Continuing our discussion about regulation, the National Association of Insurance Commissioners stepped on a hornet's nest this week with its proposal to collect market conduct data as part of the annual statement process–then keep it in a central data base. Consumer groups are all for it, but insurers fear more class-action suits and tipping off competitors to proprietary information. No matter what happens, this is one battle the industry can't win. All they can do is limit the fallout.
An NAIC conference call on the controversy yesterday drew over 100 participants. While the regulator group did not promise any definitive action (nothing unusual there), the NAIC appears primed to move forward, much to the chagrin of industry groups. (For full coverage of the conference call, click here.)
"The NAIC is a non-profit, non-governmental entity. As such, it should not collect proprietary market data for which no guarantee of confidentiality can be provided, said AIA President Marc Racicot. He added that this information is extremely sensitive, and if it were to be compromised, there would be needlessly harmful ramifications for both consumers and insurance companies.
Consumer advocates back the proposal, and why not? The more information disclosed about how insurers do business, the better, right? Predictably, they pooh-poohed any reservations insurers raised about confidentiality or potential abuse of the data.
This is a no-win situation for insurers. If they fail to derail the NAIC proposal, or at least stall it into oblivion, and their worst-case scenarios are realized, they could be facing more lawsuits or lose a competitive edge here and there.
However, even if they "win" this debate and stop the proposal cold, it will look like they are covering up evidence of wrongdoing. What do they have to hide, the consumer advocates will say.
With public advocates already suspicious of the NAIC after being left out of last week's meeting with industry officials on federal regulation, the commissioners might be eager to prove they are indeed on the consumer's side. Market conduct data collection is one area where the NAIC could easily throw consumer groups a bone.
To resolve this dispute to everyone's satisfaction, what the NAIC must do is make a clear and compelling case as to what their proposal will accomplish in practical terms, rather than merely set the stage for a fishing expedition by class-action attorneys.
What insurers must do is address concerns voiced by consumer groups about the need for further disclosure. Is there a way to guarantee confidentiality and avoid abuse of this data without hindering the ability of regulators to better supervise market conduct?
What do you folks think?
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