Suggested changes to the National Association of Insurance Commissioners’ (NAIC) Market Conduct Record Retention Model Regulation could require that state legislatures amend existing statutes in order to achieve compliance.
The National Association of Independent Insurers’ (NAII) Market Conduct Subcommittee of its Laws Committee questioned the proposed changes in a letter sent to the NAIC’s Market Conduct Examination Oversight (D) Task Force on Feb. 11, that asked, “What are the shortcomings of the existing model that warrant a wholesale rewrite of this model?”
Two paramount concerns, according to NAII’s Assistant General Counsel Don Cleasby, are requirements for applications to have a signatures, either written or digitally authenticated, and the requirement for insurers to retain declined underwriting files for three years.
“Regarding the requirement for signatures, NAII subcommittee members reminded the NAIC that many, if not most, states do not now require a signature on applications,” Cleasby said. “In addition, many state Insurance Codes do not require insurers to maintain records on declinations. An NAIC model regulation should not create substantive law that is more appropriately created by state legislatures. NAII also questions the need for new laws to be enacted on procedures that have not proven to be troublesome.”
The NAIC is an advisory organization only, but model regulations are reviewed by individual state legislatures when proposals are introduced that will affect regulation of insurers.
Additional changes to the model that raised concerns with NAII members include requirements that:
Make available to examiners any record used to input information into a computer system that deals with rating or underwriting records;
Certain documents in a claim file be date-stamped by the insurer;
Complaints be logged “by line of insurance.” Not all complaints have anything to do with a particular line of business;
Electronically-stored documents be capable of being printed and “be as legible as the original documents;
Disaster recovery procedures be maintained. Many insurance Codes do not require insurers to maintain these types of records.
Records must be available to the Department upon arrival. NAII suggest that there should be a provision requiring that the request be made in advance to allow the insurers to have records available.
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