INTERSTATE COMPACT

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INTERSTATE COMPACT

• Jeanne Daharsh
• Nebraska Department of Insurance
• May 20, 2005

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Purpose of Compact

• Speed-to-market
• Improve coordination among states
• Uniform product standards
• Central clearinghouse for product review
• Regulatory approval of filings

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State Status

• Adopted in 14 states with 13.8 of the premium
  volume (2003)
• CO, HI, IA, ID, KS, MD, ME, NE NH, RI, UT, VA,
  WA, WV
• Under consideration in 15 states
• AL, CT, FL, IL, IN, KY, MI, MT, NC, NJ, NM, NY,
  PA, TX, VT
• http//www.naic.org/compact/

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Status in Nebraska

• Part of LB119
• Introduced to Legislature 1/6/05
• Hearing 1/18/05
• Signed by Governor 3/9/05
• Effective 90 days after end of legislative
  session (9/05)
• See Slip Law at http//www.unicam.state.ne.us/

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Impact on Companies

• Operational when 26 states or states with more
  than 40 of the premium volume (life, annuity,
  DI, LTC)
• Companies have option of filing with compact or
  with states
• If filed and approved by Compact, form is
  available for use in all compacting states where
  company is licensed

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Products Covered

• Life Variable Life
• Annuity Variable Annuity
• Long Term Care
• Disability Income
• Disability Income Rates
• LTC Rates (initial rates, not rate increases)
• Advertising (LTC others are file use)

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Commission

• Fulfills Compacts objectives
• Each compacting state has 1 member
• Usually director/commissioner of insurance or
  designee

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Commission Powers

• Promulgate rules
• Establish uniform product standards
• Review product filings
• Appoint committees
• Hire employees

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Commission Committees

• Legislative
• Management
• Consumer Advisory
• Insurance Industry Advisory

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Legislative Committee

• Comprised of 8 state legislators (or designees)
  from compacting states
• 2 from each of the 4 zones
• Monitors operations of Commission
• Makes recommendations to Commission
• 2 year term

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Management Committee

• 14 members
• Based on premium volume (annuity, life, DI, LTC)
• 1 each from 6 states with largest premium volume
• 4 from other states with at least 2 of market
  share
• 4 from other states with less than 2 of market
  share with one from each zone

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Management Committee (cont.)

• Duties
• Oversee Commission
• Submit standards to compacting states after
  approved by 2/3 of Committee
• Appoint or retain an Executive Director
• Report to and consult with Legislative Committee
• Receive and review product filings

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Management Committee (cont.)

• Officers
• Chair, Vice-chair, Secretary, Treasurer
• Each serves 1 year
• May have Executive Director who serves as
  Secretary
  (not a commission member)
• Executive Director
• Manages office
• Hires and supervises Compact employees
• Prepares budget

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Consumer Advisory Committee

• 8 consumer representatives
• Independent of the insurance industry
• Members serve for 2 years

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Insurance Industry Advisory Committee

• 8 industry representatives
• Represent small, medium, and large insurers
• At least 2 representatives are producers
• Insurance companies that have filed, or intend to
  file, products for approval
• Members serve for 2 years

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Uniform Product Standards

• States may opt out of a Uniform Standard
• Decline to adopt or participate
• Opt out via legislation or regulation
• Must find that uniform standard does not provide
  reasonable protection to citizens of the state

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Uniform Product Standards (cont.)

• Standards adopted for
• individual variable non-variable annuities
• individual whole life term life
• individual endowment
• individual joint life
• individual variable life
• individual long term care
• individual disability income
• http//www.naic.org/committee_activities/executive
  /interstate_compact.htm

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Sources

• November 4, 2004 Commission Bylaws
• Nebraska LB119 Slip Law

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Questions??