PA 16-119—sHB 5051

Insurance and Real Estate Committee


SUMMARY: This act adopts the National Association of Insurance Commissioners' (NAIC) Interstate Insurance Product Regulation Compact and makes the insurance commissioner Connecticut's representative to the multi-state public entity the compact creates, the Interstate Insurance Product Regulation Commission.

Through the commission, compacting states develop uniform national product standards for life insurance, annuities, disability income, and long-term care insurance products. The compact establishes a centralized filing process for insurers to use for these insurance products. The commission reviews product filings and makes regulatory decisions about them according to the uniform standards. Insurers may sell commission-approved products in each compacting state in which the insurer is licensed to operate. The commission collects filing fees from the insurers and remits to compacting states their portion of them.

A compacting state may opt out of a uniform product standard through legislation or regulation if it determines that the standard does not provide reasonable protections for its citizens. Under the act, Connecticut opts out of existing and prospective uniform standards for long-term care insurance products and existing uniform standards for disability income insurance products. Thus, Connecticut is adopting the compact for only life insurance and annuity products.

The compact outlines the commission's purposes, powers, organizational structure, rulemaking procedures, and financial requirements. It requires open meetings, public inspection of the commission's official records, and an ethics code for the commission and its employees.

A compacting state retains its authority to perform market conduct examinations of insurers and respond to consumer complaints, including those relating to commission-approved products. The commission's actions do not abrogate or restrict a person's access to state courts; remedies under state law for breach of contract, tort, or other laws not directed at a product's content; state law on interpreting insurance contracts; or an attorney general's authority under law.

Judicial proceedings by or against the commission must be brought in a court of competent jurisdiction where the commission's principal office is located (i. e. , Washington, D. C. ).

EFFECTIVE DATE: July 1, 2017


Article I — Purposes

The compact's purposes are, through joint and cooperative action of compacting states, to do the following:

1. promote and protect consumers' interests in individual and group annuity, life insurance, disability income, and long-term care insurance products;

2. develop uniform standards for these insurance products;

3. establish a central clearinghouse to receive and promptly review product filings from insurers authorized to do business in one or more compacting states;

4. give appropriate regulatory approval to filings satisfying the applicable uniform standards;

5. improve the coordination of regulatory resources and expertise between state insurance departments;

6. create the Interstate Insurance Product Regulation Commission; and

7. perform these and other related functions that are consistent with the state regulation of insurance.

Article II — Definitions

The compact defines various terms, including “product” and “uniform standard. ” Under the compact, a “product” is a policy or contract form, including any application, endorsement, or related form attached to and made a part of the policy or contract, and any evidence of coverage or certificate an insurer is authorized to issue.

A “uniform standard” is a standard the commission adopts for a product line. It must include all the product requirements in the aggregate. Each uniform standard must be construed to prohibit any inconsistent, misleading, or ambiguous provisions. The product form made available to the public must not be unfair, inequitable, or against public policy, as determined by the commission.

Article III — Establishment of the Commission and Venue

The compact creates, as a joint public agency and instrumentality of the compacting states, the Interstate Insurance Product Regulation Commission, which may develop uniform product standards, receive and promptly review filings insurers submit, and approve filings that satisfy the applicable uniform standards. But the compact specifies that the commission is not the only entity for receiving and reviewing filings. An insurer may file its product in any state in which it is licensed to operate, and any such filing is subject to the laws of the state where filed.

The compact makes the commission solely liable for its liabilities except as the compact otherwise provides.

Under the compact, judicial proceedings by or against the commission must be brought solely and exclusively in a court of competent jurisdiction where the commission's principal office is located (i. e. , Washington, D. C. ).

Article IV — Powers of the Commission

The compact grants the commission the power to do the following:

1. promulgate rules that have the force and effect of law and will be binding in the compacting states in accordance with the compact;

2. exercise its rulemaking authority and establish reasonable uniform product standards and related advertisements, but (a) a compacting state has the right to opt out of a uniform standard and (b) any uniform standard for long-term care insurance must provide the same or greater protections for consumers as those in the NAIC's Long-Term Care Insurance Model Act and Long-Term Care Insurance Model Regulation adopted in 2001, and the commission must consider if subsequent amendments to them require the commission to amend its long-term care uniform standards;

3. receive and expeditiously review (a) product filings, (b) rate filings for disability income and long-term care insurance products, and (c) advertisements for long-term care insurance products for which the commission has adopted uniform standards, and approve those that satisfy the applicable uniform standards;

4. for any product covered under the compact, other than long-term care insurance, require an insurer to submit all or any part of its advertisement for that product for review or approval before it is used if the commission determines a product's advertisement could mislead the public;

5. exercise its rulemaking authority and designate products and advertisements that may be self-certified without the need for the commission's prior approval;

6. promulgate operating procedures;

7. bring and prosecute legal proceedings or actions, as long as a state insurance department's standing to sue or be sued is not affected;

8. issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence;

9. establish and maintain offices;

10. purchase and maintain insurance and bonds;

11. borrow, accept, or contract for personnel, including a compacting state's employees;

12. hire employees, professionals, or specialists and elect or appoint officers; fix their compensation; define their duties; give them appropriate authority to carry out the compact's purposes; and determine their qualifications;

13. establish the commission's personnel policies and programs relating to conflicts of interest, rates of compensation, and qualifications;

14. accept, receive, use, and dispose of appropriate donations and grants of money, equipment, supplies, material, and services, while avoiding any appearance of impropriety;

15. lease, purchase, accept as gifts or donations, own, hold, improve, or use any property (real, personal, or mixed), while avoiding any appearance of impropriety, and sell, convey, mortgage, pledge, lease, exchange, abandon, or dispose of property;

16. remit filing fees to compacting states;

17. enforce compacting states' compliance with rules, uniform standards, operating procedures, and bylaws;

18. provide for dispute resolution among compacting states;

19. advise compacting states on issues relating to insurers domiciled or doing business in non-compacting jurisdictions;

20. provide advice and training to state insurance department personnel responsible for product review and be a resource for the departments;

21. establish a budget, make expenditures, and borrow money;

22. appoint committees, including advisory committees;

23. provide and receive information from, and cooperate with, law enforcement agencies;

24. adopt and use a corporate seal; and

25. perform other functions as necessary or appropriate to achieve the compact's purposes consistent with state insurance regulation.

Article V — Organization of the Commission

The commission includes one person from each compacting state (usually the insurance commissioner), each with an equal vote. The commission can adopt a uniform standard only if at least two-thirds of the members vote in favor of it.

Commission Bylaws. The commission must write bylaws to govern its conduct. It must publish its bylaws in a convenient form and file them, and any amendments, with each compacting state.

The bylaws must do the following:

1. establish the commission's fiscal year;

2. provide reasonable procedures for holding meetings of, and appointing and electing members of, a management committee and other committees;

3. provide reasonable standards and procedures to govern delegation of the commission's authority;

4. provide reasonable procedures for calling and conducting commission meetings;

5. establish the titles, duties, authority, and reasonable procedures for electing the commission's officers;

6. provide reasonable standards and procedures for establishing the commission's personnel policies and programs;

7. promulgate a code of ethics to address permissible and prohibited activities of commission members and employees; and

8. provide a mechanism for winding up the commission's operations and the equitable disposition of any surplus funds existing after the compact's termination and after paying or reserving its debts and obligations.

The bylaw's procedures for calling and conducting commission meetings must (1) require a majority of commission members to conduct a meeting; (2) ensure reasonable advance notice of each meeting; and (3) provide the public the right to attend each meeting, with exceptions to protect the public's interest, people's privacy, and insurers' proprietary information. The commission may meet in camera only after a majority of the entire membership votes to close a meeting in whole or in part. As soon as practicable, it must make public a copy of the vote to close the meeting, identifying each member's vote (no proxy votes are allowed) and votes taken during the closed meeting.

Management Committee. Under the commission's bylaws, a 14-member management committee manages the commission's activities. It includes one person from (1) the six largest compacting states based on national premium volume, (2) four compacting states with at least 2% national premium volume, and (3) four compacting states with less than 2% national premium volume.

The management committee is authorized to do the following:

1. manage the commission's affairs consistent with the commission's bylaws and purposes;

2. establish and oversee the commission's organizational structure and appropriate procedures for (a) creating uniform standards and rules, (b) receiving and reviewing product filings, (c) administrative and technical support functions, (d) reviewing decisions to disapprove a product filing, and (e) reviewing elections a compacting state makes to opt out of a uniform standard;

3. oversee the commission's offices; and

4. plan, implement, and coordinate communications and activities with other state, federal, and local government organizations to advance the goals of the commission.

The commission annually elects officers from the management committee. The management committee may, subject to the commission's approval, appoint or retain an executive director on terms and conditions and for compensation the commission deems appropriate. The executive director (1) must serve as the commission's secretary, (2) must hire and supervise other staff that the commission authorizes, and (3) cannot be a commission member.

Legislative Committee. The commission must establish a legislative committee in accordance with its bylaws. The committee must monitor the commission's operations and make recommendations to it and its management committee. Under the compact, the management committee must consult with and report to the legislative committee before adopting any uniform standard, revision to the bylaws, annual budget, or other significant matter that may be provided for in the bylaws.

Advisory Committees. The commission must establish two advisory committees. One must consist of consumer representatives and the other of insurance industry representatives. The compact authorizes the commission to create other advisory committees as its bylaws may provide to carry out its functions.

Corporate Records. The commission must maintain corporate books and records in accordance with its bylaws.

Qualified Immunity, Defense, and Indemnification. The compact protects commission members, officers, executive directors, employees, or representatives from civil actions for damage to or loss of property, personal injury, or other civil liability caused by or arising out of their actual or alleged act, error, or omission that occurred, or for which there is a reasonable basis for believing occurred, within the scope of commission employment, duties, or responsibilities. Specifically, the compact (1) grants such people immunity, (2) requires the commission to defend them, and (3) requires the commission to indemnify and hold them harmless for any settlement or judgment amount obtained against them.

These immunity, defense, and hold harmless provisions do not apply to any damage, loss, injury, or liability caused by the person's intentional or willful and wanton misconduct.

Article VI — Commission Meetings and Actions

The commission must meet and take actions consistent with the compact and bylaws. Each commission member has the right and power to vote and participate in the commission's business and affairs. A member must vote in person or by other means the bylaws permit. The bylaws may provide for members' participation in meetings by telephone or other means. The commission must meet at least once a year and additionally as the bylaws may require.

Article VII — Rulemaking and Opting Out of Uniform Standards

The commission must adopt reasonable rules, including uniform standards, and operating procedures to effectively and efficiently achieve the compact's purposes. If an action exceeds the compact's scope, it is invalid and has no force and effect. Rules and operating procedures must conform to the Model State Administrative Procedure Act.

Before the commission adopts a uniform standard, it must give written notice of its intention to adopt the standard to each compacting state's legislative committee with insurance jurisdiction. It must consider fully all submitted material when adopting a standard and issue a concise explanation of its decision. A uniform standard is effective 90 days after the commission adopts it unless the commission sets a later effective date.

Opt Out. A compacting state may opt out of (i. e. , decline to adopt or participate in) a uniform standard through legislation or regulation. Under the act, Connecticut is opting out of certain uniform standards (see Article XVII below).

When opting out by regulation, the compacting state must (1) give the commission written notice within 10 business days after the commission adopts the standard or when the state first joins the compact and (2) find that the uniform standard does not provide reasonable protections to the state's citizens. The insurance commissioner must consider and balance whether the state's conditions and its citizens' needs outweigh the (1) legislature's intent to participate in the interstate agreement and (2) presumption that an adopted uniform standard provides reasonable protections to consumers. The commissioner must issue specific findings and conclusions, based on a preponderance of the evidence, that detail the state's conditions warranting a departure from the uniform standard and determine that the uniform standard would not reasonably protect the state's citizens.

A compacting state may, at the time it enacts and joins the compact, prospectively opt out of all uniform standards involving long-term care insurance by expressly providing for it in the enacted compact.

If a compacting state elects to opt out of a uniform standard, the standard is applicable until the opt-out legislation is enacted into law or the regulation is effective. Once the opt-out is effective, the standard has no further force and effect in that state unless and until the opt-out legislation or regulation is repealed or otherwise becomes ineffective under the state's laws. If a compacting state opts out of a uniform standard after the standard takes effect, the opt-out has the same prospective effect as the effect Article XIV provides for withdrawals (see below).

If a compacting state has formally initiated the opt-out process by regulation, it may petition the commission, at least 15 days before the uniform standard's effective date, to stay the effectiveness of the standard in that state. The commission may grant a stay if it determines the regulatory opt-out is being pursued in a reasonable manner and there is a likelihood of success. If a stay is granted, the commission may postpone the effective date for up to 90 days. It may extend a stay, but the compact prohibits a stay from remaining in effect for more than one year unless the compacting state can show extraordinary circumstances, including an existing legal challenge that prevents the state from opting out. The commission may end a stay upon notice that the rulemaking process has been terminated.

Judicial Review. Within 30 days after the commission adopts a rule or operating procedure, anyone may file a petition for judicial review of the rule or procedure. But the petition does not stay or otherwise prevent the rule or procedure from taking effect unless the court finds that the petitioner has a substantial likelihood of success. The court must (1) give deference to the commission's actions consistent with applicable law and (2) not find the rule or procedure to be unlawful if it represents a reasonable exercise of the commission's authority.

Article VIII — Commission Records and Enforcement

The commission must adopt rules allowing public inspection and copying of its information and official records, excluding information and records involving a person's privacy and an insurer's trade secrets. The commission may adopt rules under which it may (1) give federal and state agencies records and information otherwise exempt from disclosure and (2) enter into agreements with the agencies to receive information subject to nondisclosure and confidentiality provisions.

Except for privileged records, data, and information, the laws of any compacting state on confidentiality or nondisclosure do not relieve any compacting state's insurance commissioner of the duty to disclose any relevant records, data, or information to the commission. Disclosure to the commission does not waive or otherwise affect any confidentiality requirement. Except as the compact otherwise expressly provides, the commission is not subject to the compacting state's laws on confidentiality and nondisclosure with respect to records, data, and information in its possession. The commission's confidential information remains confidential after disclosure to an insurance commissioner.

The commission must monitor compacting states for compliance with duly adopted bylaws, rules, uniform standards, and operating procedures. The commission must notify any non-complying compacting state in writing of any noncompliance. If a non-complying compacting state fails to comply within the time specified in the notice, the compacting state is in default (see Article XIV).

A state's insurance commissioner retains his or her authority to examine and investigate an insurer's activities in the market according to state law.

An insurance commissioner is prohibited from citing an insurer for a violation of the compact provisions, standards, or requirements, with some exceptions. First, citation of an insurer is prohibited unless he or she has obtained from the commission a final order, issued at the commissioner's request, after notice to the insurer and an opportunity for a hearing before the commission. Second, citation is prohibited relating to the content of an advertisement the commission did not approve or certify, unless the commission, or an authorized commission officer or employee, authorizes the action, but this authorization does not require notice to the insurer, opportunity for a hearing, or disclosure of authorization requests or records of the commission's actions on such requests.

Article IX — Dispute Resolution

The commission must attempt, upon a member's request, to resolve any disputes or other issues subject to the compact and arising between two or more compacting states or between compacting and non-compacting states. It must adopt an operating procedure for resolving such disputes.

Article X — Product Filing and Approval

Insurers seeking the commission's approval for a product must file the product with, and pay applicable filing fees to, the commission. The compact does not prevent an insurer from filing its product with a state's insurance department for its review and determination under the state's laws.

The commission must (1) establish appropriate filing and review processes and procedures and (2) adopt rules for public access to product filing information. In establishing such rules, the commission must consider the public's interests in having access to the information, along with the protection of personal medical and financial information and trade secrets.

An insurer may sell and issue any product the commission approves in those compacting states in which it is legally authorized to do business.

Article XI — Review of Commission's Filing Decisions

Within 30 days after the commission has given an insurer notice of a disapproved product or advertisement, the insurer may appeal the determination to a review panel the commission appoints. The commission must adopt rules to establish procedures for appointing review panels and provide for notice and hearing.

An allegation that the commission, when disapproving a product or advertisement, acted arbitrarily or capriciously, abused discretion, or did not act in accordance with law is subject to judicial review in accordance with Article III.

The commission has authority to monitor, review, and reconsider products and advertisements after their filing or approval if it finds that the product does not meet the relevant uniform standard. Where appropriate, the commission may withdraw or modify its approval after proper notice and hearing, subject to the above appeal process.

Article XII — Finance

The commission must pay, or provide for payment of, the reasonable expenses of its establishment and organization. To fund the cost of its initial operations, the commission may accept contributions and other forms of funding from the NAIC, compacting states, and other sources. But in accepting contributions, the commission's independence in performing its duties must not be compromised.

The commission must collect a filing fee for each filing submitted to it to cover the cost of its operations and activities in an amount sufficient to cover its annual budget.

The commission's fiscal year budget will not be approved until it has been subject to notice and comment as provided for in Article VII. The commission is exempt from all taxation in and by the compacting states. It is prohibited from pledging any compacting state's credit except with the state's appropriate legal authorization.

The commission must keep complete, accurate internal financial accounts for receipts and disbursements of all funds under its control. The accounts are subject to accounting procedures the commission's bylaws establish. An independent, certified accountant must annually audit the commission's financial accounts and reports, including internal controls and procedures. At least every three years, the accountant's report must include a commission management and performance audit.

The commission must report annually to the governor and legislature of each compacting state. The report must include the independent audit's findings.

The commission's internal accounts are not confidential and may be shared with a compacting state's insurance commissioner upon request. But work papers related to an internal or independent audit and any information on a person's privacy and insurer's proprietary information remain confidential.

A compacting state does not have a claim to or ownership of any commission property or funds.

Article XIII — Compacting States, Effective Date, and Amendment

Any state, district, or U. S. territory may become a compacting state.

The compact is effective and binding when two states enact it into law. For purposes of adopting uniform standards and reviewing, approving, or disapproving product filings, the commission is effective only after 26 jurisdictions, or those representing 40% of the premium volume for life insurance, annuity, disability income, and long-term care insurance products have become compact states. After that, it is effective and binding as to any other compacting state when that state enacts the compact into law.

The commission may propose compact amendments for the compacting states' enactment. No amendment is effective and binding until all compacting states enact it into law.

Article XIV — Withdrawal, Default, and Termination

Withdrawal. Once effective, the compact continues in force and remains binding on each compacting state. A state may withdraw from the compact by repealing the statute that enacted it into law. The effective date of withdrawal is the effective date of the repealing statute.

The insurance commissioner of the withdrawing state must immediately notify the management committee in writing when legislation is introduced to repeal the compact, and the commission must notify the other compacting states within 10 days after receiving the notice.

The withdrawing state is responsible for all obligations, duties, and liabilities incurred through the effective date of withdrawal. The commission's approval of products and advertisements before the withdrawal continues to be effective and is given full force and effect in the withdrawing state, unless the withdrawing state rescinds the approval in the same way as provided for in the state's laws for the prospective disapproval of previously approved products.

A state may reinstate the compact after its withdrawal by reenacting the compact into law.

Default. If the commission determines that any compacting state has defaulted in the performance of any of its obligations or responsibilities under the compact, bylaws, rules, or operating procedures, then, after notice and hearing, all rights, privileges, and benefits the compact conferred on the defaulting state are suspended. The commission must immediately notify the defaulting state in writing of its suspension pending a cure of the default. The commission must provide the conditions and the deadline by which the defaulting state must cure its default. If the defaulting state fails to do so, it is terminated from the compact and all rights, privileges, and benefits the compact conferred are terminated.

Product approvals, self-certifications, and related advertisements in force on the termination date remain in force in the defaulting state in the same manner as if the state had voluntarily withdrawn from the compact.

A state may reinstate the compact after its termination by reenacting the compact into law.

Compact Dissolution. The compact dissolves on the date a compacting state withdraws or defaults, thereby reducing the compact membership to one compacting state.

Upon the compact's dissolution, the compact becomes null and void and has no further force or effect. The commission must wind up its business and affairs and distribute any surplus funds in accordance with the bylaws.

Article XV — Severability and Construction

The compact's provisions are severable and must be liberally construed to effectuate its purposes. If any phrase, clause, sentence, or provision is deemed unenforceable, the remaining provisions remain enforceable.

Article XVI — Binding Effect of Compact and Other Laws

The compact does not prevent the enforcement of any compacting state's laws, except that, for products the commission approves or were self-certified and advertisements subject to its authority, the commission's rules, uniform standards, and any other requirements are the exclusive provisions that apply.

Except for products and advertisements, no commission action abrogates or restricts the following:

1. anyone's access to state courts;

2. remedies available under state law related to breach of contract, tort, or other laws not specifically directed to a product's content;

3. state law relating to the construction of insurance contracts; or

4. a state's attorney general's authority, including the authority to maintain any actions or proceedings as the law permits.

All insurance products filed with individual states are subject to the laws of those states.

The commission's lawful actions, including adopted rules and operating procedures, are binding on the compacting states. All agreements between the commission and the compacting states are binding in accordance with their terms.

The commission may issue advisory opinions on the meaning or interpretation of a commission action that is in dispute upon the request of someone involved in a conflict over the action.

If any compact provision conferring obligations, duties, powers, or jurisdiction on the commission exceeds a compacting state legislature's constitutional limits, the provision is ineffective as to that state and those obligations, duties, powers, or jurisdiction shall remain with the compacting state.

Article XVII — State of Connecticut Opt Out

Under the act and in accordance with Article VII, Connecticut opts out of all existing and prospective uniform standards for long-term care insurance products and all existing uniform standards for disability income insurance products to preserve the state's statutory requirements governing these products. Thus, Connecticut adopts the compact for life insurance and annuity products.


Compact Members

The Interstate Insurance Product Regulation Commission became operational in May 2006. As of March 2016, 44 jurisdictions had joined the compact: Alabama, Alaska, Arizona, Arkansas, Colorado, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

The commission has adopted and made available on its website bylaws, an operating budget, an ethics code, uniform product standards, and operating rules.

OLR Tracking: JKL; JR; MS: tjo