NAIC Given Market Conduct Advice
By Jim Connolly, NU Life-Health Senior Editor
NU Online News Service, June 12, 3:59 p.m. EST?A consumer advocate has counseled insurance regulators that policing market conduct is a job that requires a collaborative effort.
The advice was delivered to members of the National Association of Insurance Commissioners at their summer meeting in Philadelphia last week by Birny Birnbaum, executive director with the Center for Economic Justice, Austin, Texas.
Citing a laundry list of recent market conduct problems that ran the gamut from vanishing premiums and credit scoring to race-based premium issues, Mr. Birnbaum said the sheer resources needed to effectively monitor market conduct suggests a need for joint efforts.
"Recognize that you can't do it all yourself and see who can help," Mr. Birnbaum continued.
Both consumer advocates and insurers can play a roll, he added. For instance, he cited the possible use of both self-critical reports put together by individual companies and the work of consumer groups in fair housing work.
A number of insurance commissioners listening to the comments expressed support for having information more publicly available.
"The NAIC needs to take a hard stand in making information public," said Jim Bernstein, commissioner of the Minnesota Bureau of Insurance.
Nat Shapo, NAIC secretary treasurer and Illinois insurance director, said that the process needs to include self-critical analysis as well as the participation of the public.
Regulators and industry participants are testing pilot projects to better target market conduct outlaws.
Two approaches are being looked at. One is a How-to Guide approach that would use existing data to flag any problems that arise. Missouri currently is using this approach as it outlined in a discussion during the meeting.
Industry representatives are also supportive of this approach. Four property-casualty trade groups including the Alliance of American Insurers, Downers Grove, Ill.; American Insurance Association, Washington; National Association of Independent Insurers, Des Plaines, Ill.; and the National Association of Mutual Insurance Companies, Indianapolis, are working on a ?How To' template using information such as existing complaint data and information in financial statements known as P. 14 data. P.14 data includes information on premiums, claims and defense costs.
The American Council of Life Insurers, Washington, also has expressed support for this approach. During a session with regulators, Linda Lanam, ACLI vice president and deputy general counsel, supported looking at current information and "drilling down if needed." Such an approach could create "uniformity, consistency and transparency," she added.
The second approach is a data analysis approach. A market conduct annual statement pilot program will be collecting data from between July 1, 2001 and June 30, 2002. The pilot includes 10 states: Arizona, California, Illinois, Maryland, Missouri, Nebraska, Ohio, Oregon, Pennsylvania and Wisconsin.
The life insurance annual statement will encompass the 100 highest premium volume companies (187 when company groups are considered). The property-casualty annual statement will comprise 90 percent of the market that will be required to report data.
Another piece of the overall NAIC market conduct effort is work on interstate market conduct examinations. Six states have now signed on to an agreement: Iowa, Kansas, Nebraska, North Dakota, Ohio and South Dakota.
Additionally, Nebraska Director Tim Wagner reported that Nebraska and two other states are working on an examination of a broker-dealer with the Securities and Exchange Commission.
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