NAIC Insurer Conduct Data Scheme Riles Insurers

WASHINGTON–A controversial program to monitor insurers' market conduct was affirmed by the National Association of Insurance Commissioners during its fall meeting here.

The MCAS (market conduct annual statement) was one of a number of items that state insurance commissioners made official NAIC policy. Others included a model regulating the use of titles that life insurance agents employ to describe themselves.

Also adopted were a medical professional liability closed claims reporting model, a reserving guideline for variable annuities and a model regulation to implement Medicare supplement standards.

By far the most contentious of the measures that were adopted were the MCAS and the medical professional liability models, each receiving extensive debate by commissioners voting on the issue.

Two versions of the MCAS were adopted by commissioners. Combined details of the two models affirmed by the NAIC include provisions that have been discussed such as a state-specific data requirement that would be stored by the NAIC and require discussion for additional data elements. A transition period in 2009 would be created and filing for 2010 would start in 2011.

The commissioners left open whether data would be collected through the annual statement or through a state's market conduct program. One reason cited was that data that could be developed under existing market conduct authority would be more “robust” than it might be under an MCAS.

Industry representatives from major insurance trade groups, including the American Insurance Association, Washington; the National Association of Mutual Insurance Companies, Indianapolis; and the Property Casualty Insurers Association of America (PCI), Des Plaines, Ill., slammed the vote.

Deirdre Manna of the PCI said that the process was not an open one because it was done behind closed doors at a commissioners gathering in Chicago.

“It does not meet the NAIC's own open meetings policy,” she said. Industry never saw the transitional proposal, she noted. There is no way to know if the discussion accurately reflected the commissioners' meeting in Chicago because many commissioners expressed differing opinion as to what went on in that meeting, Ms. Manna added.

It was the first time that industry had heard of the transitional proposal and there was no indication to industry that a vote was going to be considered, she continued.

The AIA's Dave Snyder said, “closed-door decision-making tends to lead to poor decisions, and this is a classic example of where legitimate concerns are swept aside.”

Marsha Brown of NAMIC expressed surprise at the NAIC action, saying that there are still unknowns with the proposal such as how the information will ultimately be gathered.

While insurers had opposed the proposal, consumer representatives assert that the MCAS is critical to understanding and improving the insurance marketplace.

A Medicare supplement standards model was adopted by the NAIC. The model was prompted by a change in federal law which created new standards prohibiting insurers from using genetic information against insureds. Regulators were required to create standards to reflect this change or, if they failed to do so, have the federal government develop its own standards.

The medical professional liability closed claims model drew questions about whether states had stronger reporting requirements than the model and whether insurance regulators when asked by state legislators or the General Accounting Office for information would be able to readily access data to provide answers on the medical liability market.