Interstate Compacts and the Insurance Compact
What is an Interstate Compact?
An interstate compact is a contract or agreement 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 professional licensing, supervision of offenders, educational reform, adoption, 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. Visit the Council of State Governments National Center for Interstate Compacts for further information and resources about the use of interstate compacts to address multi-state issues.
What is the Interstate Insurance Product Regulation Commission?
The Interstate Insurance Product Regulation Commission (Commission) was created and established as a "joint public agency" by Compacting States that enacted the Interstate Insurance Product Regulation Compact (Compact Statute). The Compact Statute delegates to the Commission a limited regulatory function traditionally within state insurance departments, that is, to accept, review, and approve or disapprove individual and group annuity, life insurance, disability income, and long-term care insurance products submitted by insurance companies for use in Compacting States. The Commission adopts Uniform Standards, Rules and filings requirements constituting the exclusive provisions applicable to the content and approval of such products, rates and advertising on behalf the Compacting States.
What Are the Reasons For the Development of the Compact?
The Compact Statute is based on a model law developed and adopted by the National Association of Insurance Commissioners (NAIC), an organization of chief insurance regulators in the 50 states, the District of Columbia and the five U.S. territories, and endorsed by the National Conference of State Legislatures (NCSL) and the National Conference of Insurance Legislators (NCOIL). The Insurance Compact was developed as a means of modernization of state insurance regulation, particularly reform of the state-based product filing and approval process for asset-based insurance products. Insurance is a national market – particularly for the types of insurance within the scope of the Compact Statute – but has historically been regulated exclusively by the states, in contrast to other regulated financial services. State insurance regulators recognized that there needed to be greater uniformity for these product standards. They also recognized the need to have an entity serve as a central clearinghouse for prompt review and regulatory approval of insurance products based on the Uniform Standards on behalf of the participating states.
What Types of Insurance Products are Covered by the Authority of the Compact?
The Compact Statute authorizes the Commission to develop Uniform Standards and accept, review, and approve product filings for the following product lines: life insurance, annuities, disability income, and long-term care insurance – both individual and group.
What is the History of the Compact's Development?
The Insurance Compact came into existence in March 2004, when it was enacted into law by the first state, Colorado, creating an offer to its sister states and then by the second state Utah, constituting an acceptance of the Compact. Article XIII, Section 2 of the Compact Statute required enactment by twenty-six (26) Compacting States or, alternatively, by States representing greater than forty percent (40%) for the Commission to become operational. Both of these operational thresholds were met in May 2006 and 27 Compacting States held the Commission's inaugural meeting in June 2006. The Commission adopted its Bylaws and key operating Rules in November 2006 and adopted its first set of Uniform Standards in December 2006. The Commission's product operations commenced in June 2007, when the first product filing was submitted, and was approved in July 2007. As of May 16, 2022, 44 states, the District of Columbia, and Puerto Rico (46 Compact Member Jurisdictions) representing approximately 75% of the nationwide premium volume for asset-based insurance products have adopted over 100 Uniform Standards covering all individual product lines and several employer/employee group products. A Map of Compacting States may be found here.
Insurance Compact Structure and Compacting States
How Can I Tell When a Compacting State Enacted and/or Implemented the Compact?
The Insurance Compact Office publishes a map of Compacting States on its website and by selecting the name of the Compacting State, a user can see the date the Compact legislation was enacted and when it became effective for purposes of participating in the Compact and its Uniform Standards. The Insurance Compact Office also maintains a chart showing key information for all states including the dates of enactment and implementation for all Compacting States.
How is the Interstate Insurance Product Regulation Commission Structured?
Each Compacting State is a member of the Commission. The member is designated by the state in its enabling legislation. In general, the chief insurance regulator is the designated member of the Commission who is entitled to one vote.
The Management Committee is a 14-member Committee primarily charged with managing the affairs of the Commission and its composition is outlined in Article III, Section 1(A) of the Commission Bylaws. The most current listing of the members of the Management Committee is found on the About the Compact page of the website.
The Legislative Committee is an eight (8) person committee consisting of legislators from Compacting States with four legislators appointed by the NCSL and four legislators appointed by NCOIL. The most current listing of the members of the Legislative Committee is found on the About the Compact page of the website.
Two advisory committees provide input to the Management Committee and Commission. The Consumer Advisory Committee is an eight (8) member committee consisting of consumer representatives independent of the insurance industry. The Industry Advisory Committee is an eight (8) member committee consisting of members of the insurance industry including companies, producers and organizations. The current members of the Consumer Advisory Committee and the Industry Advisory Committee may be found on About the Compact page of the website, along with the application process for participating in the Committees.
The Commission has established committees to formulate recommendations and solicit public comments on a variety of rulemaking and operational matters. The Commission relies upon the regulatory expertise in the members' states to develop, adopt, and oversee implementation of Uniform Standards, Rules and Operating Procedures as well as the budget, technology platform, and the Commission's outreach efforts. These committees include the: Product Standards Committee, Rulemaking Committee, Finance Committee, Technology Committee, Communications Committee, and Actuarial Working Group. The Commission has an independent Audit Committee that oversees the audit process including retaining and working with the independent auditors. The current members of these committees may be found on About the Compact page of the website.
Insurance Compact Rules and Operating Procedures
What are Rules and Operating Procedures?
Rules and Operating Procedures are developed and adopted by the Commission members as the policy and procedures for the administration and operation of the Commission, its activities and operations. Pursuant to the Compact, Rules, which are inclusive of Operating Procedures and Uniform Standards, have the force and effect of law and shall be binding in the Compacting States with respect to the Commission, its activities and operations and are required to conform to the Model State Administrative Procedure Act of 1981 as amended. The Rulemaking Committee is the committee of jurisdiction charged with developing and reviewing the Commission's Rules and Operating Procedures for further consideration by the Management Committee and Commission. Rules and Operating Procedures adopted by the Commission may be found on the Record page of the website.
What is the Advanced Rulemaking Process?
The Commission or one of its committees, such as the Product Standards Committee (PSC), may seek information and solicit comments in advance of developing a Rule, Operating Procedure or Uniform Standard. The advanced rulemaking process is authorized in §103 of the Rule for the Adoption, Amendment and Repeal of Rules for the IIPRC (Rulemaking Rule) and provides a minimum 60-day comment period. The Docket section of the Commission's website has a section for items being considered under Advanced Rulemaking. In 2014, the PSC utilized the advanced rulemaking process for the first time in advance of developing the Group Disability Income Uniform Standards.
What Happens if a State Opts Out of a Uniform Standard?
In order to be effective, a Uniform Standard must be approved by a two-thirds vote of the entire Management Committee and adopted by a two-thirds vote of the entire Commission. The supermajority requirement is a key factor in ensuring the Uniform Standards provide very detailed and comprehensive requirements that are among the highest across Compacting States. However, a Compacting State may opt-out of a Uniform Standard in two ways if the Uniform Standard does not meet the needs of the Compacting State. If a Compacting State opts out of a Uniform Standard, the Insurance Compact Office cannot approve product filings on behalf of the Compacting State for that Uniform Standard.
Pursuant to the Compact Statute, a Compacting State may enact legislation opting out of a Uniform Standard at any time for any reason or it may opt-out by regulation if it meets certain conditions, including providing a notice of its intent to opt-out to the Commission within ten (10) days of promulgation (i.e., publication of an adopted standards to the Commission members) and then following the Compacting State's administrative procedure law to promulgate an opt-out regulation. The Insurance Compact Office and Commission will work with any Compacting State that is considering opting out of a Uniform Standard.
If a Compacting State has opted out of a Uniform Standard, this information will be prominently listed with the Uniform Standard on the Record. Compacting States that have opted out of a Uniform Standard will not be available for selection when preparing and submitting a product filing under the applicable TOI(s) associated with that Uniform Standard.
Uniform Standard Development
Uniform Standard Development
Uniform Standards are the requirements that are used to review product filings and determine if the filing can be approved for use in the Compacting States. They are developed and adopted by the Commission members and include the forms and supporting materials. Pursuant to the Compact Statute, the Uniform Standards have the force and effect of law and are binding in the Compacting States for those products filed with the Insurance Compact. The Uniform Standards and Commission filing requirements together provide the basis for approval of any product filing with the Insurance Compact. Uniform Standards adopted by the Commission will be found on the Record page of the website.
How are Uniform Standards Developed, Adopted, and Implemented?
The Commission, working through its member states, develops and adopts Uniform Standards through an extensive and transparent multi-stage rulemaking process. Interested regulators and parties should check the Events Calendar or request to be added to the Commission distribution list for notice of public conference calls and in-person meetings.
Before the Commission became operational and in the early years of formation, the initial drafts of Uniform Standards were drafted by the NAIC through their Speed-to-Market Task Force's Interstate Compact National Standards Working Group. Once completed, they were forwarded to the PSC. Today, the PSC is charged with the initial drafting and reviewing of Uniform Standards for recommendation to the Management Committee and Commission.
The PSC is a 20-member committee that meets regularly to discuss and develop new Uniform Standards as well as review adopted Uniform Standards under the five-year review process. The PSC publishes summaries of all its calls, including member-only calls and public calls, so that other regulators and interested parties can follow their discussion. The PSC will hold public conference calls to expose recommendations and receive feedback on questions and requests for information. When a Uniform Standard is ready to be recommended by the PSC to the Management Committee, it will be done at the next public meeting of the Management Committee which will trigger the formal rulemaking process in the Rule for Adoption, Amendment, and Repeal of Rules for the Insurance Compact.
Once recommended to the Management Committee, a Uniform Standard is published for 60-day notice and written comment. The Uniform Standard is posted on the Docket page of the Commission website under the Rulemaking section. The Management Committee, as a matter of practice, holds a public hearing before considering a Uniform Standard for adoption. The Compact requires that a Uniform Standard must be approved by two-thirds of the entire Management Committee (10 out of 14 members) before it can be considered by the full Commission. Once approved by the Management Committee, the Compact requires that the Commission must adopt a Uniform Standard by two-thirds of the entire Commission (currently, 30 out of 44 members). Once Uniform Standards are adopted, the Insurance Compact Office issues a promulgation notice to all Commission members. Uniform Standards become effective ninety (90) days after the promulgation notice is issued. The Uniform Standards are then posted to the Record page of the website, where the effective date and other pertinent rulemaking information will be indicated.
What is the Five-Year Review Process?
Pursuant to §119 of the Rulemaking Rule, the Commission is required to review each of its rules, including Uniform Standards and Operating Procedures, within five (5) years of the rule's original effective date or within five (5) years of the filing of the last Five-Year Review, whichever is later. The scope of review under §119 is based on the need for continuation, repeal or amendment of the rule based primarily on whether circumstances or underlying assumptions have changed since the last time the rule was adopted, amended or reviewed. On January 1 and July 1, respectively of each year, the Insurance Compact Office issues notice of Five-Year Review for those Uniform Standards and Operating Procedures adopted within a six-month period either in the first or last half of the year, five (5) years previously. With respect to the Uniform Standards, the Insurance Compact Office labels Five-Year Review periods by phase. The Docket section of the website has a section for Uniform Standards and Operating Procedures being considered under Five-Year Review.
Filing With the Insurance Compact
Is Filing with the Insurance Compact Mandatory for Insurance Companies?
No. Companies have the choice of filing products through the Insurance Compact 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 Insurance Compact, then the Insurance Compact's Uniform Standards and review process will apply. Many companies find it more efficient and expeditious to make one filing through the Insurance Compact for all Compacting States than to make individual filings in each state.
How Much Will it Cost to File with the Insurance Compact?
In addition to the filing fees normally required by Compacting States, the Compact Statute requires the Insurance Compact to collect a filing fee to cover the cost of the operations. Filing companies are required to pay the Annual Registration Fee as well as the per product filing fee outlined in the Schedule of Fees. The Commission has developed and adopted the IIPRC Terms and Procedures for IIPRC Filing Fees. Each year, the Insurance Compact Office adopts a Schedule of Fees in conjunction with the Annual Budget.
What Is the Time Frame for a Compact Review?
The Insurance Compact's Operating Procedure for the Filing and Approval of Product Filings (Product Filing Rule) governs the review process of Compact submissions. Section 105(b) of the Product Filing Rule provides that the Insurance Compact shall "review and approve or disapprove each product filing within a period of 60 days from the date the [p]roduct [f]iling is submitted." However, the following factors, also detailed within the Product Filing Rule, affect how this period is determined. The review time is calculated with the time the company takes to respond to objections deducted from the total time the filing submission has been with the Insurance Compact. The biggest factor that determines how long a filing is reviewed is how compliant the product filing submission is with the Insurance Compact Uniform Standards.
We encourage filers to communicate any internal deadlines with us when submitting a filing by including them in the cover letter submitted in SERFF under the "Filing Description."
How Does a Company Get Started in Filing with the Insurance Compact?
All Insurance Compact filings are submitted through the NAIC's System for Electronic Rate and Form Filing (SERFF). Each calendar year all companies who intend to file with the Insurance Compact are required to register through SERFF. Once this is completed, utilizing the Annual Registration Fee Filing Instructions, the company will be provided with a "Create Compact Filing" option within SERFF. Companies can utilize this option to create their filing submission through SERFF.
What Tools are Available to Assist Company Filers with the Drafting of their Product Filing Submission?
The Insurance Compact Office has created several filing tools that are available on the website. The Insurer Resources and Record pages contain: step-by-step directions for assistance with creation of the product filing; information pertaining to the payment of the Commission fees as well as the Compacting State fees; the Weekly Tip Archive; on-demand tutorials; information regarding the use of SERFF; and state specific information for long-term care submissions as well as accelerated death benefit features. Additionally, if you have any questions as to the intent or the application of the provisions within the Uniform Standards, a Pre-Filing Communication Form is located on the Insurer Resources page of the website. This form was created in an effort to enhance communication to and with the Insurance Compact Office prior to the submission of a product filing. In addition, the Record contains all adopted Uniform Standards and corresponding checklists for each of the Uniform Standards. These checklists were designed to be interactive tools for filers. One way to help eliminate objections and make the review process as timely as possible is to review the filing in detail prior to submission, to be sure it meets the requirements in the checklists.
Do Companies Have to Include All Compact Member States in the Submissions?
No; company filers may choose to include any combination of the Compact Member States in the product filing submissions. The most important thing to remember as company filers select states during the drafting process is to only include the states in which the company is currently licensed to do business. To make the best use of the Insurance Compact and the speed-to-market platform, company filers are encouraged to include all states in which the company is currently licensed. If you are unsure of whether the Certificate of Authority is valid in a particular state, do not include that state. You can always add a state later through the Add-a-State feature. Directions for adding a state to a product filing either under current review or approved may be found on the Insurer Resources page of the website.
Public Access and Staying Current With the Insurance Compact
How Do Interested Parties Obtain Public Access of Product Filing Submissions?
The Insurance Compact has a Public Access Rule, Establishment of Conditions and Procedures for Public Inspection and Copying of Information and Official Records of the Interstate Insurance Product Regulation Commission, which identifies what is publicly accessible. In December 2014, the Insurance Compact began providing access to approved filing submissions through SERFF Filing Access (SFA). A link to SFA may be found here: https://filingaccess.serff.com/sfa/home/insurancecompact. The Insurance Compact's implementation of SFA allows users to search for and download Insurance Compact-approved submissions made publicly available under the Insurance Compact's Public Access Rule. Users no longer need to submit a written request to the Insurance Compact Office in order to obtain these records. There is no charge associated with this method. In SERFF Filing Access, users can search for Insurance Compact filings based on the Type of Insurance (TOI), Company Name and/or Company Code, along with a range of submission and disposition dates.
How Do I Contact the Insurance Compact Office?
The contact information for the Insurance Compact Office is found on the Contact Us page of the website. All are encouraged to either call (202) 471-3962 or email any inquiries to firstname.lastname@example.org. For company filers that have more complex questions regarding the design of a particular product filing, the Insurance Compact Office encourages the use of the Pre-Filing Communication Form found on the Insurer Resources page of the website.
How Do I Stay Current with What Is Going on with the Insurance Compact?
In order to stay current on Insurance Compact happenings, we encourage you to visit our website frequently and to follow the Insurance Compact on Twitter (@InsCompact). All developing Rules and Operating Procedures can be found on the Docket. Adopted Rules and Operating Procedures, as well as the history for the Uniform Standards and Operating Procedures, are found on the Record. You can follow the activities of the Product Standards Committee by reviewing their Call Summaries and you can stay current on public calls through the Events Calendar. If you would like to participate in one of our Committees, contact the Insurance Compact Office for more information. If you have a question, or just aren't sure where to start, contact us.