July 31, 2003
State Lawmakers Endorse Insurance Regulation Compact
Compact would preserve states' authority to regulate insurance market
WASHINGTON, D.C. – In an attempt to preserve sovereign state regulation of the nation’s insurance industry, the Executive Committee of the National Conference of State Legislatures unanimously approved a resolution urging states to join the Interstate Insurance Product Regulation Compact.
Since insurance has become part of the integrated financial marketplace, states have come under increased pressure from Congress and others to develop a streamlined and simplified system of product regulation that would allow insurers to market their products nationally more quickly and efficiently. Without such standard, many believe Congress will preempt state authority by stepping in to regulate the industry.
“States have successfully and effectively regulated the business of insurance for over 150 years,” said New York Senator Kemp Hannon, co-chair of NCSL’s Task Force to Streamline and Simplify Insurance Regulation. “Just as the financial services and insurance industries have changed, so too must state regulation. This Compact will give states the tools to regulate the insurance industry in a manner that is responsive to the industry and beneficial to the consumers.”
Once enacted by 26 states or states representing 40 percent of the nation's insurance premiums, the Interstate Insurance Product Regulation Compact would create a national multi-state public authority to receive, review and quickly make regulatory decisions on insurance product filings according to national uniform standards created by the Compact’s member states. The insurance compact would cover life insurance, annuity, disability income, and long-term care insurance products but not those for health or property and casualty insurance. Currently, insurance companies must seek individual state approval for product filing, which creates a complicated and timely process for insurers to bring a new product to the market.
Illinois Representative and Task Force Co-Chair Frank Mautino believes the Compact will not only streamline the insurance regulation process but should help member states do a better job protecting consumers.
"The insurance compact is a winning scenario for the states, for consumers, and for the industry," Mautino said. "It promises to preserve the state system while raising consumer protections, improving the quality of product review, and giving insurance companies the regulatory efficiency they need to compete in the new financial marketplace."
Mautino added out that the regulation of insurance accounts for about $12 billion per year in insurance premium taxes, fees and fines. This important revenue source is threatened by legislation under consideration in Congress that would create a new federal bureaucracy to regulate insurance and would preempt state insurance laws.
The Interstate Insurance Product Regulation Compact represents only the third time in its 28-year history that NCSL has endorsed model legislation. The first time was in 1991 when NCSL adopted 11 model bills to established a uniform system to strengthen insurance financial regulation following a rash of insurance company insolvencies tied to the Saving & Loan crisis of the late 1980s. Within two years of NCSL's endorsement, virtually all states enacted the model legislation. More recently, NCSL has adopted a plan to create a streamlined system of sales and use tax collection. In 2003, the streamlined sales effort was adopted by 20 states representing 30 percent of the nation's population.
For a copy of the resolution on the insurance compact that was adopted by the NCSL Executive Committee, please visit the follow Web address: http://www.ncsl.org/programs/insur/ncslcompact.htm
NCSL is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
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