Insurers: Reform Financial Exams
NU Online News Service, March 1, 12:10 p.m. EST?The financial examination process for insurers needs improvements, but these are within reach, trade organizations said after surveying the industry.
Seven trade groups presented an NAIC committee in Chicago yesterday with the results of a survey on insurers' perceptions and criticisms of the NAIC/state financial examination process.
According to one of the groups, the Indiana-based National Association of Mutual Insurance Companies, the survey confirmed, among other things, the escalation of financial examination costs and the burdens of zone examinations on multistate writers.
The survey was conducted via the Internet in December and January at the request of regulators serving on the NAIC's Examination White Paper Focus Group.
The focus group was formed last year after publication of a white paper in June that was prepared by the seven trade associations. Along with regulators, industry members and accounting firms make up the focus group membership.
A total of 207 companies responded to the 66-question survey, said NAMIC.
The other trade groups whose members participated in the survey are the American Council of Life Insurers, the National Association of Independent Insurers, the Alliance of American Insurers, the Reinsurance Association of America, the National Alliance of Life Companies and the American Insurance Association.
Those groups presented several general findings abstracted from company responses based on experiences with NAIC/state financial examinations:
? Examination costs are increasing significantly.
? Those increases in costs are caused in large part by consultants.
? Zone examinations– in which several states participate in examinations of multistate writers– cause "markedly" more cost to companies.
? Several states are making significant improvements in the examination process.
? Use of risk-based examinations, more reliance on certified public accountant work papers, better coordination and other measures are warranted.
NAMIC said the survey reinforced its notion that financial examinations are one of the most onerous regulatory burdens put on insurance companies.
Trade associations have received many complaints in the last decade about both the costs of paying for examinations and internal costs, NAMIC said.
William Boyd, financial regulation manager for NAMIC, noted that the survey results clearly showed that several states "do a good and efficient job."
"I think that this survey effort will result in improvements– read that as less burden to– the financial examination process," he said.
"It's a good time for change," said Barry Ward, an Ohio regulator who chairs the NAIC focus group, at the outset of the meeting at which the survey results were presented.
Mr. Ward's group will write a report by the end of the year that will "chart the course for improvements in the financial examination process," NAMIC said.
Trade associations later will make specific recommendations to the focus group based on the survey results.
Mr. Boyd indicated that NAMIC will post the collated survey results on its Web site at www.namic.org.
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