions to multi-state challenges.

There are over two hundred interstate compacts currently in existence covering a wide variety of subjects. Every state belongs to at least fourteen such compacts. This bill is based on the NAIC Model Act. The bill provides for a single point of product and rate filings subject to uniform national standards, which provides the following benefits:

a. Regulatory efficiency/effectiveness: more effective use of limited regulatory resources.

b. Single high-quality review of increasingly complex products.

c. Leverage collective expertise of states in setting uniform standards.

d. opportunity to redirect resources to other areas of consumer protection.

e. Meet industry's need for single point of filing.

f. Meet industry's need to get products to market in a more timely manner.

g. Permit industry to compete more effectively with financial institutions such as banks and security firms.

h. Provide consumers with a broader choice of products in a more timely manner.

States would still retain control over the insurance regulatory process even if a state elects to join the compact. If a state disagrees with a product standard developed by the Commission, it may opt-out of the uniform standard either by regulation or legislation. The bill would also allow companies to continue to file products in the individual states through the existing form filing process.

Legislative history

S.2895 of 2013 S.3057-B of 2011-12. S.4869 of 2009-10. S.5053 of 2007-08. S.5243 of 2005-06. S.6346 of 2003-04.

Fiscal implications

Establishment of a Commission would be of minimal cost to New York State. The Commission would be funded by the insurance companies who are utilizing the services of the Commission.

Effective date

The act shall take effect January 1, 2015 and shall expire and be deemed repealed December 31, 2017; provided, however, that any policy or contract issued during the period that the law is in effect that has been approved in accordance with this law shall continue in full force and effect.