NAMIC Urges State Legislators to Introduce Insurance Compliance Self-Evaluative Privilege Model Act

July 12, 2001

The National Association of Mutual Insurance Companies (NAMIC) encouraged the National Conference of Insurance Legislators (NCOIL) to introduce its Insurance Compliance Self-Evaluative Privilege Model Act in state legislatures next year. The act assures the confidentiality of internal audit reports voluntarily turned over by companies.

NAMIC Market Regulation Manager David B. Reddick wrote NCOIL as part of a public hearing on Market Conduct Examinations scheduled today in Chicago.

At the most recent National Association of Insurance Commissioners national meeting, the Self-Critical Analysis Working Group decided to limit its work to developing a “set of principles” for states to follow in deciding on a self-critical analysis privilege.

Reddick wrote that NAMIC is disappointed the Working Group chose not to pursue a model act. However, he added that NCOIL is now offered with an opportunity to renew its commitment to this issue by encouraging its members to introduce the NCOIL Insurance Compliance Self-Evaluative Privilege Model Act in state legislatures next year.

A strong proponent for reforming the insurance market conduct examination process, NAMIC also urged that legislators move away from “routine” market conduct exams and to focus their attention on “targeted” exams that attempt to uncover the most problematic company behaviors.

The NAIC Uniformity Working Group was created and charged it with developing a set of “best practices” for market conduct examinations. A number of the Working Group’s recommendations incorporate the 12-point plan for improving the market conduct examination process that NAMIC and the three other national property/casualty trade associations developed and made available to the NAIC last August.

The Working Group intends to finalize its work product by September and to encourage states to voluntarily adopt the standards it is creating. NAMIC believes the Insurance Legislators Foundation and, more broadly, the members of NCOIL can play a vital role in this issue by encouraging their insurance regulators to adopt the Working Group’s standards. This will help to ensure more uniformity among the states on how market conduct examinations are performed in the future.

As part of its work to redefine market conduct surveillance, the NAIC Market Conduct & Consumer Affairs (D) Committee spent some time at the last two NAIC national meetings discussing what could best be described as some “blue sky” thinking about the future direction of certain market conduct functions.

From these discussions, the Committee is now focused on how to develop a more comprehensive market analysis program similar in design to the existing financial analysis model. NAMIC is intrigued by the notion that this proposal might produce a more systematic way to determine which companies should be examined. At the same time, though, NAMIC is concerned that the proposal has the potential to further tax already limited insurance department resources and to impose new data requests on companies that ultimately will prove no more effective than existing processes in determining which companies are examined. NAMIC encourages NCOIL to closely monitor these developments, and to provide its “legislative perspective” where appropriate.

NCOIL is an organization of state legislators whose main area of public policy concern is insurance legislation and regulation. Many legislators active in NCOIL either chair or are members of the committees responsible for insurance legislation in their respective state houses across the country.

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