NAII Says Some NAIC Market Conduct Proposals Hit the Mark, Others Need Clarification

June 5, 2001

According to the National Association of Independent Insurers (NAII), the National Association of Insurance Commissioners’ (NAIC) proposals to improve the market conduct process for insurance companies meet the goals in some areas, while others need more clarification.

Three of NAIC’s proposals will be the subject of a public hearing at the Summer NAIC Meeting in New Orleans on June 9th. The NAII submitted written comments to Oregon Commissioner Joel Ario of the NAIC Market Conduct and Consumer Affairs (D) Committee and will also provide additional testimony at the public hearing.

The NAII expressed approval of the Market Conduct and Consumer Affairs (D) Committee for its open dialogue on market conduct issues.

According to Donald Cleasby, NAII assistant general counsel, NAII members understand that as rate and form regulation for commercial and personal property/casualty lines are modernized, market conduct regulation must also be modernized. He added that the believe many of the NAIC’s proposals hit that goal, but others need more clarification the results can be assesssed.

The first proposal, Market Analysis Program, suggests that the NAIC develop a “market analysis” model approach that mirrors the existing financial analysis function.

Cleasby said that NAII members see some portions of the outline of a Market Analysis Program as promising, particularly in the area of developing a continuum of responses for resolving market problems and developing a means to better target market conduct exams. He added that NAII also supports the development of training programs for examiners. However, other components, such as requiring an annual statement and additional information sources companies would provide departments need more detail before comments could be made.

The second proposal recommends that Association or Zone Market Conduct Examinations be developed. Cleasby said too much variation among market conditions and the laws under which markets operate in the property/casualty arena to make a multi-state examination effective or efficient.

The third proposal, the Value Added Market Conduct Program, is one some states have already implemented. This program identifies key issues periodically and targets those issues during market conduct examinations. Cleasby stated that it would be important for all states to adopt this kind of approach for market conduct exams if the program is to achieve the desired objectives.

Cleasby added that NAII companies agree that although issues can vary greatly from state to state, claims handling and processing will surface as one of the key consumer issues for property/casualty insurers.

NAII also strongly encourages the NAIC to implement the recommendations made by four national property/casualty trade associations in September of 2000.

The 12 recommendations were attached to the letter sent to the NAIC. In it NAII said it was encouraged that most of the 12 recommendations are being considered by various working groups under the NAIC’s (D) Committee.

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