Washington State has enacted a new law to regulate insurers' market conduct based more on current performance than past operations.
The law, which creates a market conduct oversight program within the state insurance commissioner's office, was signed into law Wednesday by Democratic Gov. Chris Gregoire.
Insurance Commissioner Mike Kreidler requested the measure, which is based on model legislation created by the National Association of Insurance Commissioners.
Mr. Kreidler noted that the state's current market conduct review is retrospective.
"This new law gives us the tools to evaluate company behavior in real time," he said.
The OIC had been required by law to perform market conduct exams, which he said can be expensive and disruptive, every five years on all companies doing business in Washington.
Under the new program, the mandatory five-year exam cycle is no longer required. Instead, exams will be called if an analysis of the marketplace indicates more corrective action is needed.
By utilizing market analysis, states can monitor companies' current performance instead of past performance, therefore protecting consumers and directing resources toward problem companies, Mr. Kreidler said.
Since the NAIC started its market conduct reform effort nearly a decade ago, only Texas has adopted any reform legislation.
The NAIC and the National Conference of Insurance Legislators attempted to advocate a joint model, but in the end the lawmakers backed their own plan, which was more favorable to the insurance industry.
Don Cleasby, assistant general counsel for the Property Casualty Insurers Association of America, said his group was "comfortable" with the legislation adopted by Washington.
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