Regulators Act To Coordinate Conduct Oversite

By Jim Connolly

NU Online News Service, April 22, 4:36 p.m. EST?State insurance regulators are moving forward with a number of projects aimed at streamlining oversight of conduct in the marketplace.

Their efforts include improving coordination among states in preparing market conduct reports and developing a market conduct annual statement.

Recently regulators announced a market conduct reciprocity agreement that includes Kansas and Nebraska. This fall a pilot joint market conduct exam is planned between Kansas and Nebraska. One point in the agreement that makes the joint effort possible is a confidential market regulation file on every domestic insurer that the department would retain.

Iowa and South Dakota also announced their intentions to join Nebraska and Kansas.

Nebraska Insurance Director Tim Wagner says that it is "a way to use resources efficiently and to create uniformity. This will help eliminate valid criticisms concerning redundancy. We need to fix the system."

Mr. Wagner said that he hopes this will be an effective approach for states to work together, far different from some previous multi-state market conduct examinations that have sparked criticism over lack of efficiency.

Under the reciprocity agreement, each company domiciled in states participating in the agreement would be examined every four years, he said. In general, the exam would be conducted by the domiciliary state, although that would not have to be the case, he added.

However, Mr. Wagner emphasized that the reciprocity agreements are designed to encompass a broad number of states and not just states within a particular geographic zone.

Participation in the agreement would not preclude a state with specific issues relating to a particular company from conducting a targeted market conduct examination if needed, he added.

Oregon Director Joel Ario noted that there are efforts at the NAIC to develop two to three 'best practices' market conduct procedures including reciprocity and that they could possibly become an addendum to the Market Conduct Examiners Handbook.

And it was noted that a market conduct examination of a life carrier conducted jointly by Illinois, Ohio, Oregon and Nebraska is being finalized.

Even as states coordinate their resources for market conduct examinations, work is being done to create a template that would make certain company market conduct information readily available on an annual basis.

A template for the annual statement has been provided to regulators and work on the project will continue in preparation for the summer meeting of the National Association of Insurance Commissioners, Kansas City, Mo.

A market conduct annual statement approach that has been offered is a working document developed by MetLife, Inc., Long Island City, N.Y.

The approach includes a series of interrogatories derived from the Market Conduct Examiners Handbook and experience, according to Ann Henstrand, a MetLife vice president.

The interrogatories would allow examiners to determine whether states have already examined certain technical areas and whether further review is necessary, she explained to regulators.

However, Ms. Henstrand noted that the potential for duplication of efforts in market conduct annual statements and examinations is a concern.

The interrogatories cover a number of areas. For example, they ask a company whether a specified area has been reviewed as part of a market conduct statement, a Securities and Exchange Commission or National Association of Securities Dealers examination or an Insurance Marketplace Standards Association assessment.

And it also asks if the company is an IMSA member and what was the last date of an IMSA assessment.

On privacy, it asks a company to provide information on: whether there are procedures in place to reasonably control and safeguard the collection; as well as use and disclosure of information gathered in connection with insurance transactions.

Additionally, it addresses:

?needs analysis policies and procedures--"Do you have policies and procedures designed to reasonably assure that customer needs are determined in connection with any recommendation to purchase products?"

?HIV related requirements--do you have policies and procedures in place to assure that HIV info is not used to discriminate.

During conversations over how market conduct policies should be shaped, regulators have noted that the confidentiality of data that is collected and stored will need to be ensured.

Linda Lanam, vice president and deputy general counsel with the American Council of Life Insurers, Washington, said that ACLI is pleased with the direction that market conduct efforts are taking and the effort to identify important issues to look at as a market conduct annual statement is reviewed.

Although it is still early in the process, according to Lanam, "What we are looking for is a way to give regulators better information."

It is important to use existing information and improve the quality of data that they get, she continued.

In previous discussions, consumer representatives such as Deborah Goldberg, co-director of the Neighborhood Revitalization Project in Washington, have suggested that there should be a way to see what is actually going on in the marketplace in addition to what is recorded in compliance procedures and documents.

Ms. Goldberg pointed out that some practices are difficult to track. As an example, she noted African American homebuyers who do not have phone calls returned by agents and do not receive a quote.

Jim Connolly is a senior editor with National Undewriter Life & Health/Financial Services edition.

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Regulators Act To Coordinate Conduct Oversite

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