Report Title:

Interstate Insurance Compact

Description:

Adopts the National Association of Insurance Commissioners' Interstate Insurance Compact while exempting long term care insurance from the provisions of the compact.

THE SENATE

S.B. NO.

2887

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO INTERSTATE INSURANCE COMPACT.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. State insurance regulators across the nation recognize that the financial services industry is changing. Many products sold by life insurers have evolved to become primarily investment products. Consequently, life insurers increasingly face direct competition from products offered by depository institutions and securities firms. Because depository institutions and securities firms are able to sell products nationally, often without any prior regulatory review, they are able to bring these new products to market more quickly and without the added expense of meeting different requirements in different states.

The National Association of Insurance Commissioners and state insurance regulators have worked diligently over the past two years to identify the issues in this area and come up with possible solutions to reflect the new market realities. Regulators now believe there is a way to develop a more efficient review process for life insurance and annuity products -- one that will help insurers better compete in the marketplace while maintaining a high level of protection for insurance consumers. Regulators feel that the best way to accomplish this is through the creation of an interstate compact, which will have the flexibility to include life insurance, annuities, disability income and possibly long-term care products.

This Act, however, purposefully excludes long-term care insurance products from Hawaii's agreement to abide with the compact's decisions as Hawaii adopted article 431:10H, Hawaii Revised Statutes, the Long-Term Care Insurance Act, in 1999. Chapter 431:10H facilitates flexibility and innovation in the development of long-term care insurance coverage.

The purpose of this Act is to adopt the National Association of Insurance Commissioners' Interstate Insurance Compact while exempting long-term care insurance from the provisions of the compact. For consumers, there will be high product standards and quicker access to a broader choice of investment products. State insurance regulators will be able to share best practices and use their resources more effectively, and insurers will be able to enjoy a more level playing field in competing with banks and securities firms.

SECTION 2. Chapter 431, Hawaii Revised Statutes, is amended by adding a new article to be appropriately designated and to read as follows:

"ARTICLE

INTERSTATE INSURANCE COMPACT

§431: -101 Scope. (a) The purposes of this compact are, through means of joint and cooperative action among the compacting states:

(1) To promote and protect the interest of consumers of annuity, individual and group life insurance, and disability income products;

(2) To develop uniform standards for annuity, individual and group life insurance, and disability income product lines;

(3) To establish a central clearinghouse to receive and provide prompt review of annuity, life insurance, and disability income product filings, including advertisements related thereto, submitted by insurers authorized to do business in one or more compacting states;

(4) To give appropriate regulatory approval to those product filings and advertisements satisfying the applicable uniform standard;

(5) To improve coordination of regulatory resources and expertise between state insurance departments regarding the setting of uniform standards and review of annuities, individual and group life insurance, and disability income products;

(6) To create the interstate insurance product regulation commission; and

(7) To perform these and such other related functions as may be consistent with the state regulation of the business of insurance.

(b) This compact shall not commit this State to any of the commission's decisions regarding long-term care insurance products.

§431: -102 Definitions. As used in this article, the following definitions apply:

"Advertisement" means any material which creates or enhances interest by the public in a product, and such other material defined as advertisement in the rules and operating procedures of the commission.

"Bylaws" mean those bylaws established by the commission for its governance, or for directing or controlling the commission's actions or conduct.

"Compacting state" means any state which has enacted the enabling legislation for this compact.

"Commission" means the interstate insurance product regulation commission that reviews annuity, life insurance, and disability income insurance products established by this compact.

"Commissioner" means the chief insurance regulatory official of a state.

"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.

"Insurer" means any entity licensed by a state to issue contracts of insurance for those lines of insurance covered by this article.

"Member" means the person chosen by a compacting state, or the person's designee.

"Non-compacting state" means any state which has not enacted the enabling legislation for this compact.

"Operating procedures" mean procedures promulgated by the commission implementing a rule, uniform standard, or a provision of this compact.

"Product" means an annuity, individual or group life insurance, or disability income insurance product, which an insurer is authorized to issue.

"Rule" means a requirement of the commission, including the creation of a uniform standard, duly adopted pursuant to section 431: -112, substantially affecting interested parties, in addition to the commission, which shall have the force and effect of law in the compacting states.

"State" means any state, district, or territory of the United States of America.

"Third-party filer" means an entity that submits a product filing to the commission on behalf of an insurer.

"Uniform standard" means a standard adopted by the commission for a product line, pursuant to section 431: -112, and shall include all of the product requirements in aggregate.

§431: -103 Establishment of the commission and venue. (a) The compacting states hereby create and establish a joint public entity known as the "Interstate Insurance Product Regulation Commission."

(b) The commission is a body corporate and politic and an instrumentality of the compacting states.

(c) The commission is solely responsible for its liabilities except as otherwise specifically provided in this compact.

(d) Venue is proper and judicial proceedings by or against the commission shall be brought solely and exclusively in an appropriate court where the principal office of the commission is located, except as otherwise specifically provided in this compact.

§431: -104 Powers of the commission. The commission shall have the power:

(1) To adopt rules, pursuant to section 431: -112, which 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 this article;

(2) To exercise its rule-making authority and establish reasonable uniform standards for annuity, individual and group life insurance, and disability income insurance product lines, and advertisements related thereto, which shall have the force and effect of law and shall be binding in the compacting states, but only for such products filed with the commission, provided, that a compacting state shall have the right to opt out of such uniform standard pursuant to section 431: -112, to the extent and in the manner provided in this article;

(3) To receive product filings for insurance products and advertisements related thereto and establish and collect appropriate filing fees, and review such filings in an expeditious manner;

(4) To give regulatory approval of those products and advertisements that meet the appropriate uniform standard and do not otherwise contain any inconsistent, misleading, or ambiguous provisions, and the issuance of such product to the public is not unfair, unreasonable, or against public policy, where such approval 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 this compact;

(5) To exercise its rule-making authority and designate product lines that may be subject to a self-certification process without the need for prior approval by the commission;

(6) To adopt operating procedures, pursuant to section 431: -112, which shall be binding in the compacting states to the extent and in the manner provided in this article;

(7) 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;

(8) To issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence;

(9) To establish and maintain offices;

(10) To purchase and maintain insurance and bonds;

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

(12) To hire employees, professionals, or specialists, and elect or appoint officers, and to fix their compensation, define their duties, 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;

(13) 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;

(14) To lease, purchase, accept appropriate gifts or donations of, or otherwise to own, hold, improve, or use, any property, real, personal, or mixed;

(15) To sell, convey, mortgage, pledge, lease, exchange, abandon, or otherwise dispose of any property, real, personal, or mixed;

(16) To remit filing fees to compacting states as may be set forth in the bylaws, rules, or operating procedures;

(17) To enforce compliance by compacting states with rules, uniform standards, operating procedures, and bylaws;

(18) To provide for dispute resolution among compacting states;

(19) To advise compacting states on issues relating to insurers domiciled or doing business in non-compacting jurisdictions, consistent with the purposes of this compact;

(20) 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;

(21) To establish a budget and make expenditures;

(22) To borrow money;

(23) To appoint committees, including advisory committees comprised of 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;

(24) To provide and receive information from, and to cooperate with law enforcement agencies;

(25) To adopt and use a corporate seal; and

(26) 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.

§431: -105 Appointment to commission. The governor, with the advice and consent of the senate, shall appoint the member of the commission to represent the State.

§431: -106 Membership; voting; bylaws. (a) Each compacting state shall have and be limited to one member. Each member shall be qualified to serve in such capacity under or pursuant to 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 the member shall be appointed. Any vacancy occurring in the commission shall be filled in accordance with the laws of the compacting state wherein such 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.

(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 adoption of a uniform standard shall be effective unless taken at a meeting where a majority of the members are present and vote in favor thereof; provided that any action not effective for such a reason may be ratified within thirty days by the concurrence in writing of a majority of the commission membership.

(c) The commission shall, by a majority of the members, adopt 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:

(1) Establishing the fiscal year of the commission;

(2) Providing reasonable procedures for appointing and electing members, as well as holding meetings, of the management committee;

(3) Providing reasonable standards and procedures for the establishment and meetings of other committees, and governing any general or specific delegation of any authority or function of the commission;

(4) Providing reasonable procedures for calling and conducting meetings of the commission that consists 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 shall make public a copy of the vote to close the meeting revealing the vote of each member with no proxy votes allowed, and votes taken during such meeting;

(5) Establishing the titles, duties, and authority, and reasonable procedures for the election, of the officers of the commission;

(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;

(7) Adopting a code of ethics to address permissible and prohibited activities of commission members and employees; and

(8) Adopting 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.

(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.

§431: -107 Management committee; officers and personnel. (a) A management committee comprising no more than fourteen members shall be established as provided in the bylaws; provided that in determining the actual composition of the management committee, consideration shall be given to representation of those compacting states based on their volume of individual and group life insurance, annuity, disability income, and long-term care insurance premiums, as well as regional representation through the national association of insurance commissioners’ zones. Each member of the management committee shall serve a two-year term and the terms of such members shall be staggered as provided in the bylaws.

(b) The management committee shall have such authority and duties as may be set forth in the bylaws, including but not limited to:

(1) Managing the affairs of the commission in a manner consistent with the bylaws and purposes of the commission;

(2) Establishing and overseeing an organizational structure within, and appropriate procedures for, the commission to provide for the creation of uniform standards and other rules, subject to approval by the full commission, receipt and review of product filings, administrative and technical support functions, review of decisions regarding the disapproval of a product filing, and the review of elections made by a compacting state to reject a uniform standard;

(3) Overseeing the offices of the commission; and

(4) Planning, implementing, and coordinating communications and activities with other state, federal, and local government organizations in order to advance the goals of the commission.

(c) The commission shall, by a majority of the members, elect annually officers with each having such authority and duties, as may be specified in the bylaws.

(d) The management committee may, subject to the approval of the commission, appoint or retain an executive director for such period, upon such terms and conditions and for such compensation as the commission may deem appropriate. The executive director shall serve as secretary to the commission, but shall not be a member of the commission. The executive director shall hire and supervise such other staff as may be authorized by the commission.

§431: -108 Advisory committees. An advisory committee comprised of not less than eight but no greater than sixteen state legislators shall be established to monitor the operations of, and make recommendations to, the commission; provided that an equal number of members on such advisory committee shall be appointed by the National Conference of State Legislatures and the National Conference of Insurance Legislators and shall serve alternating terms not to exceed two years. The commission may establish additional advisory committees as its bylaws may provide for the carrying out of its functions. The member of any advisory committee created pursuant to this compact, who is not a member of the commission, shall not have any voting rights and the recommendations of any advisory committee shall be nonbinding on the commission.

§431: -109 Corporate records of the commission. The commission shall maintain its corporate books and records in accordance with the bylaws.

§431: -110 Qualified immunity; defense; indemnification. (a) The members, officers, executive director, and employees of the commission shall be immune from suit and liability, either personally or in their official capacity, for any claim for damage to or loss of property or personal injury or other civil liability caused or arising out of any actual or alleged act, error, or omission that occurred, or that such person had a reasonable basis for believing occurred within the scope of commission employment, duties, or responsibilities; provided that nothing in this paragraph shall be construed to protect any such person from suit or liability for any damage, loss, injury, or liability caused by the intentional or willful and wanton misconduct of any such person.

(b) The commission shall defend any commissioner of a compacting state, or the commissioner's representatives or employees, or the commission's representatives or employees, in any civil action seeking to impose liability, arising out of any actual or alleged act, error, or omission that occurred within the scope of commission employment, duties, or responsibilities, or that the defendant had a reasonable basis for believing occurred within the scope of commission employment, duties or responsibilities; provided that nothing herein shall be construed to prohibit such person from retaining counsel; and provided further that the actual or alleged act, error, or omission did not result from the intentional or wilful and wanton misconduct of any such person.

(c) The commission shall indemnify and hold harmless the commissioner of a compacting state, or the commissioner's representatives or employees, or the commission's representatives or employees, for the amount of any settlement or judgment obtained against such persons arising out of any actual or alleged act, error, or omission that occurred within the scope of commission employment, duties, or responsibilities, or that such persons had a reasonable basis for believing occurred within the scope of commission employment, duties, or responsibilities, provided that the actual or alleged act, error, or omission did not result from the intentional or willful and wanton misconduct of any such person.

§431: -111 Meetings and acts of the commission. (a) The commission shall meet and take such actions as are consistent with the provisions of this compact and the bylaws.

(b) Each member of the commission shall have the right and power to cast a vote to which that compacting state is entitled and to participate in the business and affairs of the commission. A member shall vote in person or by such other means as provided in the bylaws, and shall not delegate the member's vote to another member. The bylaws may provide for members' participation in meetings by telephone or other means of communication.

(c) The commission shall meet at least once during each calendar year. Additional meetings shall be held as set forth in the bylaws.

§431: -112 Rules and operating procedures; rulemaking functions of the commission and rejection of uniform standards. (a) The commission shall adopt reasonable rules, including uniform standards, and operating procedures in order to effectively and efficiently achieve the purposes of this compact. Notwithstanding the foregoing, in the event the commission exercises its rulemaking authority in a manner that is beyond the scope of the purposes of this article, or the powers granted hereunder, then such action by the commission shall be invalid and have no force and effect.

(b) Rules and operating procedures shall be made pursuant to a rulemaking process that conforms to the Model State Administrative Procedure Act of 1981, as amended, as may be appropriate to the operations of the commission. Before the commission adopts a uniform standard, the commission shall give written notice to the relevant state legislative committees in each compacting state responsible for insurance issues of its intention to adopt the uniform standard. The commission in adopting a uniform standard shall consider fully all submitted materials and issue a concise explanation of its decision.

(c) All rules and amendments shall become effective as of the date specified in each rule or amendment; provided that a compacting state may opt out of a uniform standard as provided in this article. In the event that a compacting state opts out of a uniform standard as provided herein, it shall have no further force and effect in the compacting state. Should a majority of compacting states opt out of a uniform standard, that uniform standard shall have no further force and effect in any compacting states.

(d) A compacting state may opt out of a uniform standard, either by legislation or by rule adopted by the insurance commissioner. If a compacting state elects to opt out of a uniform standard by rule, it shall:

(1) Give written notice to the commission no later than ten business days after the later of the promulgation of the uniform standard or the state becoming a compacting state; and

(2) Find that the uniform standard is not appropriate after considering the prevailing conditions in that state.

(e) Not later than thirty days after a rule or operating procedure is promulgated, any person may file a petition for judicial review of the rule or operating procedure; provided that the filing of such a petition shall not stay or otherwise prevent such rule or operating procedure from becoming effective unless there is a finding that there is a substantial likelihood of success on behalf of the party filing such petition. The court shall give deference to the actions of the commission consistent with federal law and shall not find the rule or operating procedure to be unlawful if such rule or operating procedure represents a reasonable exercise of the commission's authority.

§431: -113 Commission records and enforcement. (a) The commission shall adopt rules establishing conditions and procedures for public inspection and copying of its information and official records, except such information and records involving the privacy of individuals and insurers' trade secrets The commission may adopt additional rules under which it may make available to federal and state agencies, including law enforcement agencies, records and information otherwise exempt from disclosure, and may enter into agreements with such agencies to receive or exchange information or records subject to nondisclosure and confidentiality provisions.

(b) Except as to privileged records, data, and information, the laws of any compacting state pertaining to confidentiality or nondisclosure shall not relieve any compacting state commissioner of the duty to disclose any relevant records, data, or information to the commission; provided that disclosure to the commission shall not be deemed to waive or otherwise affect any confidentiality requirement; and further provided that, except as otherwise expressly provided in this article, the commission shall not be subject to the compacting state's laws pertaining to confidentiality and nondisclosure with respect to records, data, and information in its possession. Confidential information of the commission shall remain confidential after such information is provided to any commissioner.

(c) The commission shall monitor compacting states for compliance with duly adopted bylaws, rules, including uniform standards, and operating procedures. The commission shall notify such non-complying compacting state in writing of its noncompliance with commission bylaws, rules, or operating procedures. If the non-complying compacting state fails to remedy such noncompliance within one year after its receipt of such notification, such compacting state shall be deemed to be in default as set forth in section 431: -120.

(d) The commissioner of any state in which an insurer is authorized to do business, or is conducting the business of insurance, shall continue to exercise the commissioner's authority to oversee the market regulation of the activities of the insurer in accordance with the provisions of the state's law. The commissioner's enforcement of compliance with the compact is governed by the following provisions:

(1) With respect to the commissioner's market regulation of a product or advertisement that is approved or certified to the commission, the content of the product or advertisement shall not constitute a violation of the provisions, standards, or requirements of the compact except upon a final order of the commission, issued at the request of a commissioner after prior notice to the insurer and an opportunity for hearing before the commission.

(2) Before a commissioner may bring an action for violation of any provision, standard, or requirement of the compact relating to the content of an advertisement not approved or certified to the commission, the commission, or an authorized commission officer or employee, must authorize the action. However, authorization pursuant to this paragraph does not require notice to the insurer, opportunity for hearing, or disclosure of requests for authorization or records of the commission's action on such requests.

§431: -114 Dispute resolution. The commission shall attempt, upon the request of a member, to resolve any disputes or other issues that are subject to this compact and which may arise between two or more compacting states, or between compacting states and non-compacting states, and the commission shall promulgate an operating procedure providing for resolution of such disputes.

§431: -115 Product filing and approval. (a) Insurers and third-party filers seeking to have a product approved by the commission shall file such product with, and pay applicable filing fees to, the commission. Nothing in this article shall be construed to restrict or otherwise prevent an insurer from filing its product in any state wherein such insurer is licensed to conduct the business of insurance, and such filing shall be subject to the laws of the state where filed. The commission shall establish appropriate filing and review processes and procedures pursuant to commission rules and operating procedures. Notwithstanding any provision herein to the contrary, the commission shall promulgate rules to establish conditions and procedures under which the commission will provide public access to product filing information. In establishing such rules, the commission shall consider the interests of the public in having access to such information, as well as protection of personal medical and financial information and trade secrets, that may be contained in a product filing or supporting information.

(b) Each product filed with the commission shall be reviewed in accordance with the applicable rule, uniform standard, and operating procedure. For those products where it is determined that a uniform standard does not apply, such products shall be reviewed in accordance with applicable commission rules and operating procedures. An insurer or third-party filer may request the commission to make a preliminary determination regarding whether a product is subject to a specific uniform standard.

(c) The commission shall give its approval of a product filed with the commission after its review and a determination by the commission that such product complies with the applicable rule, uniform standard, and operating procedure. A determination of the commission approving or disapproving a product filed with the commission shall be given controlling weight unless it is found to be arbitrary, capricious, or an abuse of discretion, or otherwise not in accordance with the law.

(d) Any product approved by the commission may be sold or otherwise issued in those compacting states for which the insurer is legally authorized to do business.

§431: -116 Review of commission decisions regarding product filings. (a) Not later than thirty days after the commission has disapproved a product filed with the commission, the insurer or third party filer whose filing was disapproved may appeal such determination to a review panel appointed by the commission. The commission shall adopt rules to establish procedures for appointing such review panel and provide for notice and hearing. An allegation that the commission, in disapproving a product filed with the commission, acted arbitrarily, capriciously, or in a manner that is an abuse of discretion or otherwise not in accordance with the law, may be heard before a court of competent jurisdiction.

(b) The commission shall have authority to monitor, review, and reconsider products subsequent to their approval and, where appropriate, the commission may withdraw or modify its approval after proper notice and hearing.

§431: -117 Finance. (a) The commission shall pay or provide for the payment of the reasonable expenses of its establishment and organization. To fund the cost of its initial operations, the commission may accept contributions and other forms of funding from the national association of insurance commissioners, compacting states, and other sources.

(b) The commission shall collect a filing fee from each insurer and third party filer filing a product with the commission to cover the cost of the operations and activities of the commission and its staff in a total amount sufficient to cover the commission's annual budget.

(c) The commission's budget for a fiscal year shall not be approved until it has been subject to notice and comment as set forth in rules promulgated in accordance with section 431: -112.

(d) The commission shall be exempt from all taxation in and by the compacting states.

(e) The commission shall not pledge the credit of any compacting state, except by and with the appropriate legal authority of that compacting state.

(f) The commission shall keep complete and accurate accounts of all its internal receipts (including grants and donations) and disbursements of all funds under its control. The internal financial accounts of the commission shall be subject to the accounting procedures established under its bylaws. The financial accounts and reports including the system of internal controls and procedures of the commission shall be audited annually by an independent certified public accountant. Upon the determination of the commission, but no less frequently than every three years, the review of such independent auditor shall include a management and performance audit of the commission. The commission shall make an annual report to the governor and legislature of the compacting states, which shall include a report of such independent audit. The commission's internal accounts shall not be confidential and such materials may be shared with the commissioner of any compacting state upon request, provided that any work papers related to any internal or independent audit and any information regarding the privacy of individuals and insurers' proprietary information, including trade secrets, shall remain confidential.

(g) No compacting state shall have any claim to or ownership of any property held by or vested in the commission or to any commission funds held pursuant to the provisions of this compact.

§431: -118 Compacting states; effective date; amendment. (a) Any state is eligible to become a compacting state.

(b) The compact shall become effective and binding upon legislative enactment of the compact into law by two compacting states; provided the commission shall become effective for purposes of adopting uniform standards for products only after the legislative enactment of the compact into law by twelve states; and further provided the commission shall become effective for purposes of reviewing, and giving approval or disapproval of, products filed with the commission that satisfy applicable uniform standards only after the legislative enactment of the compact into law by twenty-six states or, alternatively, by states representing greater than fifty per cent of the premium volume for life and annuity products, based on records of the National Association of Insurance Commissioners as of December 31 of the prior year. Thereafter, it shall become effective and binding as to any other compacting state upon enactment of the compact into law by that state.

(c) Amendments to the compact may be proposed by the commission for enactment by the compacting states. No amendment shall become effective and binding upon the commission and the compacting states unless and until all compacting states enact such amendment into law.

§431: -119 Withdrawal. (a) Once effective, the compact shall continue in force and remain binding upon each and every compacting state; provided that a compacting state may withdraw from the compact ("withdrawing state") by enacting a statute specifically repealing the statute which enacted the compact into law.

(b) The effective date of withdrawal is the effective date of the repealing statute; provided the withdrawal shall not apply to any product filings approved on the date the repealing statute becomes effective except by mutual agreement of the commission and the withdrawing state.

(c) The commissioner of the withdrawing state shall immediately notify the chairperson of the commission in writing upon the introduction of legislation repealing this compact in the withdrawing state.

(d) The commission shall notify the other compacting states of the withdrawing state's intent to withdraw within ten days of its receipt thereof.

(e) The withdrawing state is responsible for its share of obligations, duties, and liabilities incurred through the effective date of withdrawal, including any obligations, the performance of which extend beyond the effective date of withdrawal, except to the extent those obligations may have been released or relinquished by mutual agreement of the commission and the withdrawing state. The commission's approval of products prior to the effective date of withdrawal shall continue to be effective and be given full force and effect in the withdrawing state, unless formally rescinded by the withdrawing state in the same manner as provided by the laws of the withdrawing state for the prospective disapproval of products previously approved under state law.

(f) Reinstatement following withdrawal of any compacting state shall occur upon the effective date of the withdrawing state reenacting the compact.

§431: -120 Default. (a) If the commission determines that any compacting state has at any time defaulted ("defaulting state") in the performance of any of its obligations or responsibilities under this compact, the bylaws or duly promulgated rules or operating procedures, all rights, privileges, and benefits conferred by this compact on such defaulting party shall be suspended from the effective date of default as fixed by the commission. The grounds for default include, but are not limited to, failure of a compacting state to perform such obligations or responsibilities, and any other grounds designated in commission rules. The commission shall immediately notify the defaulting state in writing of the defaulting state's suspension pending a cure of the default. The commission shall stipulate the conditions and the time period within which the defaulting state must cure its default. If the defaulting state fails to cure the default within the time period specified by the commission, the defaulting state shall be terminated from the compact and all rights, privileges, and benefits conferred by this compact shall be terminated from the effective date of termination.

(b) Product approvals by the commission that are in force on the effective date of termination shall remain in force in the defaulting state in the same manner as if the defaulting state had withdrawn voluntarily pursuant to subsection (a).

(c) Reinstatement following termination of any compacting state requires a reenactment of the compact.

§431: -121 Dissolution of compact. (a) The compact dissolves effective upon the date of the withdrawal or default of the compacting state which reduces membership in the compact to one compacting state.

(b) Upon the dissolution of this compact, the compact becomes null and void and shall be of no further force or effect, and the business and affairs of the commission shall be wound up and any surplus funds shall be distributed in accordance with the bylaws.

§431: -122 Severability and construction. (a) The provisions of this compact shall be severable, and if any phrase, clause, sentence, or provision is deemed unenforceable, the remaining provisions of the compact shall be enforceable.

(b) The provisions of this compact shall be liberally construed to effectuate its purposes.

§431: -123 Other laws. (a) Nothing herein prevents the enforcement of any other law of a compacting state that is not inconsistent with this compact.

(b) For any product approved by or certified to the commission, the rules, uniform standards, and any other requirements of the commission shall constitute the exclusive provisions applicable to the content, approval, and certification of such products. For advertisement that is subject to the commission’s authority, any rule, uniform standard, or other requirement of the commission which governs the content of the advertisement shall constitute the exclusive provision that a commissioner may apply to the content of the advertisement. Notwithstanding the foregoing, no action taken by the commission shall abrogate or restrict:

(1) The access of any person to state courts;

(2) Remedies available under state law related to breach of contract, tort, or other laws not specifically directed to the content of the product;

(3) State law relating to the construction of insurance contracts; or

(4) The authority of the attorney general of the state or any other government official or agency, including but not limited to maintaining any actions or proceedings, as authorized by law.

(c) All insurance products filed with individual states shall be subject to the laws of those states.

§431: -124 Binding effect of the compact. (a) All lawful actions of the commission, including all rules and operating procedures promulgated by the commission, are binding upon the compacting states.

(b) All agreements between the commission and the compacting states are binding in accordance with their terms.

(c) Upon the request of a party to a conflict over the meaning or interpretation of commission actions, and upon a majority vote of the compacting states, the commission may issue advisory opinions regarding such meaning or interpretation.

(d) In the event any provision of this compact exceeds the constitutional limits imposed on the legislature of any compacting state, the obligations, duties, powers, or jurisdiction sought to be conferred by such provision upon the commission shall be ineffective as to such compacting state, and such obligations, duties, powers, or jurisdiction shall remain in the compacting state and shall be exercised by the agency thereof to which such obligations, duties, powers, or jurisdiction are delegated by law in effect at the time this compact becomes effective."

SECTION 3. Chapter 431, Hawaii Revised Statutes, is amended by adding to part II of article 2 a new section to be appropriately designated and to read as follows:

"§431:2- Standards for commissioner. When reviewing a uniform standard, the commissioner shall consider the following standards in determining whether to opt out of a uniform standard pursuant to section 431: -112:

(1) Whether the public interest is being served or protected pursuant to section 431:1-102;

(2) Whether the reasonable expectations of the consumer will be met;

(3) Whether the uniform standard is or will require a reasonably clear, plain English communication to the consumer;

(4) Whether the consumer will be protected in a typical transaction where the consumer may have less power, information, or understanding of the meaning or consequences of the transaction, or any part thereof, than the insurer or producer;

(5) The long term effects of the uniform standard;

(6) The possible effects of the uniform standard on the financial condition of insurers;

(7) Confidentiality requirements in state or federal law;

(8) State and federal constitutional issues;

(9) The impact of the uniform standard on any provision of the insurance code or any state or federal law;

(10) The uniform standard’s particular impact in the State and any conditions unique to the State; and

(11) The integration of the uniform standard with state or federal law and any possible conflicts with such laws."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on January 1, 2005.

INTRODUCED BY:

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BY REQUEST