Market Conduct Discussed At NAIC

By Jim Connolly, NU Life-Health Senior Editor

NU Online News Service, Dec. 16, 4:08 p.m.EST?Market conduct surveillance plans by regulators may bethe right answer to effective regulation of insurers but the wrongspeed for simultaneous change in both the life andproperty-casualty parts of the business, state regulators were toldlast week.

The advice came during the winter meeting of the NationalAssociation of Insurance Commissioners in San Diego.

Both consumer and insurer representatives said that there is aneed to put a regulatory product out that creates guidelines thatcan be tested to see what works and doesn't work.

During the course of market conduct sessions, it was suggestedby Dave Reddick, a representative with the National Association ofMutual Companies, Indianapolis, that the different pieces of themarket conduct puzzle being developed by various NAIC workinggroups include a "How-to Guide."

The Guide is being developed to offer regulators a sourcedescribing effective market conduct tools. A catalogue ofregulatory tools has been developed and a second phase of the Guidewould offer instruction over how to use these tools.

Linda Lanam, a representative with the American Council of LifeInsurers, Washington, said, "it is very important we use 2003 totake a look at what is being done and to make sure that it isworking. The more we can do, the more it will give rise to newthings."

Birny Birnbaum, executive director of the Center for EconomicJustice, Austin, Texas, suggested that rather than presentingstatus reports, it was important to put a product out.

But Cindy Amman, a Missouri regulator, argued for the systematicapproach that is being taken. Many states do not know what toolsare available, she said. Consequently, it is important for stateregulators to first learn what is available before learning how touse these regulations.

Noting that there will be a large turnover in commissioners nextyear, Mr. Birnbaum suggested that a one or two page document bewritten so that "when new commissioners come in, you can say thisis what market conduct regulation should look like."

However, Joel Ario, Oregon insurance administrator, noted thatit was not that simple to achieve a unified vision because thereare different viewpoints among regulators.

Even so, there are signs that regulators are taking steps towork more closely together. A market conduct uniformity workinggroup reported that 42 states said that they are compliant in atleast two of four areas of market conduct uniformity including examscheduling, pre-exam scheduling, exam procedures and exam reports.The goal for 2002 had been 26 states.

Jann Goodpaster, an Oregon regulator, informed interestedparties that 100 percent of states are meeting uniformity in atleast two areas.

And a market conduct examination tracking system is expected tobe up and running on January 1, 2003.

By Jan. 1, 2003, life insurers will also have turned in theirmarket data call reports to regulators. That data will be culledfor statistical norms and outliers, and a report presented in March2003, according to Sue Stead, an Ohio regulator, heading up themarket analysis working group. Property-casualty companies aregearing up for the same exercise.

Lenore Marema, a representative with the Alliance of AmericanInsurers, Downers Grove, Ill, said that member companies areconcerned about the project's cost and want to be assured thatinformation collected will actually be used. Companies will bekeeping track of costs, she said.

Ms. Stead added that when doing that, it is important thatuniform criteria be established so that it is an apples to applescomparison.

The market conduct analysis feedback for members of the NationalAssociation of Independent Insurers, Des Plaines, Ill., is a "realmixed message," Don Cleasby, an NAII representative toldregulators. Although members say they support the project if itcreates dialogue and coordination among regulators, Mr. Cleasbysaid, others are skeptical that the money is being spent for apilot that is not going to move anywhere and any cost must lead tosome result.