Regulators Move Forward on Programs Designed to Prevent Market Problems, Standardize Exams

December 20, 2001

The National Association of Insurance Commissioners (NAIC) has begun developing a program to help states identify market conduct problems as early as possible and has adopted a proposal to make market conduct exams more uniform. The National Association of Independent Insurers (NAII) has thrown its support behind both actions.

The NAIC has created the Market Conduct and Consumer Affairs’ Ad Hoc Market Analysis Working Group to prioritize and coordinate market conduct regulation functions by creating a framework for cooperation among the states with federal regulators regarding the identification of market conduct problems.

“At the NAIC’s recent Chicago meeting the Working Group adopted a program outline that would include provisions on the purpose of the market analysis as well addressing market analysis issue for both companies and markets, (i.e. private passenger auto market) and data sources that might be needed to address problems. The outline also includes provisions on the role of the NAIC in market analysis,” said National Association of Independent Insurers’ (NAII) Assistant General Counsel Donald Cleasby.

According to NAII, the working group identified seven priority issues that need to be addressed in order to implement the outline. States should:

Identify data sources needed. At the request of a consumer representative, the NAIC will look for additional data sources that might be needed;

Focus on companies with sufficient market share as a starting point for market analysis;

Identify key, baseline elements for market analysis;

Focus on general market issues and industry trends;

Develop better methods of sharing collected information;

Develop better methods to coordinate analysis and regulatory efforts; and

Explore the role of self-audits in market analysis efforts.

While satisfied with the general direction of the working group, Cleasby noted that the NAII may have concern with any expansion of data information that would have to be provided, said Cleasby.

“State insurance departments are already receiving tremendous amounts of information including info from the NAIC’s database on complaint trending, intra-department communications, market conduct exam histories, investigation and enforcement information through NAIC’s Regulatory Information Retrieval System (RIRS), as well as rate and form data and agent information and this list represents only one fourth of the data information already provided,” Cleasby explained. “The NAII believes that the need for more information must be clearly demonstrated.”

In other market conduct related issues addressed by the NAIC, Cleasby said that the Uniformity Working Group under the Market Conduct and Consumer Affairs Committee also adopted an outline with the goal of reforming and making market conduct exam proceedings more uniform from state to state.

“The Uniformity Working Group has taken giant steps forward by adopting this comprehensive outline that includes all the elements needed to create standardized market conduct exams proceedings,” Cleasby said. “Toward the NAIC’s larger goal of overall streamlining and uniformity, this outline, if implemented, hits the target.”

The outline suggests uniform standards for examination scheduling, pre-examination planning, examination procedures and exam reports. The Uniformity Working Group also created a subgroup that will develop a program that encourages states to implement the recommendations of the outline and that would monitor states’ progress in doing so.

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