2013 legislative activity: The early review

Also on four states' legislative agendas this year are introduced bills seeking to join the Interstate Insurance Product Regulation Compact (IIPRC). The states with these pending proposals are Connecticut (SB 35), Florida HB 383 and SB 242), Montana's SB 28 and New York's (SB 2895 and AB 1983.) Assuming one or more of these bills are enacted, life insurers would be able to take advantage of some of the efficiencies the IIPRC affords in terms of standards, filings and state approvals.

Apart from the pending changes, life insurers are sure to be implementing Michigan's actual upcoming changes in annuity suitability requirements that are effective on June 1. Similar to the requirements previously adopted in many states consistent with Model 275, these new statutory sections require insurers to establish and maintain specific internal compliance and training procedures.

A late spring effective date is also applicable for New York's AB 9845, which becomes effective June 15, 2013. This bill enacted a new section in the insurance code that requires insurers to perform a comparison of life insurance policies against the federal death master file to identify potential matches of its insureds or account holders and to complete a good faith effort to confirm the death of the insured and locate beneficiaries. It also established standards for cross-checking policies, multiple policy search procedures, and standards for locating claimants. This, in effect, codifies many of the requirements established in Regulation 200, which became effective last year on June 14. While the primary focus is on the claims aspect of unclaimed property, this recent enactment also "borrows" the underwriting focus from Regulation 200 in its requirement that life insurers obtain "identifying information" early on in the underwriting process.

While state legislatures have much to contend with in the early months of each year, especially those with short sessions, the departments of insurance, of course, promulgate regulations and issue guidance throughout the year. Insurers issuing annuities might be interested in a fairly recent regulatory development in Wyoming. Effective February 12, this state revised its rules related to sales of replacement life insurance policies and annuities. These changes include an increase in the number of days that the applicant has a right to exercise a request for an unconditional refund of all premiums paid, from 20 days to 30 days, commencing from the date of delivery of the policy. The revised rules also specify that "in the case of a variable or market value adjustment policy or contract, a payment of the cash surrender value provided under the policy or contract plus the fees and other charges deducted from the gross premiums or considerations or imposed under such policy or contract."

So while it is still early in 2013, the legislative and regulatory activity is a definite continuum with multiple potential and actual impacts on the underwriting and claims processes.

For more from Kathy Donovan, see:

• Annuities: An end-of-the-year regulatory perspective
• Annuity suitability: Assessing compliance risk
• Senior designations: The wave continues