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

In several recent policy form reviews, both prior approvals and post-approval reviews, the NYSID has raised an issue that may warrant some investigation of policy delivery practices at your company.  It arises when applications include a statement along the lines that the policy does not take effect unless the insured is insurable or in "good health" at the time the policy is delivered. 

At policy delivery there are two possibilities:  one is that money was collected and a conditional receipt or temporary insurance agreement provided.  The Department's position is that  when a conditional receipt was issued the insured need not be insurable at delivery and so the affirmation in the signature section is not permissible.  The other possibility is that no money was collected at application.  In that instance, a  statement in the base application regarding continued good health status is permissible, but the Department requires that a form such as a "Statement of Good Health" be used at delivery (this must be a filed and approved form) in order to collect information on health status.  

This position is likely to come up in future post-approval reviews, and so companies would be well-advised to review applications approved on a CL6 basis, as well as their actual practices on policy delivery to determine whether they are in compliance with the rules set out above or whether a revision to the form or the filing of a Statement of Good Health should be considered. 

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A conference is being held at the American Enterprise Institute tomorrow (7/9/08) on the "Future of Insurance Regulation." Coincidentally, the US House Financial Services Subcommittee on Capital Markets and Insurance is also meeting tomorrow  to mark-up proposals of H.R. 5840, the Insurance Information Act, which would establish an Office of Insurance Information within Treasury, "NARAB II", a national system to process non-resident producer licensing, and the Increasing Insurance Coverage Options for Consumers Act.  

Of course I follow the discussions of federal vs. state regulation of insurance, but one of my frustrations with what I often read and hear is the assertion that federal regulation represents efficiency, with the optional nature of a proposed federal charter representing competition among regulators. State regulation on the other hand is generally presented as immovable and irretrievably mired in inefficiency and insensitivity to competitive demands.   This appears to be the dominant theme at the AEI conference, yet it seems simplistic to me in several ways.   One of them is that when we make such a comparison, we are looking at a system that has yet to be fully conceived versus one that has a very long and complicated history.  Who among us can't dream?  The challenges obviously arise when systems are implemented and develop and are presented with difficult decisions and must draft regulations and deal with real life on both a day-to-day basis and in crisis.  Then inefficiencies and bureaucracies begin to take hold and grow.  I have not yet read or seen any reason why a federal agency would not completely dominate an alternative state system and simultaneously grow to become large and inefficient. 

But there is another option that has been proposed by some that I hear much less about, but which I find very interesting.  This option is called the Single-License Approach to Regulating Insurance and it is discussed in a paper authored by Henry N. Butler, Executive Director of the Searle Center on Law, Regulation and Economic Growth at Northwestern University School of Law and  Larry E. Ribstein, the Mildred van Voorhis Jones Chair in Law at University of Illinois College of Law.  The paper  is available for download at no charge from the Social Science Research Network. 

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