New York Life Insurance Compliance Lawyer & Attorney : Currin Law Office : Annuity Compliance & Insurance Regulation

The NYSID has posted new SERFF guidelines with two big changes:  Cover letters are no longer to be used in SERFF and in a change to the rules on Variable Material, the funds for variable products are to be listed separately in a "List of Funds." 

While it is something to get used to, the change regarding cover letters is pretty straightforward.  The guidance explains that the information that used to appear in a cover letter should be included in the filing description and that there should be no reference to a cover letter in other places. 

The changes for variable funds is bigger and will take some thinking through for all.  The guidance states:  "The Life Bureau now requires that the memorandum of variable material that lists the available variable funds be submitted separately from the memorandum of variable material for all other variations of the forms."  (Emphasis added).  

Basically, the idea seems to be that having a separate List of Funds (LOF), which can be used for multiple products rather than being limited to one, will be easier to get approved quickly and will improve the process.   Several companies that I have talked to about this have indicated that they will not go to a single LOF for all their products due to the way they are organized on a corporate level - e.g. different products are handled by different areas of the company, sometimes with little direct communication about things like fund changes.  But to the extent that multiple products can be covered by one LOF, and only that LOF will need to be re-filed for a fund change, it is likely that this change will reduce the number of filings for some companies.  The guidance offers 3 approaches for how the new LOFs can be incorporated into a SERFF filing:  Each has its pros and cons, so we will all have to figure out what works best based on our own filing needs and practices. 

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What a difference a few months make!  As previously discussed here, the 2007 Annual Report from the NYSID to the NY Legislature indicated that there was a 29% rejection rate for CL6 submissions.  However, in a recent update on these numbers, the Department stated that rejections have dropped to 16% and that the average disposal time now is approximately 1 week.   That is of course, very good news - faster turnarounds AND fewer rejections! 

That is a great way to head into the summer, particularly when so many of us are gearing up for a portfolio of 2001 CSO filings! 

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In its 2007 Annual Report to the Legislature, the NYSID Life Bureau reports that it processed 1,740 files (7,770 forms) in that calendar year.  Of the 7,770 forms, 2,660 were individual life and 1,981 were individual annuity.  The rest were group life, group annuity, credit insurance, viatical settlement and miscellaneous policies.   These are broken down in Table 14 of the Annual Report. 

The Life Bureau reports that approximately 33.6% of the 7,770 were submitted for full prior approval and approximately 65.3% were submitted under a certified process. 

Of course, some of the 7,770 were seen by the Department more than once, because rejected files are often re-submitted.  Of the prior approval files, 29.8% were rejected or withdrawn and of the certified files 29.3% were rejected or withdrawn.  It is very interesting to note the consistency of those numbers.  This consistency even persists in out-of-state filings where 29.9% were rejected or withdrawn!  (Because out-of-state forms no longer need be filed this last 29.9% is out of a much smaller total number of forms - just 1.1% of all forms processed were for out-of-state use in 2007). 

The annual report does not discuss the reasons for the rejections or withdrawals, but it would seem that more of the prior approval rejections/withdrawals would have been for substantive reasons as those submissions tend to be of the more complex and innovative products.  The 29% of certified filings would be likely to have more procedural errors in certifications, form number consistency and, in all likelihood, statements of variable material.  So while the numbers across all types of filings are virtually identical, it is likely that the reasons for the department actions  were very different. 

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Yesterday I received some suggestions from a CL6 reviewer on ways to make a submission of revised variable material move more quickly.  These were quite helpful and much appreciated.  While there were several, one suggests that it may make sense for companies to completely re-think  how they organize their Variable Material.  It will certainly take some time to do, but the feedback from the Department is that it will speed the reviews and so, ultimately, that effort should pay off with faster approvals! 

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Disclaimer:  I speak only for myself here.  I do not purport to speak for "the industry."  I do not purport to speak for my clients.  This is just me.  So....

In the policy forms meeting with the Department today there was an extended discussion  about the process for making fund changes and a good deal of dissatisfaction expressed.  I can understand wanting more flexibility in Variable Material, particularly with respect to fund changes.  However, as of today, we have a clear process.  We know what to do, the guidance is easy to comply with and it is fast!  For me, this is the definition of a good process.  We can argue around and around about what is necessary from a legal and regulatory viewpoint, but on a day-to-day basis, this process is a good one because it is clear.   I like knowing that within 5-10 days of getting final fund change information I can have documented approval for them to be used because I know exactly what to do and how long it will take. 

What I am very concerned about is opening up a protracted discussion which will, by definition, create uncertainty.   But not only that, most importantly, who is going to be involved in this discussion?  At the Department, it is going to be the people we need to have spending time on other, in my personal view, more important matters.  I would like Kathy, Ralph, Deb, Dennis and Tom and the people who report to them, spending time on innovative products, on revising the outlines, on new regulations, on wrapping up post-approval reviews and on the myriad of other things that need their attention so that life insurers can do their business in New York.  They will likely spend hours internally - and with us - talking about Variable Material and fund changes - all to fix something that may not be perfect, but it works!  At least we know how to get fund changes approved! 

Who can get an "innovative product" approved quickly?  And we won't be able to if the staff is spending all their time debating fund change nuances and other items already dealt with in the recently posted guidance.  Some may not have gotten everything they want, that rarely happens in a regulated industry.  But can't we pick our battles, deal with it and get on to more pressing issues?  After all, there are only so many hours in a day.....

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The NYSID has posted new SERFF guidelines for life product submissions on their website.   This new guidance is particularly helpful in completing the NAIC Transmittal form specifically for NY requirements. 

It should be noted that the Life Bureau has not historically given priority to SERFF filings and that does not appear to change with this guidance.   If a certified filing is clean, it will move VERY quickly through the Life Bureau whether it is submitted by paper or via SERFF.   We would be happy to discuss the pros and cons of each method with you! 

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At today's policy forms filing task force meeting, the NYSID indicated that they are discussing internally what the process will be to allow companies to file revised policies during the period between now and when the new regulation becomes effective on 1/1/08. 

The issue is that certification is problematic when the regulation is not yet effective.   Forms drafted to comply with the new regulation would not be in compliance with the current regulation, but the certification is happening now.  Because the certification cannot be modified, companies cannot take it upon themselves to make changes to the certification that would make it accurate.  Therefore, a specific process is necessary.  It appears that guidance on how to handle this situation will be forthcoming so that companies can begin to put these submissions together and get them approved in time for a January 1 launch under the new regulation. 

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As regular readers know, I have  been advocating the simplification of filings for submission to New York.   In my recent experience, problems with filings are most likely to involve variable material.  While the policy forms themselves are not reviewed under the certified process, the variable material (which is now considered a policy form and stamped approved) is read in detail and is the source of many policy form rejections.   As one reader commented to me and I agree,  this seems completely inconsistent with the whole concept of CL6 filings - i.e. they are not reviewed -  but that is the practice today. 

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At the recent Speed-to-Market seminar given by NYSID staff members,  First Deputy Superintendent Kermitt J. Brooks indicated that the target approval time for CL6 submission is 25-30 days.  As frequent readers know, my experience is that clean filings already exceed that goal, but that complicated filings, where errors are much more likely,  bring the average to something less than that.  Kathy Nelligan indicated that approximately 70% of submissions come in under the certified process and that the current rejection rate is at roughly 20%.  Her remarks confirmed that many of those rejections are for certification errors and problems with variability.  

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This week I received approval of the oldest CL6 that I had pending for any company.  That filing was 5 months old and was a complicated one.  I have recently received several more recent approvals that indicate a much faster turnaround time.  My very recent experience is that complicated filings take 60-90 days and simpler filings take 1-2 weeks. 

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I recently posted my thoughts on small submissions given my experience with so many different types and styles of submissions to the New York State Insurance Department.  This morning my new strategy seems to be panning out as I thought it would... I received two approvals in this morning's mail, both dated May 11.  One was submitted on May 3rd and one on May 4th.  Those are incredible turnaround times!!   Thanks to the Department for the amazingly fast work!    I know I will be making as many submissions as I can using this strategy!   If I make it easy for them, they respond with speed.  I can't ask for more than that! 

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I have now seen multiple letters from the NYSID warning companies that their CL6 privileges may be suspended due to problems with their companies' previous CL6 filings. 

In these cases, the letters were addressed to, and were based on filings from, a single unit of the company and one that was other than the unit bringing the letter to my attention.  However, the Department's warning applies to a company's filings across the board.  In some cases, the unit bringing the letter to me did not realize that a temporary hold had been placed on their submissions until it had been lifted! 

Of course, the NYSID doesn't know which unit generates which filings, so they are not in a position to clearly differentiate, but when companies have separate and distinct areas that generate filings and when those units may have very different policies and procedures in effect, these company-wide actions cause particular problems for large, decentralized companies.   

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Over the last few months, I have been paying close attention to the many varied submissions that I have done on behalf of client companies and have come away with a clear strategy - keep it simple! 

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The New York State Insurance Department has announced that they plan to start sending warning letters to companies that submit deficient filings. 

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I was recently asked about handling domiciliary state approval for NY domiciled companies doing business in 50 states. 

In my experience, this was a bigger problem prior to the development of the certified (or "CL6") process in NY.  In those days, NY approval could take many months and NY-domiciled companies who needed approval in NY for those domiciliary states could be in a very difficult situation.  Back then, my recommendation was to develop a version to file under NY's out-of-state use statute - those were filed for informational purposes and were subject to a much less stringent set of review standards.  Those were typically processed within a couple of weeks and then that date could be used for domiciliary state approval. 

However, NY law has changed so that NY-domiciled companies no longer file most of their forms for out-of-state use.  Now the statute has an annual filing requirement for those forms.  They can be used immediately outside NY so long as they are reported on an annual basis, in a format not yet fully developed.   In addition, forms intended for use in NY are now often submitted under the expedited "CL6" process. 

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Companies doing business in New York face difficult options when designing innovative products that need approval in New York.  New York law and the Department's administrative guidelines provide for filing alternatives, but each has advantages and disadvantages when the product is an innovative one that the Department might not have seen or which might be new to the company.  One approach is to file for full prior approval.  The obvious advantage of this approach is that the Company has the benefit of a full vetting of the issues with the Department and all requested revisions are made before product launch.  The major disadvantage is time.  Currently, it is not unusual for review periods to exceed one year, which in the fast paced world of product development, is usually not acceptable.  But another,less obvious, disadvantage is that even though many filings submitted for full prior approval are innovative ones, where the issues are complex, the Department still enforces its policy to close a file if all issues are not resolved with two rounds of correspondence. 

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On the New York State Insurance Department's website, there is posted guidance on the procedure for filings to change company names and addresses as well as in situations where there is a company merger.  www.ins.state.ny.us/ilifchng.htm.  However, the guidance does not suggest time frames for making the required filings.  In recent conversations with Ms, Kathleen A. Nelligan, Chief Insurance Attorney for the Life Bureau, she requested that companies file these submissions as early as possible, so as to allow time for unforeseen issues that might arise.  Ms. Nelligan indicated that the Department would prefer to receive the submissions early and issue conditional approvals than receive the submissions timed to correspond with the anticipated name change/merger date. 

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