AB542: Bill Text

One of the most important functions of the commission is establishing uniform standards for insurance products, which have the force and effect of law in the states that enact the compact for products filed with the commission. The uniform standards relate to the form of a policy or contract, including an application and evidence of coverage, for an insurance product and are intended to prohibit the use of inconsistent, misleading, or ambiguous provisions in insurance products. Before adopting a uniform standard, the commission must give written notice to the legislative committees of the compacting states with jurisdiction over insurance matters. A uniform standard becomes effective 90 days after it is promulgated by the commission, or at a later date determined by the commission. However, a compacting state may opt out of a uniform standard, by legislation or administrative rule, in accordance with procedures outlined in the bill. In addition, when enacting the compact a compacting state may prospectively opt out of all uniform standards established by the commission relating to long-term care insurance products; under this bill, however, Wisconsin does not prospectively opt out of those uniform standards.

Under current law, except for certain very limited types of insurance, all insurance forms must be filed with and approved by the commissioner before they may be used in this state. Under the bill, an important function of the commission is receiving and reviewing insurance products, rate filings for disability income and long-term care insurance products, and advertisements relating to long-term care insurance products for which the commission has developed uniform standards, which are voluntarily filed with the commission by insurers seeking the approval of the commission. The commission may approve those insurance products, rate filings, and advertisements that satisfy applicable uniform standards adopted by the commission. The approval has the force and effect of law in the compacting states, and any insurance product that is approved by the commission may be sold in any of the compacting states. In addition, if the commission determines that the advertisement of an insurance product, other than a long-term care insurance product, could have the capacity or tendency to mislead the public, the commission may require an insurer to submit its advertisement for that insurance product for the commission's review or approval before the advertisement may be used. The commission may also designate products and advertisement that may be self-certified without prior approval by the commission.

The bill provides that the compact becomes effective and binding when two states enact it, except that the commission becomes effective for purposes of adopting uniform standards and reviewing and approving insurance products only after 26 states, or states representing greater than 40 percent of the premium volume for insurance products, become compacting states. In general, only states that enact the compact are subject to its provisions and the authority of the commission. The bill provides that a state may withdraw from the compact by repealing its enacting statute. A compacting state may be terminated from the compact if it defaults in the performance of any of its obligations or responsibilities under the compact.

Insurance form filing with the commissioner

Under current law, with a few exceptions, no insurance policy or group certificate form may be used unless it has been filed with and approved by the commissioner. Any form that has not been disapproved in 30 days after filing is approved. The statutes set out the grounds on which the commissioner may disapprove a form. The commissioner may order that the use of a form be discontinued if, after a hearing, the commissioner finds that an approved form would now be disapproved if newly filed. Penalties may not be imposed against an insurer for using a form that does not comply with a statute or rule if the statute or rule was in effect when the form was approved. However, penalties may be imposed against an insurer for using a form that does not comply with a statute or rule if the statute or rule takes effect after the date on which the form was approved.

This bill provides that, with a number of specified exceptions, a form first used on or after the effective date of the provision (which is approximately three months after the bill is passed and published) that has not already been filed by that date may be used without approval by the commissioner. The specified exceptions, which must still be filed and approved before use, include forms for long-term care insurance, worker's compensation policies, Medicare replacement or supplement policies, health care liability insurance, policies under the Health Insurance Risk-Sharing Plan, rustproofing warranty insurance, and warranty contracts; forms ordered to be filed by the commissioner or required to be filed by a rule of the commissioner; forms that include appraisal or arbitration provisions not specifically authorized by rule; and forms containing certain clauses that require explicit approval. For forms that do not have to be filed and approved before use, however, the insurer must still file the form with the commissioner 30 days before use and certify that the form complies with the statutes related to insurance and any rules promulgated under those statutes. The commissioner may still, after a hearing, order the discontinuance of the use of a form that did not require approval before use if there are grounds for disapproval. Any form that was approved by, or self-certified to and not disapproved by, the commission is not subject to any requirement for filing with the commissioner.

The bill provides that penalties may not be imposed against an insurer for the use of a form solely based on a finding of the commissioner that the content of the form is misleading. The bill also provides that, if an insurer uses a form that was filed but not approved before use and that violates a statute related to insurance or any rules promulgated under those statutes, the insurer violates that statute or rule and is subject to penalties.

Suitability of annuity contracts

Under current law, an insurance intermediary, or insurer if no intermediary is involved, is prohibited from making a recommendation to a person who is 65 years old or older (senior consumer) about purchasing or exchanging an annuity unless the intermediary or insurer has reasonable grounds to believe that the recommendation is suitable for the senior consumer based on facts disclosed by the senior consumer. Before making a recommendation, the intermediary or insurer must make reasonable efforts to obtain information from the senior consumer about his or her financial status, tax status, and investment objectives. The bill makes these provisions apply to all consumers, not just to those who are 65 years old or older.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB542, s. 1 Section 1. 14.82 of the statutes is created to read:

AB542,5,5 14.82 Interstate insurance product regulation commission. There is created an interstate insurance product regulation commission as specified in s. 601.58 (3). The member of the commission representing this state shall be the commissioner of insurance or his or her designated representative, who must be an official or employee of the office of the commissioner of insurance. The commission member shall serve without compensation but shall be reimbursed from the appropriation under s. 20.145 (1) (g) for actual and necessary expenses incurred in the performance of his or her duties. The commission has the powers and duties granted and imposed under s. 601.58.

AB542, s. 2 Section 2. 40.55 (1) of the statutes is amended to read:

AB542,5,14 40.55 (1) Except as provided in sub. (5), the state shall offer, through the group insurance board, to eligible employees under s. 40.02 (25) (bm) and to state annuitants long-term care insurance policies which have been approved for sale in this state by filed with the office of the commissioner of insurance and which have been approved for offering under contracts established by the group insurance board if the insurer requests that the policy be offered and the state shall also allow an eligible employee or a state annuitant to purchase those policies for his or her spouse or parent.

AB542, s. 3 Section 3. 100.205 (6) (intro.) of the statutes is amended to read:

AB542,5,19 100.205 (6) (intro.) Every warrantor shall purchase a policy of insurance covering the financial integrity of its warranties. The policy of insurance shall be on a form approved by the commissioner of insurance under s. 631.20 and shall have the following minimum provisions:

AB542, s. 4 Section 4. 601.58 of the statutes is created to read:

AB542,5,24 601.58 Interstate insurance product regulation compact. The interstate insurance product regulation compact is hereby enacted into law and entered into by this state with all other jurisdictions legally joining therein, in substantially the following form:

AB542,6,2 (1) Article I - Purposes. Through means of joint and cooperative action among the compacting states, the purposes of this compact include all of the following:

AB542,6,4 (a) To promote and protect the interest of consumers of individual and group annuity, life insurance, disability income, and long-term care insurance products.

AB542,6,6 (b) To develop uniform standards for insurance products covered under the compact.

AB542,6,10 (c) To establish a central clearinghouse to receive and provide prompt review of insurance products covered under the compact and, in certain cases, advertisements related thereto, submitted by insurers authorized to do business in one or more compacting states.

AB542,6,12 (d) To give appropriate regulatory approval to those product filings and advertisements satisfying the applicable uniform standard.

AB542,6,15 (e) To improve coordination of regulatory resources and expertise between state insurance departments regarding the setting of uniform standards and review of insurance products covered under the compact.

AB542,6,16 (f) To create the interstate insurance product regulation commission.

AB542,6,18 (g) To perform these and such other related functions as may be consistent with the state regulation of the business of insurance.

AB542,6,19 (2) Article II - Definitions. In this compact:

AB542,6,23 (a) "Advertisement" means any material designed to create public interest in a product or to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy, as more specifically defined in the rules and operating procedures of the commission.

AB542,6,25 (b) "Bylaws" mean those bylaws established by the commission for its governance, or for directing or controlling the commission's actions or conduct.

AB542,7,2 (c) "Commission" means the interstate insurance product regulation commission established by this compact.

AB542,7,5 (d) "Commissioner" means the chief insurance regulatory official of a state, including, but not limited to, commissioner, superintendent, director, or administrator.

AB542,7,8 (e) "Compacting state" means any state that has enacted this compact legislation and that has not withdrawn under sub. (14) (a) or been terminated under sub. (14) (g).

AB542,7,10 (f) "Domiciliary state" means the state in which an insurer is incorporated or organized; or, in the case of an alien insurer, its state of entry.

AB542,7,12 (g) "Insurer" means any entity licensed by a state to issue contracts of insurance for any of the lines of insurance covered by this section.

AB542,7,14 (h) "Member" means the person chosen by a compacting state as its representative to the commission, or his or her designee.

AB542,7,16 (i) "Noncompacting state" means any state that is not at the time a compacting state.

AB542,7,18 (j) "Operating procedures" mean procedures promulgated by the commission implementing a rule, a uniform standard, or a provision of this compact.

AB542,7,23 (k) "Product" means the form of a policy or contract, including any application, endorsement, or related form that is attached to and made a part of the policy or contract, and any evidence of coverage or certificate, for an individual or group annuity, life insurance, disability income, or long-term care insurance product that an insurer is authorized to issue.

AB542,8,4 (L) To hire employees, professionals, or specialists, and elect or appoint officers, and to fix their compensation, define their duties and give them appropriate authority to carry out the purposes of the compact, and determine their qualifications; and to establish the commission's personnel policies and programs relating to, among other things, conflicts of interest, rates of compensation, and qualifications of personnel.

AB542,8,6 (m) "State" means any state, district, or territory of the United States of America.

AB542,8,8 (n) "Third-party filer" means an entity that submits a product filing to the commission on behalf of an insurer.

AB542,8,14 (o) "Uniform standard" means a standard adopted by the commission for a product line, pursuant to sub. (7), and shall include all of the product requirements in the aggregate; provided, that each uniform standard shall be construed, whether express or implied, to prohibit the use of any inconsistent, misleading, or ambiguous provisions in a product and the form of the product made available to the public shall not be unfair, inequitable, or against public policy as determined by the commission.

AB542,9,4 (3) Article III - Establishment of the Commission and Venue. The compacting states hereby create the interstate insurance product regulation commission. Pursuant to sub. (4), the commission will have the power to develop uniform standards for product lines, receive and provide prompt review of products filed therewith, and give approval to those product filings satisfying applicable uniform standards; provided, that it is not intended for the commission to be the exclusive entity for receipt and review of insurance product filings. Nothing herein shall prohibit any insurer from filing its product in any state wherein the insurer is licensed to conduct the business of insurance, and any such filing shall be subject to the laws of the state where filed. The commission is a body corporate and politic, and an instrumentality of the compacting states. The commission is solely responsible for its liabilities except as otherwise specifically provided in this compact. Venue is proper and judicial proceedings by or against the commission shall be brought solely and exclusively in a court of competent jurisdiction where the principal office of the commission is located.

AB542,9,6 (4) Article IV - Powers of the Commission. The commission shall have all of the following powers:

AB542,9,8 (a) To promulgate rules, pursuant to sub. (7), which shall be binding in the compacting states to the extent and in the manner provided in this compact.

AB542,9,24 (b) To exercise its rule-making authority and establish reasonable uniform standards for products covered under the compact, and advertisement related thereto, which shall have the force and effect of law and shall be binding in the compacting states, but only for those products filed with the commission; provided, that a compacting state shall have the right to opt out of such uniform standard pursuant to sub. (7), to the extent and in the manner provided in this compact; and provided further, that any uniform standard established by the commission for long-term care insurance products may provide the same or greater protections for consumers as, but shall not provide less than, those protections set forth in the National Association of Insurance Commissioners' Long-Term Care Insurance Model Act and Long-Term Care Insurance Model Regulation, respectively, adopted as of 2001. The commission shall consider whether any subsequent amendments to the National Association of Insurance Commissioners' Long-Term Care Insurance Model Act or Long-Term Care Insurance Model Regulation adopted by the National Association of Insurance Commissioners require amending of the uniform standards established by the commission for long-term care insurance products.

AB542,10,6 (c) To receive and review in an expeditious manner products filed with the commission, and rate filings for disability income and long-term care insurance products, and give approval of those products and rate filings that satisfy the applicable uniform standard, where such approval shall have the force and effect of law and be binding on the compacting states to the extent and in the manner provided in the compact.

AB542,10,17 (d) To receive and review in an expeditious manner advertisement relating to long-term care insurance products for which uniform standards have been adopted by the commission, and give approval to all advertisement that satisfies the applicable uniform standard. For any product covered under this compact, other than long-term care insurance products, the commission shall have the authority to require an insurer to submit all or any part of its advertisement with respect to that product for review or approval prior to use, if the commission determines that the nature of the product is such that an advertisement of the product could have the capacity or tendency to mislead the public. The actions of the commission as provided in this subsection shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in the compact.

AB542,10,20 (e) To exercise its rule-making authority and designate products and advertisement that may be subject to a self-certification process without the need for prior approval by the commission.

AB542,10,23 (f) To promulgate operating procedures, pursuant to sub. (7), that shall be binding in the compacting states to the extent and in the manner provided in this compact.

AB542,11,3 (g) To bring and prosecute legal proceedings or actions in its name as the commission; provided, that the standing of any state insurance department to sue or be sued under applicable law shall not be affected.

AB542,11,5 (h) To issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence.

AB542,11,6 (i) To establish and maintain offices.

AB542,11,7 (j) To purchase and maintain insurance and bonds.

AB542,11,9 (k) To borrow, accept, or contract for services of personnel, including, but not limited to, employees of a compacting state.

AB542,11,15 (L) To hire employees, professionals, or specialists, and elect or appoint officers, and to fix their compensation, define their duties and give them appropriate authority to carry out the purposes of the compact, and determine their qualifications; and to establish the commission's personnel policies and programs relating to, among other things, conflicts of interest, rates of compensation, and qualifications of personnel.

AB542,11,19 (m) To accept any and all appropriate donations and grants of money, equipment, supplies, materials, and services, and to receive, utilize, and dispose of the same; provided, that at all times the commission shall strive to avoid any appearance of impropriety.

AB542,11,22 (n) To lease, purchase, accept appropriate gifts or donations of, or otherwise own, hold, improve, or use, any property, real, personal, or mixed; provided, that at all times the commission shall strive to avoid any appearance of impropriety.

AB542,11,24 (o) To sell, convey, mortgage, pledge, lease, exchange, abandon, or otherwise dispose of any property, real, personal, or mixed.

AB542,12,2 (p) To remit filing fees to compacting states as may be set forth in the bylaws, rules, or operating procedures.

AB542,12,4 (q) To enforce compliance by compacting states with rules, uniform standards, operating procedures, and bylaws.

AB542,12,5 (r) To provide for dispute resolution among compacting states.

AB542,12,8 (s) To advise compacting states on issues relating to insurers domiciled or doing business in noncompacting jurisdictions, consistent with the purposes of this compact.

AB542,12,11 (t) To provide advice and training to those personnel in state insurance departments responsible for product review, and to be a resource for state insurance departments.

AB542,12,12 (u) To establish a budget and make expenditures.

AB542,12,13 (v) To borrow money.

AB542,12,17 (w) To appoint committees, including advisory committees comprising members, state insurance regulators, state legislators or their representatives, insurance industry and consumer representatives, and such other interested persons as may be designated in the bylaws.

AB542,12,19 (x) To provide and receive information from, and to cooperate with, law enforcement agencies.

AB542,12,20 (y) To adopt and use a corporate seal.

AB542,12,23 (z) To perform such other functions as may be necessary or appropriate to achieve the purposes of this compact consistent with the state regulation of the business of insurance.

AB542,13,6 (5) Article V - Organization of the Commission. (a) Each compacting state shall have one member. Each member shall be qualified to serve in such capacity under the applicable law of the compacting state. Any member may be removed or suspended from office as provided by the law of the state from which he or she shall be appointed. Any vacancy occurring in the commission shall be filled in accordance with the laws of the compacting state wherein the vacancy exists. Nothing herein shall be construed to affect the manner in which a compacting state determines the election or appointment and qualification of its own commissioner.

AB542,13,11 (b) Each member shall be entitled to one vote and shall have an opportunity to participate in the governance of the commission in accordance with the bylaws. Notwithstanding any provision herein to the contrary, no action of the commission with respect to the promulgation of a uniform standard shall be effective unless two-thirds of the members vote in favor thereof.

AB542,13,14 (c) The commission shall, by a majority of the members, prescribe bylaws to govern its conduct as may be necessary or appropriate to carry out the purposes, and exercise the powers, of the compact, including, but not limited to:

AB542,13,15 1. Establishing the fiscal year of the commission.

AB542,13,17 2. Providing reasonable procedures for appointing and electing members, as well as holding meetings, of the management committee.

AB542,13,18 3. Providing reasonable standards and procedures for all of the following:

AB542,13,19 a. The establishment and meetings of other committees.

AB542,13,21 b. Governing any general or specific delegation of any authority or function of the commission.

AB542,14,4 4. Providing reasonable procedures for calling and conducting meetings of the commission that consist of a majority of commission members, ensuring reasonable advance notice of each such meeting, and providing for the right of citizens to attend each such meeting with enumerated exceptions designed to protect the public's interest, the privacy of individuals, and insurers' proprietary information, including trade secrets. The commission may meet in camera only after a majority of the entire membership votes to close a meeting en toto or in part. As soon as practicable, the commission must make public all of the following:

AB542,14,6 a. A copy of the vote to close the meeting revealing the vote of each member with no proxy votes allowed.

AB542,14,7 b. Votes taken during such meeting.

AB542,14,9 5. Establishing the titles, duties, and authority, and reasonable procedures for the election, of the officers of the commission.

AB542,14,13 6. Providing reasonable standards and procedures for the establishment of the personnel policies and programs of the commission. Notwithstanding any civil service or other similar laws of any compacting state, the bylaws shall exclusively govern the personnel policies and programs of the commission.

AB542,14,15 7. Promulgating a code of ethics to address permissible and prohibited activities of commission members and employees.

AB542,14,18 8. Providing a mechanism for winding up the operations of the commission and the equitable disposition of any surplus funds that may exist after the termination of the compact after the payment or reserving of all of its debts and obligations.

AB542,14,21 (d) The commission shall publish its bylaws in a convenient form and file a copy thereof and a copy of any amendment thereto, with the appropriate agency or officer in each of the compacting states.

AB542,14,23 (e) A management committee comprising no more than 14 members shall be established as follows: