BILL NUMBER: S5046
SPONSOR: BAILEY
 
TITLE OF BILL:
An act to amend the insurance law, in relation to establishing the
interstate insurance product regulation compact to regulate certain
insurance products
 
PURPOSE:
Establishes an interstate insurance product regulation compact. The
purposes of this compact are, through means of joint and cooperative
action among the compacting states:
a. to promote and protect the interest of consumers of individual and
group annuity, life insurance, disability income and long-term care
insurance products;
b. to develop uniform standards for insurance products covered under the
compact;
c. to establish a central clearinghouse to receive and provide prompt
review of insurance products covered under the compact and, in certain
cases, advertisements related thereto, submitted by insurers authorized
to do business in one or more compacting states;
d. to give appropriate regulatory approval to those product filings and
advertisements satisfying the applicable uniform standards;
e. to improve coordination of regulatory resources and expertise among
state insurance departments regarding the setting of uniform standards
and review of insurance products covered under the compact;
f. to create the interstate insurance product regulation commission;
g. to perform such other related functions consistent with the state
regulation of insurance.
 
SUMMARY OF PROVISIONS:
Section 1 of the bill provides legislative findings and intent.
Section 2 adds a new Article 82 to the Insurance Law entitled the
"Interstate Insurance Product Regulation Compact" (the "Compact"). This
Article consists of seventeen new bill sections: Sections 8201-8217.
The bill creates an "Interstate Insurance Product Regulation Commission"
(the "Commission") and provides the statutory framework for states to
enter into the Compact.
The Compact would establish a single point of filing for certain insur-
ance products and rate filings which would be subject to uniform
national standards. Those states that are members of the Compact would
develop the uniform standards that apply to products filed with the
Commission. Product standards would be developed through a rulemaking
process which would require the approval of two-thirds of the commission
management committee and two-thirds of the commission members. Unless a
state opts-out, approval of a product by the Compact would be the same
as approval by a member state. The bill would, however, allow companies
the option to continue to file products in the individual states through
the existing form filing processes. The bill also provides that individ-
ual states will continue to regulate market activities and allows for
coordination among states and the Commission to determine instances of
violations of uniform standards subject to the final order of the
Commission. If a state disagrees with a product standard developed by
the Commission, it may opt out of the uniform standard either by regu-
lation or legislation. For long-term care insurance, states may opt-out
at the time of the joining the Compact. In order to opt out by regu-
lation, a state must show that the uniform standard does not provide
reasonable protections to the citizens of the state and that the needs
of the state outweigh the Legislature's intent to participate in and
receive the benefits of the Compact.
The Compact would become effective when two states enact compact legis-
lation. The Commission becomes operational (that is adopting uniform
standards, receiving products and giving approvals/disapprovals) if
twenty-six states or states representing forty percent of the premium
for life, disability income, long-term care insurance or annuities join
the Compact. Operations of the Commission would be financed initially
through contributions and other Sources of funding and over time through
the filing fees paid by insurers.
All donations, grants of money, equipment, supplies, materials or
services, purchases, gifts, donations, conveyances, mortgages, pledges,
leases and exchanges, received by or on behalf of the Commission will be
limited to the direct funding of the lawful and authorized operations of
the Commission. In addition, the Commission is solely responsible for
its liabilities unless otherwise specifically provided in the Compact.
However, in no event shall the obligations of the Commission be the debt
of the State of New York nor shall any revenues or property of the State
of New York be liable therefore.
All states joining the Compact would be involved in setting up and over-
seeing the activities of the Compact, including developing product stan-
dards and the rules and operating procedures of the Commission.
The Commission would make an annual report to the legislature and gover-
nor of each state joining the Compact. In addition to opting out of
particular product standards, each state has the right to withdraw from
the Compact, by enacting a statute repealing this bill.
 
JUSTIFICATION:
In general, interstate compacts are used to establish the framework for
cooperative solutions to multi-state challenges. There are over two
hundred interstate compacts currently in existence covering a wide vari-
ety of subjects. Every state belongs to an average of 25 such compacts.
This bill is based on a Model Act developed by the National Association
of Insurance Commissioners (NAIC). The bill provides for a single point
of product and rate filings subject to uniform national standards, which
provides the following benefits:
a. Regulatory efficiency/effectiveness: more effective use of limited
regulatory resources;
b. Single, high-quality review of increasingly complex products;
c. Leverage collective expertise of states in. setting uniform stand-
ards;
d. Opportunity for state regulators to redirect resources to other areas
of consumer protection and to oversee innovative product filings;
e. Meet industry's need for single point of filing and enhance their
ability to compete more effectively with other financial institutions;
h. Provide insurance customers with a broader choice of products in a
timelier manner. States would still retain control over the insurance
regulatory process even if a state elects to join the compact. If a
state disagrees with a product standard developed by the Commission, it
may opt-out of the uniform standard either by regulation or legislation.
The bill would also allow companies to continue to file products in the
individual states through the existing form filing process. The Commis-
sion has been fully operational since 2006, when it first met the
26-state or 40 premium volume threshold established in this bill. Today,
there are 45 states that are members of this Compact and over 100 prod-
uct standards have been reviewed and approved by the Commission.
Products approved by the Commission are currently being marketed in all
45 states that are members of the Compact. These product standards have
upheld, and in some instances, enhanced important consumer protections,
while affording the streamlined, multi-state policy form and rate
approval process that the Compact intended.
Once New York joins the Compact, the New York Department of Financial
Services will automatically become a permanent member of the Management
Committee overseeing the Commission and will have a great deal of input
into the inner workings of the Commission and the development of new or
refinement of existing policy standards.
Lastly, by joining the Compact and taking advantage of the streamlined,
uniform policy form filing process that the Commission affords, the New
York Department of Financial Services can adjust staffing priorities so
as to spend less time on oversight of the types of common policy form
filings that have been developed by the Commission. In doing so, the
Department staff can spend more time on reviewing more complex or inno-
vative policy form filings that have not yet been approved by the
Commission. New York could then be at the forefront of life insurance
product innovation for the nation, leading to the sales of more
products, which will benefit consumers.
 
LEGISLATIVE HISTORY:
S2794 of 2023-24: Referred to Insurance
S3770 of 2021-22
S3507 of 2019-20
S426 of 2017-18
S3287 of 2015-16 (similar to S2895-A of 2014)
 
FISCAL IMPLICATIONS:
Having New York join the Compact would cause minimal or no fiscal impact
to the state, since the Commission is fully operational and is being
financed by product filing fees provided by the companies that are using
the process.
 
EFFECTIVE DATE:
The act shall take effect 180 days after it shall have become a law.