"New York Experience Shows Promise and Pitfalls of
Susan Plumley, senior regulatory analyst at
Firemans Fund in Marin County California, is impressed. A new professional liability
product the company now offers in New York took just 11 days to get approved by state
regulators. Prior to the establishment of the states expedited approval process,
that same okay could have taken three months.
Both Firemans Fund the first company to
seek and get a product approved through the new system and the New York State Insurance
Department are pioneers on the speed-to-market frontier. As NAIC has recognized with its
initiatives to streamline the product approval process (IC Week, November 27, 2000) it is
a territory full of promise and pitfalls.
Launched just four months ago, New
Yorks new procedures to expedite the review process for product filings shifts the
compliance burden from the regulator to the regulated. Under the system, insurers do the
time consuming front-end work ensuring that the product complies with state regulations
that was once the purview of state examiners.
Since the launch, some 80 filings have been
approved through the expedited process. The majority have been property and casualty
products, though a small number of life and annuity products have also been okayed.
"The company is taking responsibility
for things the department would normally have to go over with a fine tooth comb,"
said Stephen Maluk, the departments assistant director of policy. That means that
prior to filing, a company representative "knowledgeable as to the laws, regulations
and circular letters applicable to the policy form that is the subject" of the filing
must attest that the new product is in compliance with those laws and regulations.
The state provides a host of check-lists that
must be included with a filing. The checklists provide an easy to follow compliance
roadmap for regulators, a way to ensure that a new product meets the states basic
They also mean more work for the insurer.
"Its a way to make sure
youve taken care of what New York is looking for," said Firemans
Funds Plumley. "The insurer does part of the work the examiner would normally
In its second filing approved in 11 days
three Firemans Fund staff spent two to three weeks preparing the paperwork. Plumley
has no regrets: "It certainly is worth going through the trouble," she said.
Its been slower going on the life side,
as both the department and industry acknowledge.
"Theres been some hesitancy"
among life insurers, said deputy superintendent Louis Petroluongo. "And you
cant blame them we expected some trepidation."
While hes quick to praise the
departments efforts, Life Insurance Council of New York (LICONY) president and CEO
Thomas Workman acknowledges "were not quite there yet." The tepid response
of his members "has to do with the variety and complexity of the products on the life
and annu-ities side" and the need to finetune the checklist process so that all
products are covered and antiquated references are removed, he said. Thats an
ongoing process: The departments Policy Form Filing Task Force meets monthly with
company representatives to tweak the system and increase its use.
In addition, the change in procedures creates
wariness among companies because they do not yet understand how the backend reviews will
work. Under the old system, the time a department examiner spent reviewing and okaying a
product gave assurance that the filing met state requirements. By taking on that burden
themselves, companies are taking a risk.
"We ought to be willing to bear a
stronger burden of making sure that when a filing goes forward we have dotted our Is
and crossed our Ts," said Workman.
"To get the product to market very
quickly there has to be some responsibility on part of the company and if we subsequently
learn that [the product] doesnt [meet state requirements] I see nothing wrong with
slapping them on the wrist and having them act accordingly," said Maluk. In the
meantime, said Petroluongo, the department is reviewing its staff assignments and will
shift examiners to backend reviews as needed.
Like its counterpart at the national level,
New Yorks speed-to-market initiative is a work in progress. Most companies still
rely on the traditional process. Still, both industry and regulators believe they have
seen the future of new product approvals and believe they can make it work.
Meanwhile, NAIC "is looking with a lot
of interest at what were doing" as part of its speed-to-market initiatives,
said Maluk. New York will be one of 10 states participating in the limited launch of
NAICs Coordinated Advertising Rate and Form Review Authority (CARFRA) this spring.
Article as it Appeared in the January 8, 2001 edition of Insurance Compliance Week