By Linda Koco
Contributing Editor, AnnuityNews
Many insurance producers today are getting faster access to individual insurance products — including annuity products — than they did five years ago because more states are signing onto a compact designed to bring products to market faster, according to the commission administering the effort.
The faster access applies if the companies they represent file their products through the IIPRC, says Karen Schutter, executive director of the Interstate Insurance Product Regulation Commission. The products the IIPRC reviews and approves include not only annuities but also life, disability and long-term care insurance.
The comments came on the occasion of Nevada joining the IIPRC this month. Nevada is the 40th state to go live with IIPRC since its startup in 2006. In an interview with InsuranceNewsNet, Schutter responded to questions about how growth of the IIPRC is affecting advisors.
Faster access to products is a key benefit that agents can get if their companies use the IIPRC to file their products, Schutter contends.
The IIPRC is a multi-state electronic filing and approval facility that carriers can elect to use for product filings and approvals. Currently, 126 carriers have registered to use the system, which sets uniform standards for the filings it will accept.
Are commissions affected?
How do those uniform standards affect commissions?
Filings from a registered carrier have one set of commission requirements for the product, Schutter says. The carrier will use this set with the particular product in all IIPRC member states.
Certain of IIPRC’s standards might affect the commission level a carrier elects for a product, she allows.
That could happen if the standards involve higher non-forfeiture requirements—say, in variable annuities—than would be the case if the product were filed individually in a state that has less stringent non-forfeiture requirements, she says.
“However, some states have already adopted our higher non-forfeiture standards — for variable annuities, for instance — so this may not be a major issue for carriers or their agents.”
Sixty days or less
IIPRC’s review and approval process takes no longer than 60 days, Schutter points out.
In fact, the average turnaround time is substantially shorter — only 40 days as of August 2011, according to the product filing trends log at the facility’s website. That’s down from 2010, when the average turnaround was 42 days.
The shorter turnaround time affects agents, she says, because when a product gets IIPRC approval, the carrier can start selling the product right away in all IIPRC member states. This speeds up agent and consumer access to the products in comparison to what would be the case if the products had been filed individually on a state-by-state basis, Schutter says.
In the state-by-state filing system, a carrier files a new product (or a product tweak) in each state where it wants to offer the product. The carriers try to complete state-by-state filings in a short period, but in many instances, they encounter glitches in one state or another and/or run into unique requirements the filings must meet.
As a result, in the state-by-state system, some filings can take several months to complete in all desired states.
This means agents will have to wait to sell the product locally, even if they have been reading about the product in the trade press or heard about it from an agent in another state who is already selling the product. These filing-and-approval delays have been a source of irritation in advisor circles for many years, to say nothing of carrier and regulatory circles.
In the last decade, speed-to-market became such a concern for all sectors of the industry that it served as “a driving factor” behind creation of the IIPRC, Schutter says.
In the middle of the decade, two states — Colorado and Utah — created the Interstate Insurance Compact using model legislation supported by both National Association of Insurance Commissioners (NAIC) and National Conference of Insurance Legislators (NCOIL). The compact’s mission is to modernize state-based insurance regulation and uphold strong consumer protections.
In mid-2006, the compact formed the IIPRC to carry out the work of the compact by establishing uniform standards, the multi-state filing and approval process, and other means.
Today, Schutter says, products not only move through the IIPRC filing and approval process faster than they would with many state-by-state filings, but they also, once approved, become available for rollout in all IIPRC states at the same time.
That can be especially meaningful for insurance producers who are licensed to sell in multiple states, she says. Because IIPRC-approved products must follow uniform standards and consumer protections, producers for IIPRC-registered carriers “don’t have to learn the contract for each state where the carrier is selling it, and they don’t have to hunt for contract differences from state to state.”
The uniform standards can also help for producers who have customers who have moved into the local area from another IIPRC member state, she says. A carrier’s IIPRC-approved product will be consistent in all states.
“The contracts don’t necessary look alike,” Schutter points out, “but the standards are the same in every member state.”
The contracts have a symbol on the pages that indicates that the product is an IIPRC-approved contract, she adds.
Collectively, IIPRC’s 40 member states represent nearly 70 percent of premium volume nationwide, according to Schutter. The IIPRC has standards for, and accepts filings for, individual life, annuity, disability and long term care insurance, but Schutter says it will be adding group products later on.
As of August, IIPRC’s registered insurance companies represented approximately 54 percent of the national premium volume, according to the IIPRC website. Of those companies, 81 percent had submitted filings in the first seven months of the year.
The seven largest member states, according to premium volume, are Illinois, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania and Texas. One more state — Oregon — will go live in January, bringing the total active members to 41 states.
Altogether, the facility has approved more than 950 products since it started accepting filings in June 2007. The large majority of approved products are life insurance products.
Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda can be reached at firstname.lastname@example.org.
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