NCOIL Confab To Mull NAIC Market Conduct Model

One of the main issues addressed at the meeting will be changes made by the National Association of Insurance Commissioners, Kansas City, Mo., to the Market Conduct Model Surveillance Model Act.

Discussion of changes to the model involve both technical wording issues as well as several substantive points.

Among the points of discussion is whether in advance of an examination, which must be paid for by the company, the carrier will be given a cost estimate for the process or an actual budget figure.

Legislators will also take up whether a company should be allowed an administrative or an informational hearing if it disagrees with the findings of an examination and how the concept of accepting the market conduct exam results of another state should be effectuated.

Insurance trade groups that are expected to weigh in on the model include the American Insurance Association, the ACLI, the National Association of Mutual Insurance Companies, and the Property Casualty Insurers Association of America. Birny Birnbaum, executive director of the Center for Economic Justice, is also offering suggestions so that the model can advance with broad support.

The incorporation of NAIC models that refer to an NAIC market analysis handbook is an issue that has been of concern to members, said Lenore Marema, PCI vice president-industry and regulatory affairs. Another concern, she added, is that an insurer be permitted to retain the right to request an administrative hearing.

The draft sent back to NCOIL from the NAIC calls for an informal meeting to address a company's concerns rather than a hearing.

The issue is also a concern for members of NAMIC, said Dave Reddick, state affairs manager-Southeast region. There are some states, he said, that currently allow for a challenge as to whether an examination is an appropriate action.

Mr. Reddick also said that on the issue of setting a cost for a market conduct exam that a regulator should be able to present a budget and be accountable for what an examination will cost. "It will bring discipline to the process," he explained.

The CEJ's Mr. Birnbaum is advising legislators at NCOIL to accept all technical and many substantive changes made by the NAIC. NCOIL should also continue to work with NAIC to ensure the success of market conduct reform, he added.

Mr. Birnbaum believes a commissioner's explanation for determining a market conduct examination is sufficient and should not be contested through an administrative hearing. This prevents the creation of "significant roadblocks for regulators attempting to address market conduct problems," according to Mr. Birnbaum.

On the issue of budgets, Mr. Birnbaum said it is important to note that it is an estimated budget in order to prevent cost runups that could prevent completion of an exam if the budget is reached before the exam is completed.

And, on the issue of deferring to the regulator where a carrier is based?domestic deference?Mr. Birnbaum recommended that NCOIL stick to its basic framework and not reopen the discussion. The concept allows a state to accept the market conduct findings of another state.

But, he continued, if the issue is revisited, it is important that a state verify that the state conducting the market conduct examination has a competent market conduct program in place.

Other issues that will be discussed during the meeting include: medical malpractice insurance and patient safety, insurers' credit scoring procedures, and ergonomic guidelines developed by Occupational Safety and Health Administration.

And, a vote is expected on a TRIA resolution. The resolution calls for an extension of TRIA and the inclusion of group life in that extension, according to Tim Tucker, NCOIL director of state-federal relations.