Insurance industry lobbyists are pushing hard for Connecticut to join 32 others states in an interstate compact aimed at streamlining the approval process for new insurance products.
Both the Department of Insurance and the Department of Economic and Community Development also support a bill to allow the state to join the movement to standardize state-based insurance regulation.
But state lawmakers have been cool to the proposal in the past, and the compact faces opposition from Attorney General Richard Blumenthal, who says joining it jeopardizes important consumer protections.
“Given our recent experience with credit abuses and subprime misconduct, we should be especially loath to surrender regulators oversight or scrutiny,” Blumenthal wrote in a Jan. 27 letter to state lawmakers. “Recent experience teaches that our authority is necessary to protect our citizens.”
Big states such as Texas, Ohio, Michigan and Pennsylvania have already joined the compact, as have all New England states except, Connecticut. New York and California have legislation pending.
The compact, organized by the National Association of Insurance Commissioners, is a multi-state agreement that creates a central point for filing, reviewing and approving insurance products based on national uniform standards.
It allows insurers to get new products approved in a matter of weeks, much quicker than the current system, which can take 60 to 90 days or longer.
“Insurance companies today are cranking out 20 to 30 new products a year,” John Parker, a spokesperson for the National Association of Insurance and Financial Advisors, told state lawmakers at a public hearing last month. “The time involved in getting those approved in Connecticut is significantly longer than what’s allowed under the compact.”
Insurance companies argue that the current slow approval process is putting them at a competitive disadvantage. Certain other financial services companies that are pushing similar products are federally regulated, so they can sidestep the cumbersome state level approval process and get their products to the market quicker.
“It’s very important to do things as efficiently as possible,” Parker said.
Joan McDonald, commissioner of the Department of Economic and Community Development, said the state should adopt the compact so that Connecticut remains an attractive place for insurance companies to do business.
“Getting products approved quickly is imperative, and businesses will locate in states where they can accomplish this,” McDonald wrote in testimony to state lawmakers. “There is no question that regulatory costs and the ability to quickly adapt to market changes are deciding factors when companies are relocating or expanding, and states are taking advantage of this by marketing themselves as ‘compact’ states.”
But Blumenthal said he worries that the compact would weaken his and the Connecticut Insurance Department’s authority and could be harmful to consumers.
For example, he says the only way to reject products sanctioned by the compact would be for the General Assembly to approve legislation or for the insurance commissioner to create regulations that clearly articulate that Connecticut is opting out of an entire product.
“Neither process is easy or quick,” Blumenthal wrote.
Another concern is that challenges to commission decisions would need to be filed in the home state of the NAIC rather than in Connecticut, “making legal challenges difficult for Connecticut consumers.”
But Parker said no states have opted out of the compact yet, a sign that it is successful and has proper consumer safeguards in place.
McDonald warned that a decision by Connecticut to reject the compact could increase the likelihood of federal regulation.
“If states such as Connecticut decline to join, then even more pressure will be placed on the Congress to displace the state-based insurance regulation or otherwise offer life insurers an optional federal charter,” she wrote. “If this were to occur, one may reasonable anticipate that Connecticut’s life insurance industry would seek to migrate to a single federal insurance regulator rather than move to another state.”
Rockville Promotes Spirko
Joseph Spirko has been promoted to vice president and controller at Rockville Bank, where he will be responsible for planning, organizing and directing accounting and financial control activities.
Spirko has been with the bank for two years as assistant vice president and SEC accounting officer. He has more than two decades of financial services experience.
Greg Bordonaro is a Hartford Business Journal staff writer.