ORLANDO, FLA.– Expressing concern that the annual filings will become a catchall, insurers are resisting a plan by the nation's insurance regulators to have market conduct reports become a part of carriers' annual statements.

A decision is expected by April 15, according to a discussion here during the spring meeting of the National Association of Insurance Commissioners.

The conversation took place during the NAIC's Market Regulation and Consumer Affairs 'D' Committee. If the item is adopted, it would then go to the NAIC's executive committee for consideration.

In addition to expressing concern over using the financial filing to draw in other nonfinancial information, insurers also are raising concern about the confidentiality of data that would be included in these reports.

Regulators and consumer advocates, on the other hand, say the information will permit them to better assess a company and lead to better regulatory oversight in the market.

The market conduct annual statement was initiated in 2002 and became permanent two years later. Recently, Ohio, which had been spearheading the market conduct data effort since its inception, notified the NAIC that it would not continue to do so. The NAIC is considering both adding the information to the annual financial statement as well as conceivably creating a central repository for this data.

The discussion followed a March 27 letter from six insurance trade groups: America's Health Insurance Plans, the American Council of Life Insurers, the American Insurance Association, all in Washington; Blue Cross and Blue Shield Association, Chicago; the National Association of Mutual Insurance Companies, Indianapolis; and the Property Casualty Insurers Association of America, Des Plaines, Ill.

The letter cites multiple concerns including:

o The appropriateness of including market conduct data in an annual statement form designed for solvency regulation data.

o Timing differences in submission of the Annual Statement and Market Conduct Annual Statement data.

o Loss of the current confidential treatment of MCAS data.

o A potential mandate that all states require market conduct data reporting as part of the Annual Statement Blank, even though many states have, thus far, not elected to require MCAS submission.

o Lack of relevant and timely information on proposals under consideration.

The letter goes on to say that annual statements are by and large public documents, and if the information on market conduct is included, that information would also be considered public.

On the issue of confidentiality, a discussion by NAIC counsel during the session suggested there are two elements that need to be considered in determining whether information is confidential: the state in which the data is collected, and whether the data is collected through a market conduct exam or through the annual statement.

The discussion indicated that if it was collected through the annual statement, it would not be confidential unless there were special circumstances.

But regulators and Birny Birnbaum, an NAIC-funded consumer and executive director with the Center for Economic Justice, Austin, Texas, questioned the blanket concern of insurers over confidentiality. “Data is the foundation of everything we want to do to improve market regulation,” he said.

The idea of wanting to send data to individual states rather than to one central place doesn't make sense, he said. It is more effective to collect data in one place. Nineteen current data elements are a good start, but more needs to be done to ensure “rigorous analysis,” he added.

And, he noted, collection should be put out for competitive bidding by statistical agents. Mr. Birnbaum also said that “unless there is a trade secret, it disturbs the market conduct process to give blanket confidentiality to these data elements.”

Responding to industry comments that there was not enough time to understand the impact on confidentiality of placing these data elements in an annual statement, Montana Insurance Commissioner John Morrison, chair of the “D” committee, noted that industry has had five years to review these data elements.

Kim Holland, Oklahoma insurance commissioner, noted that of 14 property-casualty data elements, all but four are available on state insurance department Web sites.

“So, I'm very confused about confidentiality,” she said of industry concern. She added, however, that in matters that really require confidentiality, “we're respectful of confidentiality and know how critical it is.”

“To aggregate empirical data should be of the utmost importance to this organization and should be to your members, so that only qualified companies are recognized.”

But Rey Becker, vice president-commercial lines, with the PCI, expressed concern that centralizing data with the NAIC is an issue that is turning up in various NAIC projects.

Indeed, separately, a central repository is being discussed for projects including actuarial filings under a proposed principles-based reserving system that is being developed for life and health insurance products.

And, separately, the Senior Issues Task Force is reviewing data received from 23 long-term care insurance companies that responded to a joint LTC data call by the Task Force and the Market Analysis “D” working group. A total of 59 data points were completed by these companies.

The Senior Issues Task Force conducted the data call because there was a belief that it was important to find out exactly what is going on in the market, said Sean Dilweg, Wisconsin insurance commissioner. From a policy side, it is important to look at issues such as the commonality of LTC terminology and exploring the option of external reviews, he explained.

When asked if the results of such data could be held in a central place, Mr. Dilweg said there is going to be a discussion on the data project over the coming year to look at issues associated with the data call.

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Insurers Balk At Conduct Data In Annual Reports

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