GAO Says NAIC Lacks Conduct Review Standards

By Steven Brostoff, Washington Editor

NU Online News Service, Oct. 3, 11:54 a.m. EDT,Washington?The National Association of InsuranceCommissioners should develop a common set of standards for auniform market oversight program that will include all states, theUnited States General Accounting Office said.

In a new report on state insurance regulation, GAO said thatbecause there are no generally accepted standards for marketanalysis and market conduct examinations, each state decides how itwill carry out these activities.

As a result, GAO said, few states have formal programs formarket analysis and examinations are used inconsistently, and insome cases, infrequently.

Moreover, GAO said, states have no generally accepted criteriafor determining which companies to examine or which type ofexamination to perform.

GAO noted that the NAIC has tried to find ways to facilitateuniformity in state market analysis programs and promote interstatecooperation in market conduct examinations.

However, despite these efforts, progress has been slow, GAOsaid.

Even though NAIC developed a handbook for market conductexaminers, states are not required to use it and it does notcontain standards on when to conduct examinations or how to choosecompanies, GAO said.

Moreover, GAO said, while NAIC developed an Examination TrackingSystem, which is a computer database aimed at helping statescoordinate examinations, states have not used the systemwidely.

Thus, GAO said, the system has not improved efficiency asquickly as had been hoped.

GAO also noted that NAIC recently announced a major newinitiative to improve insurance regulators' use of market analysisand market conduct examinations.

However, GAO said, because progress in the past has been slow,results from the new initiative are uncertain.

The report was requested by House Financial Services CommitteeChairman Mike Oxley, R-Ohio.