NCOIL To NAIC: Well Set Conduct

New York

A state legislators group said last week they plan to develop a model market conduct law for the nation before the year ends and asked insurance regulators they met with here to help them with the job.

The request was made to the National Association of Insurance Commissioners, which has been working for over two years on several market conduct initiatives of their own and continued to do so at their New York summer meeting.

At an open NAIC session, the president of the National Conference of Insurance Legislators, State Rep. Kathleen Keenan, D-St. Albans City, Vt., told NAIC members that over four years ago NCOIL recognized the “inefficiency and redundancy” in market conduct regulation.

Ms. Keenan said there is “real concern over federal preemption” of insurance regulation and the plan is to have a model law ready by the fall.

Ms. Keenan noted the initiatives of the Kansas City, Mo.-based NAIC, but said that “without statutory underpinnings, interstate agreements or other initiatives, to reform market conduct regulation it will last only as long as the policymakers who signed it remain in office or until they change their minds.”

NCOIL will probably begin drafting the model law shortly, said State Sen. Steven Geller, D-Hallandale Beach, Fla., vice president of the Albany, N.Y.-based NCOIL. The report could include recommendations from a recent report of NCOIL's research arm, the Insurance Legislators Foundation.

Recommendations include giving insurers home states primacy in market conduct regulation over other states where filings are required, chief executive officer self-certification of compliance, targeted market conduct exams, and recognition of self-critical analysis, Mr. Geller told commissioners.

Mike Pickens, NAIC president and Arkansas insurance commissioner, said that NAIC would provide NCOIL with an update of where its committee activities stood and NCOIL would allow for input once a model was developed.

One element of market conduct work that regulators have been working on is reciprocity of market conduct work among states, which Nebraska Director Tim Wagner said needs to advance at a quicker pace.

“We have talked for three years, but we need more names on the dotted line. We have to have some tangible movement,” Mr. Wagner said. A goal of 15 states has been established for year-end 2003, he added.

Another component of the NAIC's market conduct effort is work on a data call that is part of a market conduct annual statement. During the meeting here, Sue Stead, an Ohio regulator spearheading that effort, moved that the data call for both life and property-casualty companies be extended another year.

The motion, which carried, has raised questions and concerns among insurers who have maintained that the existing data that has been collected should be analyzed before the pilot is extended.

“Our members are significantly concerned over the costs and resources involved in this pilot project,” Linda Lanam, vice president and deputy general counsel of the American Council of Life Insurers, Washington, told regulators.

Ms. Lanam requested that information that is already available to regulators from companies' financial statements not be included in requested information that insurers would have to program.

The reaction of property-casualty trade groups is “one of disappointment on our part,” said Dave Reddick, market regulation manager with the National Association of Mutual Insurance Companies, Indianapolis.

Mr. Reddick was speaking for a joint trade group of property-casualty companies. “It is patently unfair of you to decide to extend the project given that the data is not due from the first one.” There is no detail as to how the extended pilot will be implemented, Mr. Reddick said.

“We are disappointed,” said Lenore Marema, vice president of legal and regulatory affairs with the Alliance of American Insurers, Downers Grove, Ill. The decision was made “without seeing the data[from the first call] and without giving a rip about costs.”

A third market conduct issue debated was the possibility of a privacy survey that would measure how companies are complying with privacy requirements.

Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, said that consumer representatives should have the same input that industry had to the survey.

Joel Ario, Oregon insurance regulator, responded by saying that the survey was part of a market conduct exam and was usually exclusively handled by regulators. However, he continued, if there was a consumer advocate with particular experience in privacy, then it could be possible for them to look at the survey. But, Mr. Ario added, it would have to be done quickly because regulators intended to proceed with the project.

But, Larry Mirel, commissioner with the Department of Insurance and Securities Regulation for the District of Columbia, asserted, “We are the regulators of insurance. It is our job to determine the questions to ask.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 30, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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NCOIL To NAIC: Well Set Conduct

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