Frequently Asked Questions
About the Interstate Insurance Product Regulation Commission

Generally, what is an interstate compact?
An interstate compact is a contract between states that allows states to cooperate on multi-state or national issues while retaining state control. Interstate compacts are specifically mentioned in the U.S. Constitution. Although historically used to address border disputes and water rights, the use of interstate compacts has expanded significantly in recent decades to cover tax issues, drivers' licensing and vehicle registration, environmental issues, emergency management and other issues. Over 200 interstate compacts currently exist, and on average every state belongs to at least 25 compacts.

What is the Interstate Insurance Product Regulation Compact (the "Compact")?
The Interstate Insurance Product Regulation Compact which to date has been adopted by 31 Member States representing half of the premium volume nationwide, created the Interstate Insurance Product Regulation Commission (IIPRC) - a public entity treated as an instrumentality of the Compacting Member States. The IIPRC provides the States with a vehicle to (1) develop uniform national product standards that will afford a high level of protection to consumers of life insurance, annuities, disability income and long-term care insurance products; (2) establish a central point of filing for these insurance products; and (3) thoroughly review product filings and make regulatory decisions according to the uniform product standards.

What are the benefits of the Compact for Member States?

• The Compact is a pro-active speed-to-market initiative implemented by its Member States to provide for increased and cost-effective insurance choices in support of a competitive and modern financial marketplace.
• The standards and operations of the IIPRC uphold strong consumer protections as the hallmark of state-based regulation.
• Membership in the IPRC allows state insurance departments to efficiently re-allocate department resources originally utilized for product review towards other regulatory operations, including a focus on important market conduct.

When was the IIPRC created?
The IIPRC came into existence in March 2004 upon the legislative enactment of two states, Colorado and Utah, respectively. Although the IIPRC was created in March 2004, it did not become operational for purposes of adopting uniform product standards until it met one of its threshold goals. Once twenty-six (26) Member States or, alternatively, Member States representing greater than forty percent (40%) of the premium volume were to join the IIPRC. In May 2006, the IIPRC reached both of these threshold goals for becoming operational.

How is the Compact governed?
The Compact is governed by the IIPRC, which includes one Member from each Compacting State. The Management Committee of 14 Members directs the activities of the IIPRC. The composition of the Management Committee under the Bylaws includes: (1) one member from each of the six largest states by premium volume, (2) four members from states with greater than 2% of premium volume, and (3) four members from states with less than 2% of premium representing each of the four geographic zones recognized by the NAIC. The IIPRC Officers elected from the Management Committee are Commissioner Jane Cline (WV), Chair; Director Mary Jo Hudson (OH), Vice Chair; and Commissioner Glenn Wilson, (MN), Treasurer.

How does the IIPRC operate?
The Compact is designed to facilitate transparency and accountability. The activities of the IIPRC are governed by the Bylaws and rulemaking procedures which have been developed through extensive consultations with the Member States, legislators as well as consumer and industry interested parties. The meetings are required to be open to the public, except in very limited situations which are detailed in the Bylaws and rules. As aforementioned, the uniform standard-setting process is conducted through comprehensive public notice and comment procedures which afford all interested parties the opportunity to provide input.

What type of insurance policies would the Compact cover?
The Compact has jurisdiction over four product lines: life insurance, annuities, disability income, and long-term care insurance. In an increasingly mobile society, these are products that have a long life and will travel with people as they move across state lines. As such, they are not as sensitive to local costs and conditions as are products such as automobile, homeowners and health insurance. Also, the chosen products have a common theme of accumulating wealth for people or helping to protect wealth that has been accumulated.

How would uniform product standards be developed?
States participating in the Compact will adopt uniform product standards through a rulemaking process. In order to be adopted, a uniform standard must receive approval by two-thirds of the Management Committee and two-thirds majority of the states participating in the Compact. A standard would be effective 90 days after its promulgation or at a later date as determined by the IIPRC.

What guidelines for product standards are included in the Compact?
The Compact requires that product standards be construed to prohibit the use of any inconsistent, misleading or ambiguous provisions in a product. It also requires that the form of the product made available to the public shall not be unfair, inequitable or against public policy as determined by the IIPRC.

How will the Compact raise product standards and consumer protection?
The standard-setting process in the Compact engages the collective expertise of the Member insurance departments as well as seeks the input of the greater state insurance regulatory community through the NAIC. Comments and concerns from legislative representatives, consumers and industry assist in informing our process to ensure high level standards. As the process is open to public participation, all interested parties are invited to comment as well.

Another important feature of the process is its voluntary nature. If product standards created by the IIPRC are not adequate, states will opt-out of the uniform standards, and the Compact will not work. Finally, the Compact requires supermajorities of both the Management Committee and the full Commission membership of the IIPRC to approve uniform product standards.

These features promote a consensus-based approach to decision-making, which promises to produce higher product standards to benefit consumers, in exchange for an effective single point of filing with uniform standards that will provide insurers with the "speed to market" they want in order to compete more effectively.

May a state opt-out of uniform product standards once it joins the Compact?
Member States may opt-out of a uniform product standard in two ways if it does not meet the needs of the state. First, it may enact legislation opting out of any uniform standard at any time for any reason. Second, it may opt-out by regulation following the promulgation of a uniform standard if it meets certain conditions

How do state legislatures participate in the Compact?
A state legislature must enact the Compact Model Statute through legislation in order for a state to join the IIPRC. Under the Compact law, the IIPRC created a Legislative Committee comprised of eight (8) Member State legislators appointed by NCSL and NCOIL which works as an active partner to monitor the operations of the IIPRC and make recommendations. The IIPRC is also required to give notice to all Member State legislatures before any product standards can be adopted; and file an annual report with the governors and legislatures of its Member States. Additionally, state legislatures may opt-out of a uniform standard for any product line at any time through legislation.

How do consumers participate in the Compact?
The Compact legislation directs the IIPRC to establish an advisory committee for consumer representatives. It directs a similar advisory committee for insurance industry representatives. The consumer advisory group provides feedback to the IIPRC on uniform standards, rules, and operating procedures. It serves as a formal mechanism for consumer representatives to monitor the operations of the Compact and to make recommendations.

Is participation with the Compact mandatory for insurance companies?
No. Companies will have the choice of filing products through the IIPRC or filing products directly with a state. If a company chooses the latter course, then the regulator will apply the existing product standard laws and procedures of the state. If a company files with the IIPRC, then the IIPRC standards and review process will apply.

Who enforces decisions of the Compact?
The state insurance commissioner continues to oversee market regulation activities. However, the IIPRC monitors Member States for compliance with the bylaws, rules, uniform standards and operating procedures of the IIPRC. The IIPRC provides assistance to state insurance departments in determining whether a violation of a uniform standard had occurred.

How will the Compact be funded?
The Compact will be financed by insurers who must pay the Annual IIPRC Registration Fee and IIPRC Filing Fees. The Compact authorizes the IIPRC to accept any and all appropriate donations and grants of money. In March 2006, the NAIC provided a contribution to the IIPRC in the amount of $500,000 to help cover its start-up activities. There will be no fiscal impact on states joining the compact as the IIPRC will collect and remit state filing fees.

What will the Commission use for its electronic rate & form filing system?
The IIPRC decided to utilize the System for Electronic Rate and Form Filing (SERFF) maintained by the NAIC for the benefit of state insurance regulators. State regulators and industry participants expressed a strong desire to use a single system for filing and review. SERFF contained the functionality most nearly mirroring IIPRC needs. SERFF is operable in all 51 jurisdictions and over 1,800 companies are licensed and filing with SERFF.