NAIC’s Interstate Compact Project

1. NAIC’s Interstate Compact Project Ann Henstrand MultiState Associates Inc. ahenstrand@multistate.com 718-832-8455 For ACORD November 8, 2005

2. 50 State Form Standards NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 • Life and annuity companies began asking for regulatory relief in late 1990s, emphasis on product approvals • In 1990s with booming equity markets and aging baby boomers new competitors were mutual funds, broker/dealers and banks for retirement savings and wealth accumulation and protection products • Banks, funds and broker/dealers can move products from concept to national marketplace in a matter of a month; some states take as long as a year to approve life or annuity forms and products

3. NAIC Recent Work NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 • Current debate began at NAIC in reaction to threat of federal regulation, this time threat started with large insurers, banks and others post GLBA, pushing in Congress for an optional federal charter • NAIC formed Working Groups and began to draft a Compact in early 2002, adopted final model in record time in December 2002, with some important amendments in early 2003 (an almost unheard-of-pace for the NAIC!) • Endorsed by NCSL, NCOIL, CSG and NGA • Today, enacted in 18 states and under consideration in 13 others • May reach the threshold for activation (26 states or 40% premium volume) in 2006, at least no later than 2008 • NAIC Working Group has adopted national product standards for more than 20 products to date • Also now in place is a competing cooperative agreement among 3 largestates

4. State Differences, Lessons Learned NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 • As the Compact Commission moves to operation, small group of dedicated regulators and industry representatives have been meeting to meticulously hammer out product features • Very detailed discussions on every aspect of product filings between industry and regulators continue

5. State Differences, Lessons Learned NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 Regulatory concerns: • Consumers need clear and transparent disclosures • “Free look” periods • Actuarial soundness, underwriting issues • Consistent definitions of terms Industry concerns: • Consistent definitions of terms • Freedom to design, market and service unique products while avoiding lengthy review and approval • E-commerce and electronic signatures and “antiquated” statute requiring in-person delivery of policies

6. Sample Controversial Issues NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 • Deemed approved by a time certain, usually 60 days • Confidentiality of submitted materials during approval process; identification of trade secret information • Inclusion of other coverages – credit insurance, long-term care • Interaction between insurer and regulator data systems/product coding matrices • Suicide clauses, health evaluations, privacy provisions and other state to state inconsistencies

7. Who’s following the debate? NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 • Companies who are participating in the Standards development effort include: Principal Financial, Bankers Life, GE, Hartford Life, ING, The Hancock, Mass Mutual, MetLife, New York Life, NorthWestern Mutual, Prudential, SAFECO, State Farm, TorchMark, Unum Provident, and Western & Southern • Trade associations: ACLI, NALC, AHIP, NAIFA, NAIPO, ACORD, LICONY, RAA, (and to a lesser extent, the p/c trades)

8. ACORD Activities NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 • While NAIC was concentrating on policy contractual matters, monitored for compliance of ACORD filings • In 2005, NAIC began to discuss applications and riders • ACORD identified as possible opportunity to provide leadership and guidance to trades and regulators based on expertise in developing standardized forms • ACORD submitted ACORD app and riders to Spped to market Summit in August 2005 • Currently ACORD is consulting with: • Regulators (Florida, New York, Maine, others) • Carriers (dialogue between ACORD participants and government relations people watching or working on Compact) • Trade association staff (with common members and common goals)

9. NAIC’s Interstate Compact Project NAIC’s Interstate Compact Project ACORD Standards Forum, November 8, 2005 • Why would a company NOT support the Compact? • Lowest common denominator = toughest most restrictive and expensive standards • Being nimble and well-able to use current 50-state system can be seen as a competitive advantage • What’s next? • Other questions and answers?