BOSTON–Property-casualty insurance industry representatives told state lawmakers yesterday they have confidentiality concerns about the National Conference of Insurance Legislators' proposed market conduct model surveillance act.

Texas Rep. Craig Eiland, D-Galveston, said at the opening session of NCOIL's summer meeting here that he will take comments until August 9, and he hopes to have a final draft ready for the group's autumn meeting for approval by the Executive Committee.

American Insurance Association representative Catherine Paolino said the provision requiring carriers to produce data from a third-party vendor could put an unfair burden on them if the vendor declines to produce such proprietary information.

“We would much prefer a provision requiring insurers to help facilitate providing the data from vendors to regulators,” she said.

The model suggests that carriers should seek vendors amenable to providing such data and proposes a phase-in period.

But Ms. Paolino said that is not always a practical solution and the requirement could lead to a lot of new litigation.

Vermont Rep. Virginia Milkey, D-Brattleboro, said the requirement did not present any unfair burden and noted citizens and companies are often required to provide such confidential information to tax authorities.

Neal Alldredge, representing the National Association of Mutual Insurance Companies, said, overall, the model represents a significant improvement from the model document jointly approved with the National Association of Insurance Commissioners in September of 2004.

In particular, the section encouraging states to recognize the market conduct findings of another state, known as domestic deference, is a much more workable provision than in the previous document, which he said merely added another layer of bureaucracy.

The model also contains a drafting note suggesting a means for carriers to appeal market conduct findings other than to the regulator himself. While the industry found that encouraging, it would have preferred something stronger than a drafting note to memorialize the idea.

Mr. Alldredge said his organization would likely not seek an introduction of the bill in various statehouses, but would probably support it if it was introduced.

Rep. Eiland extended the comment period to encourage regulators and consumer groups to comment. So far they have shied away from the process.

The current draft is a return to the document originally proposed by NCOIL in the beginning of 2004 but modified to meet regulator concerns and obtain joint backing with the NAIC.

At the time, insurance representatives suggested the joint model provided too much regulator discretion in ordering market conduct exams.

Florida Senator Steve Geller, D-Hallandale Beach, said the joint document was a product of so many compromises that it ended up having no constituency from the insurance industry, consumers or regulators, and thus was never introduced in any legislature.

The only market conduct reform bill passed in the past two years was by the Texas Legislature, and is closely modeled after the proposed NCOIL draft, Rep. Eiland said.

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