We'll Oppose Conduct Law Nationwide: PCI

We'll Oppose Conduct Law Nationwide: PCI

By Daniel Hays

NU Online News Service, Sept. 8, 12:11 p.m. EDT?If the nation's insurance commissioners approve a proposed model law to regulate insurer market conduct examinations, an influential trade group said it will fight to modify or defeat the measure in state legislatures across the country.[@@]

"If this bill is introduced in the states, we can't support it," said Lenore Marema, vice president of the Property Casualty Insurers Association of America in Des Plaines, Ill.

The model measure is expected to pass when it comes up for a vote at the Sept. 11-14 meeting in Anchorage, Alaska of the National Association of Insurance Commissioners, during a plenary session where the PCI will not have an opportunity to express its viewpoint, Ms. Marema said.

The model is a modified version of a bill developed first by the National Conference of Insurance Legislators.

Ms. Marema noted that the NCOIL model originally said action by regulators was to be proceeded by an analysis, but the model gives a commissioner the discretion to conduct an exam without any analysis, and there is "little statutory guidance around what they can do."

PCI, she said, will work in the various states "to modify it to our satisfaction." Otherwise, she added, "I don't see how we would get to a position of support. If you don't have an effective reform model, real-time reform doesn't happen."

The original concept for the model, she said, was to use analysis "to target outliers" in the marketplace.

PCI noted that the NAIC had suggested 15 amendments to the existing NCOIL Market Conduct Model Law, some of which were subsequently adopted by NCOIL to create the revised model that NAIC is due to vote on.

PCI is particularly concerned that the model does not include enforceable rights or address remedies for statutory parameters given to examiners.

"The wide-ranging regulatory latitude that exists in the current state market conduct exam system is a very critical problem that contributes to the misallocation of resources for these exams," the group said. "The NCOIL Market Conduct Model Law did not go far enough to address these problems, and unfortunately almost all of the NAIC amendments move this model toward permitting that unchecked regulatory discretion to continue."

In a comment letter, PCI said that the model should place reasonable limits on the data collection authorized in a market analysis, and require regulatory actions to be based on the results of such analysis.

According to PCI, the model outlines a better way to review the actions of insurers, but creates no enforceable rights and remedies for companies when regulators do not follow the legislative directions provided.

The organization also complained that the measure would retreat "from the minimal due process provisions provided to licensees when the NAIC work products, which are incorporaed by reference, are changed in the future. State regulators will not only be able to interpret the law, but they will effectively be able to change the law as well."

PCI also objected to what it said was a lack of cleare limits on fines and penalties, or the market conduct examination fees that can be charged.

"PCI supports the effort to create one effective market conduct model act to solve problems that exist in the current state system," Ms. Marema said. "However, because the most recently amended version of the NCOIL Model Law retreats from addressing the issues in an effective way, rather than advancing the ball, we cannot support the amended Model Law. It is the February 2004 NCOIL Model Law from which we will work. We urge NCOIL and the NAIC to return to the point of departure and work further to address these critical issues."