A Summary of the Insurance Compact's Background and Development
NAIC - The Future of Insurance Regulation
In 2000, members of the National Association of Insurance Commissioners (NAIC) unanimously adopted The Statement of Intent: The Future of Insurance Regulation as a blueprint for significant and substantial regulatory reforms to modernize state insurance regulation. The NAIC formed the Speed-to-Market Working Group to address regulatory efficiency issues as insurers facing direct competition from financial institutions and securities firms sought a more effective filing and review process. The Working Group recommended the development of a system featuring a single point of filing and review; development of national standards for insurance products; and a more efficient state-based procedure for processing and filing.
In early 2001, state insurance regulators created CARFRA (Coordinated Advertising, Rate and Form Review Authority), a voluntary pilot program designed to allow regulators to set national product standards and create a single point of filing for designated insurance products, such as life insurance and annuities. CARFRA made progress in developing product standards, but was not successful because there was a general consensus that in order to overcome the state deviations in filing requirements, state laws and regulations would need to be changed. Because of these uncertainties, companies were not comfortable filing with CARFRA.
In February 2002, NAIC members discussed options for achieving true uniform product standards. State insurance regulators knew they needed a way to facilitate interstate cooperation and develop national uniform standards that would be applicable in multiple states. An interstate compact seemed an ideal way to address this issue.
The NAIC formed a working group in 2002 to develop compact legislation. The NAIC adopted the initial Interstate Insurance Compact Model in December 2002 with the understanding that it would be a starting point for discussion with state legislators, attorneys general, governors, and other stakeholders. The NAIC worked closely with the National Conference of State Legislatures (NCSL), the National Conference of Insurance Legislators (NCOIL), the National Association of Attorneys General (NAAG), and other state officials to further refine and enhance the Compact Model legislation. In July 2003, the NAIC adopted eight amendments to the legislation which serves as the current version of the model legislation. NCSL and NCOIL have both endorsed the Compact - the first time that this has happened for an interstate compact.
Interstate Insurance Product Regulation Commission (Commission) - The Future is Now
The Compact was created when the first two states, Colorado and Utah, enacted the Compact legislation. The Interstate Insurance Product Regulation Commission (Commission) was brought into existence in May 2006, upon meeting the threshold requirements of 26 states or 40% of premium volume nationwide.
The Commission held its Inaugural Meeting in June of 2006, in Washington, DC, where its interim Management Committee was formed and the System for Electronic Rate and Form Filing (SERFF) was adopted as its electronic filing platform. In September 2006, after comprehensive discussions with legislative, consumer and industry representatives, the Commission adopted Bylaws and the Rulemaking Rule.
The Commission held its first Annual Meeting in November 2006, whereby its permanent Management Committee was established and Officers were elected from Pennsylvania, West Virginia and Minnesota. At this meeting, the Commission announced the hiring of its first Executive Director to oversee the Commission's start-up and day-to-day operations.
Within six months of its creation, the Commission adopted the first Uniform Standards in December 2006. By mid-2007, the Commission reached its goal to become operational for receiving and reviewing product filings. In the fall of 2007, the Commission instituted filing fees to finance Insurance Compact operations. By the start of 2008, the Commission had brought on an experienced regulatory team to provide daily support for the product review process, and Insurance Compact Annual Registration Fees were inaugurated to further finance the Commission. Throughout 2008, the Insurance Compact Office worked with the Members and interested parties to develop Uniform Standards through extensive public notice and participation processes. At the end of 2008, the Commission had in effect 46 Uniform Standards.
By 2011, with the adoption of the individual Disability Income Uniform Standards, the four product lines designated in the Compact had all been enacted, and over 80 Uniform Standards were in effect. In late 2012 and early 2013, a suite of Uniform Standards for the Group Term Life product line were adopted. In 2016, the Commission worked diligently to draft and adopt a suite of Uniform Standards for the Group Disability Income Insurance Product Line.
Today, the Commission has adopted over 100 Uniform Standards, and has 46 member states and territories, representing approximately three-fourths of the national asset-based premium volume. Click here to see a map of the current member states.
Inaugural Meeting of Commission in Washington, DC. Under the motto banner of "States, Strength and Speed Aligned," the Commission Members reaffirmed their commitment to modernize state-based insurance regulation to meet the needs of the evolving global insurance marketplace while continuing to uphold strong consumer protections.
July through December 2006:
The Commission established its operational foundation through extensive consultations with regulators, legislative representatives, consumers, and industry in developing and adopting the Bylaws. The Commission held the First Annual Commission Meeting in Lansdowne, VA. The first Uniform Standards were adopted within the initial six months of operation the Commission Legislative Committee named its leadership and worked as an active partner to oversee the progress of the Insurance Compact.
The Commission hired staff; and elected Officers from West Virginia, Michigan and Minnesota. Updates to the System for Electronic Rate and Form Filing (SERFF) were completed to allow companies to electronically file their products with the Insurance Compact including payment of Member state fees electronically. Eleven individual life Uniform Standards were in effect for June. The Compact Office seconded an interim product filing examiner from a Member State to review Compact filings. Upon adopting the "Product Filing Rule," the Insurance Compact opened for business and received the first product filings by insurers on target with the mid-2007 time frame. The Insurance Compact approved the first product filings received in under 30 days. The Commission adopted a Compact filing fee structure as the Compact Statute provides that the Commission shall be funded by filing fees. Nine more Uniform Standards were adopted, bringing the total number of Uniform Standards to 36.
Experienced Regulators and Actuary join the Compact team. Annual Registration Fees are instituted and collected from companies who wish to file with the Insurance Compact. Additional States enacted the Compact legislation, bringing the premium volume represented by Insurance Compact members to over one-half of the premium volume nationwide. Additional Uniform Standards were developed and became effective, bringing the total number of Uniform Standards to 46, by the end of 2008.
Mississippi, New Mexico, and Missouri enacted the Compact legislation for a total of 36 Member states. More Uniform Standards became effective in both the life and annuity product lines, bringing the total number of Uniform Standards in effect to over 50. The "Product Filing Rule" was amended to eliminate the two-year time frame associated with the Mix and Match filing process.
The Commission worked on the development and adoption of the full-suite of individual Long-Term Care Insurance Uniform Standards. The Commission convened an in-person meeting in May for the purpose of receiving comments on the Long-Term Care Rate Uniform Standards. With the adoption of these Uniform Standards, the Insurance Compact expanded to three individual product lines – life, annuity and long-term care – in effect. The Commission amended the "Filing Fee Rule" to change the definition of Regional Filers and to adopt a Schedule of Fees to be adopted on an annual basis along with the Insurance Compact's Annual Budget.
New Jersey, Alabama, Nevada, and Oregon enacted the Compact legislation, bringing the total number of Member states to 41, with approximately 70% of the premium volume nationwide. Additional resources joined the Compact Team with the retention of a new Product Review consultant. The four product lines designated in the Compact were all enacted with the adoption of the Disability Income Uniform Standards. Over 80 Uniform Standards were in effect. Additional actuarial resources and full-time staff joined the Compact Team.
Group Term Life Uniform Standards for employee/employer groups were developed and adopted – the first of the group uniform product standards. Over 90 Uniform Standards have been adopted. The Commission adopted a new Schedule of Fees based on whether or not an actuarial review is required for the product filing and the premium volume of filing companies.
The Commission had 43 members with the enactment of the Compact legislation in Montana and Arkansas. The Insurance Compact had a record year with the number of registered and filing companies. Over 180 companies utilized the speed-to-market platform of the Compact for product filings and approvals.
New Resources joined the Compact Team. The Commission continued to conduct a Five-Year Review of all Uniform Standards, as mandated in the "Rulemaking Rule." Arizona enacted the Compact, increasing membership to 44 Compacting States.
The Commission proposed the 100th uniform standard and modernized the Insurance Compact website. The Commission also completed an update of several life and annuity product Uniform Standards, which became effective in July of 2016. The Commission undertook a formal process to review Florida's legislative enactment of the Compact finding that it was not similar to the Compact enactment of other Compacting States, as there were several material variances.
May marked the 10th anniversary of the Insurance Compact reaching its operational threshold, after being adopted by at least 26 states, or 40% of the national premium volume. Group Disability Income Product Uniform Standards were adopted and became effective in June, and the Commission clarified the provision in the life product Uniform Standards that prohibited a war exclusion for known members of the military. The Commission continued work on the Five-Year Review of the Individual Long-Term Care Uniform Standards throughout the year. In June, Connecticut enacted the Compact legislation to become the Compact's 45th member, effective July 1, 2017. A record 226 companies registered with the Insurance Compact in 2016.
In 2017, the Commission took final action on amendments to the individual Long-Term Care Uniform Standards under Phase 6 of the Five-Year Review, and on amendments to certain life and annuity Uniform Standards under Phase 7. The Commission's Product Standards Committee continued their work reviewing the Individual Disability Income Insurance Uniform Standards under Phase 8 of the Five-Year Review, and began to explore how the Compact can accommodate industry innovation while maintaining consumer protections. June marked the Compact's 10th Anniversary of Product Filings. The Insurance Compact again received a record number of Annual Registrations from filing companies in 2017.