We'll Oppose Conduct Law Nationwide: PCI

By Daniel Hays

NU Online News Service, Sept. 8, 12:11 p.m.EDT?If the nation's insurance commissioners approve aproposed model law to regulate insurer market conduct examinations,an influential trade group said it will fight to modify or defeatthe measure in state legislatures across the country.[@@]

"If this bill is introduced in the states, we can't support it,"said Lenore Marema, vice president of the Property CasualtyInsurers Association of America in Des Plaines, Ill.

The model measure is expected to pass when it comes up for avote at the Sept. 11-14 meeting in Anchorage, Alaska of theNational Association of Insurance Commissioners, during a plenarysession where the PCI will not have an opportunity to express itsviewpoint, Ms. Marema said.

The model is a modified version of a bill developed first by theNational Conference of Insurance Legislators.

Ms. Marema noted that the NCOIL model originally said action byregulators was to be proceeded by an analysis, but the model givesa commissioner the discretion to conduct an exam without anyanalysis, and there is "little statutory guidance around what theycan do."

PCI, she said, will work in the various states "to modify it toour satisfaction." Otherwise, she added, "I don't see how we wouldget to a position of support. If you don't have an effective reformmodel, real-time reform doesn't happen."

The original concept for the model, she said, was to useanalysis "to target outliers" in the marketplace.

PCI noted that the NAIC had suggested 15 amendments to theexisting NCOIL Market Conduct Model Law, some of which weresubsequently adopted by NCOIL to create the revised model that NAICis due to vote on.

PCI is particularly concerned that the model does not includeenforceable rights or address remedies for statutory parametersgiven to examiners.

"The wide-ranging regulatory latitude that exists in the currentstate market conduct exam system is a very critical problem thatcontributes to the misallocation of resources for these exams," thegroup said. "The NCOIL Market Conduct Model Law did not go farenough to address these problems, and unfortunately almost all ofthe NAIC amendments move this model toward permitting thatunchecked regulatory discretion to continue."

In a comment letter, PCI said that the model should placereasonable limits on the data collection authorized in a marketanalysis, and require regulatory actions to be based on the resultsof such analysis.

According to PCI, the model outlines a better way to review theactions of insurers, but creates no enforceable rights and remediesfor companies when regulators do not follow the legislativedirections provided.

The organization also complained that the measure would retreat"from the minimal due process provisions provided to licensees whenthe NAIC work products, which are incorporaed by reference, arechanged in the future. State regulators will not only be able tointerpret the law, but they will effectively be able to change thelaw as well."

PCI also objected to what it said was a lack of cleare limits onfines and penalties, or the market conduct examination fees thatcan be charged.

"PCI supports the effort to create one effective market conductmodel act to solve problems that exist in the current statesystem," Ms. Marema said. "However, because the most recentlyamended version of the NCOIL Model Law retreats from addressing theissues in an effective way, rather than advancing the ball, wecannot support the amended Model Law. It is the February 2004 NCOILModel Law from which we will work. We urge NCOIL and the NAIC toreturn to the point of departure and work further to address thesecritical issues."