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"New York Experience Shows Promise and Pitfalls of Speed-to-Market"

Article as it Appeared in the January 8, 2001 edition of Insurance Compliance Week

Susan Plumley, senior regulatory analyst at Fireman’s 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 state’s expedited approval process, that same okay could have taken three months.

Both Fireman’s 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 York’s 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 department’s 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 state’s basic requirements.

They also mean more work for the insurer.

"It’s a way to make sure you’ve taken care of what New York is looking for," said Fireman’s Fund’s Plumley. "The insurer does part of the work the examiner would normally do."

In its second filing approved in 11 days three Fireman’s Fund staff spent two to three weeks preparing the paperwork. Plumley has no regrets: "It certainly is worth going through the trouble," she said.

It’s been slower going on the life side, as both the department and industry acknowledge.

"There’s been some hesitancy" among life insurers, said deputy superintendent Louis Petroluongo. "And you can’t blame them we expected some trepidation."

While he’s quick to praise the department’s efforts, Life Insurance Council of New York (LICONY) president and CEO Thomas Workman acknowledges "we’re 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. That’s an ongoing process: The department’s 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 I’s and crossed our T’s," 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] doesn’t [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 York’s 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 we’re 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 NAIC’s Coordinated Advertising Rate and Form Review Authority (CARFRA) this spring.

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