NAIC Speed to Market

1. NAIC Speed to Market Eric Nordman, CPCU, CIE AICP Heartland Chapter August 8, 2003

2. Today’s Topics • A Short History Lesson • What is Speed to Market? • SERFF Electronic Filing Transactions • Speed to Market Tools • Divergent Paths for Life & PC • CARFRA & the Interstate Compact • Your Burning Questions

3. A Short History Lesson • Speed to market is critical for insurers to effectively compete in this modern world. • Delays in product approval cost insurers money

4. History Continued • Technology has changed our perspective • Speed today is much faster than it was 10 years ago. • People expect instant results.

5. History Continued • Life insurers face different competitive pressures than do health or property and casualty insurers • Over time, life insurers have evolved to concentrate more on investment products and less on traditional life insurance products

6. History Continued • Not too long ago, paper was the way the product approval business was done • It is slow • It is inefficient • It has been improved upon

7. History Continued • Traditional methods will continue to be available to insurers • Continuing to use paper-based filing will place an insurer at a competitive disadvantage

8. History Continued • Improvements have been made to paper-based processes • Electronic filing is the new way to do business

9. Speed to MarketWhat is it? • Integration of multi-state regulatory procedures with individual state regulatory requirements • Encouraging states to adopt regulatory environments that place greater reliance on competition for commercial lines insurance products

10. Speed to MarketWhat is it? • Full implementation of SERFF and integration of the operational efficiencies for both paper-based and electronic product filings • Development and implementation of an interstate compact for certain product filings

11. SERFF Goals • Speed to Market • Improved Accuracy • Validations for Completeness • Reduced Cost • Greater Uniformity • Improved Workflow • Better Communication

12. SERFF Licensed States - 2003 States Licensed to use SERFF All 50 States, Puerto Rico and District of Columbia

13. SERFF Participating States –2003 Accepting Filings Yes (50) States Licensed & Accepting SERFF filings AL, AK, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO,, MS, MT, NE, NJ, NY, NM, NV, NC, ND, OH, OK, OR, PA, PR, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY States Licensed Only ~ RI

14. SERFF States Accepting All Major Lines of Business

15. SERFF States Accepting Lines of Business

16. SERFF Company Participation Company filing statistics - • 167Insurance entities, representing836companies. • In 2002, there were25,528filings were submitted.. This represents a 600% increase over filings submitted the previous year. • In2003, Over35,200filings in first six months.

17. SERFF Insurance Company Types of Filers in 2003 YTD Licensed SERFF Insurance Company Filers - 836

18. 2002 SERFF StatesAverage Filing Turnaround

19. 2003 SERFF NationwideAverage Filing Turnaround

20. SERFF Costs • Transaction Fee - NAIC • Pay-as-you-go: $15 per filing per state, or • Prepaid Filing Block (never expires) • Remote Hosting – ICS or EDS • Approximately $25 per month per user • Training - Integro • Class tuition $600 plus travel expenses to class site • Adobe Acrobat (full version) • Approximately $185 - $225 per copy

21. Filing Block Fees

22. SERFF Remote Hosting - Simplified • The SERFF User’s workstation accesses the server at the Remote Host site. • The access is protected by data firewalls and sign-on security. • The data exchange is further secured through SSL encrypted transmission. • The SERFF system makes use of the infrastructure in which most clients have already invested. • PC Platform (Desktop or Laptop) • Web Browser with access to the Internet • Adobe Acrobat to create pdf formatted documents • Any PC application of client choice for word processing or user specific requirement

23. Remote Hosters • Vendors: • Electronic Data Systems Corp. (EDS) • Jason Ware, 913-327-2670, jason.ware@eds.com • Integrated Corporate Solutions (ICS) • J B Blocher, 913-685-6588, jbb@teamics.com Pricing available through the vendor

24. Training • Primary Vendor: • Integro • Adam Davy, 720-904-1637, adavy@integro.com • Several training options: • Regional • On Site • Working with vendor to establish computer assisted training • Pricing available through the vendor

25. SERFF Features in Review • Tracking • Navigation • Views • Search • Export • EFT • API

26. SERFF Tracking

27. SERFF Navigation

28. SERFF Views

29. SERFF Search (basic)

30. SERFF Search (basic results)

31. SERFF Search (advanced)

32. SERFF Export

33. SERFF Electronic Funds Transfer (EFT) • States using EFT are: KY, MN, ND, VT • Other states (currently 10) are working on implementation issues • Companies using EFT: 7 • EFT transactions so far: 125 • EFT transactions in July 2003: 48

34. SERFF Application Programming Interface (API) • States implementing or testing use of one-way (download) API: OH, NC, TX, WI, IL • Development of two-way (give and receive transfer of data) API is now called SERFF Programming Interface (SPI). • SPI is being developed jointly by InSystems(Tracker) and ICS. NAIC project work expected to be completed Dec. 2003. Implementation expected 1st Qtr. 2004.

35. Future SERFF Enhancements(still in design investigation phases) • Replacing Main page and Document page buttons with active text links. Functionality still remains in system. • Transmittal Header redesigned with tabless sections so all information is available on one webpage.

36. How do I start using SERFF? • Obtain license agreement, complete and return with exhibits • Contact remote hosting provider, sign agreement, obtain user ID’s • Attend SERFF training, send test files • Begin sending production filings to states

37. Contact Information For further information, please contact one of the following at (816) 842-3600: States Industry Bill Maher Jane Borcherding Joy Morrison Jim Latteman John Lamperez

39. Speed to Market Tools • Uniform Filing Transmittal Documents • Common Product Naming Conventions • Product Review Standards Checklists • Common Product Filing Metrics • Elimination of “Desk Drawer” Rules • Encouragement toward greater reliance on competitive forces for commercial lines

40. Divergent Paths for Life & PC • Evolution from tradition life products to investments • Gramm-Leach-Bliley • New competitors • Differing regulatory environments

41. Divergent Paths for Life & PC • PC remains state or local in nature • Tort systems vary • WC systems vary • Auto reparations systems vary • Need for local regulatory presence remains strong

42. CARFRA & the Interstate Compact • Coordinated Advertising, Rate and Form Review Authority or CARFRA • Testing a concept for multi-state coordinated filing review • Applies to Life and Health Filings • Several filings successfully reviewed • Led to investigation on lack of use

43. CARFRA and the Interstate Compact • Regulators discovered that the coordinated approach was helpful and possible, but did not meet all of the industry’s needs. • State statutory and regulatory filing requirements still differed so a single contract could not be issued. • Concluded that an interstate compact was only feasible option to address lack of uniformity in laws and regulations.

44. Purposes of theInterstate Compact • To promote and protect the interest of consumers of individual and group annuity, life insurance, disability income and long-term care insurance products; • To develop uniform standards for insurance products covered under the Compact;

45. Purposes of theInterstate Compact • 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;

46. Purposes of theInterstate Compact • To give appropriate regulatory approval to those product filings and advertisements satisfying the applicable uniform standard; • To improve coordination of regulatory resources and expertise between state insurance departments regarding the setting of uniform standards and review of insurance products covered under the Compact;

47. Purposes of theInterstate Compact • To create the Interstate Insurance Product Regulation Commission; and • To perform these and such other related functions as may be consistent with the state regulation of the business of insurance.

48. The Interstate Compact • Important functions include: • To receive and review in an expeditious manner Products filed with the Commission, and rate filings for disability income and long-term care insurance Products, and give approval of those Products and rate filings that satisfy the applicable Uniform Standard, where such approval shall have the force and effect of law and be binding on the Compacting States to the extent and in the manner provided in the Compact;

49. The Interstate Compact • Important functions include: • To appoint committees, including advisory committees comprising Members, state insurance regulators, state legislators or their representatives, insurance industry and consumer representatives, and such other interested persons as may be designated in the Bylaws;

50. The Interstate Compact Membership • Each Compacting State shall have and be limited to one Member. • Each Member shall be qualified to serve in that capacity pursuant to applicable law of the Compacting State. • Ordinarily, it is presumed the member will be the insurance commissioner.