CSHB 439(L&C) AM-INSURANCE PRODUCT REGULATION COMPACT    CHAIR CON BUNDE announced CSHB 439(L&C) AM to be up for consideration. REPRESENTATIVE JOHN COGHILL, sponsor of HB 439, explained that it would standardize products that are beneficial for the state of Alaska. He was asked to do it, but he also supported it. It would include the state in an interstate compact dealing with life insurance products like life insurance annuities and long term care products. He thought the nature of the insurance industry demanded this because it wasn't as closely regulated on a state-by-state basis and the federal government would probably develop guidelines. The director of the Division of Insurance would be a part of the commission so changes that may happen would be well known and he thought this would be a better way to do it. CHAIR BUNDE asked him if he felt this bill would benefit Alaska in terms of him being a state's rights, smaller government person. REPRESENTATIVE COGHILL replied yes and that Alaska could pull out of the compact if "it starts yanking our chain" or if consumers were not protected. However, he pointed out that the compact has better consumer protections than some of the things the state already is doing. He said the director could explain those in much better detail. 2:43:10 PM LINDA HALL, Director, Division of Insurance, said that she did not request this bill to be introduced. She explained that the interstate compact has been a creature of the National Association of Insurance Commissioners and it has already been adopted by 21 states. Twenty-six states must adopt this compact before it can become effective. It originated with the recognition that the insurance marketplace was changing - with a lot of overlap in bank and insurance products. There is also recognition of the increased mobility of the population. One of the issues that has become a problem around the country is uniform filing and getting new products to consumers. So, there has been a real push to do "speed market" - a single uniform standard single-filing system. The state participates in "SERF," an electronic filing system that facilitates products getting to consumers. 2:45:13 PM MS. HALL noted her concern is that there is a growing push for federal regulation of insurance, which would cause a loss of consumer protection here. She explained that the "Optional Federal Charter" was sponsored by some of the life insurance companies who were looking for a more efficient way of being regulated as opposed to having 50 different state regulators with 50 different sets of rules and it was introduced last week in Congress. The basic structure is that each state that is a member of the compact would send a delegate to that commission; the chief regulator in Alaska is the director. For anything to occur in that body would take a two-thirds majority vote. She said these products don't include health insurance or property liability workers' compensation type of insurances. If a state chooses to opt out of a standard, it has 10 days to do so and must provide some rationale for why it doesn't protect its consumers. Legislatures can opt out at any time. The commission is delegated the authority to adopt these standards. It will only look at individual and group life insurance annuities, disability income insurance and long-term care products. Her observation on this bill is that the insurers would still be able to determine where they want to file their product - through the traditional system with the state or through the commission. The original fear of this kind of proposal was that whatever standards were accepted would be the lowest common denominator, but she would not be here talking about this bill if she thought would happen. She said there have been six meetings so far on adopting standards and they now exceed those in Alaska statute. For instance, the state has no standard for a "free look" which is when a consumer has 10 days to look at a product and give it back without any kind of penalty. She thought that kind of thing would be good. She thought other good provisions would be for creating binding arbitration and adopting readability standards. MS. HALL also explained that generally the insurers who write these products file their national products with her division and she was already seeing a lot of filings for products that exceed the state's statutory standards. Because it's easier and more efficient than filing 50 separate products in 50 different states, insurance companies were filing to the highest standard and she was seeing the benefits from that. Standards help insurance companies more readily get their products in the marketplace, which is where they look for a competitive advantage. Both the National Conference of State Legislatures (NCSL) and the National Conference of Insurance Legislators (NCOIL) have endorsed this compact and that this legislation has been introduced in 16 other legislatures this year. 2:49:40 PM CHAIR BUNDE asked if it's more likely to happen sooner than later. MS. HALL replied yes. 2:50:07 PM JOHN GEORGE, American Counsel of Life Insurers, said he asked for this legislation and Ms. Hall did a great job of explaining it. He offered to answer questions, but there were none. CHAIR BUNDE said he would hold HB 439 and bring it up again at the first available opportunity.