Insurers Offer Regulators Ideas on How to Maximize Data for Market Conduct Exam Process

In an effort to make the market conduct exam process more efficient, the P/C insurance industry has submitted a draft outline for a “Guide to Market Conduct Analysis” to the National Association of Insurance Commissioners (NAIC).

The draft, developed by the Alliance of American Insurers, the American Insurance Association, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies, will assist state insurance regulators in making better use of existing data, thereby reducing the need for costly and time-consuming extra data calls.

Developing a system of market conduct analysis for the states so that they can better target companies for further review is a major goal of the NAIC this year. The industry input on the guide would do just that.

The industry outline 1) sets forth a consistent approach among the states for market conduct analysis based on information that states already have, and 2) develops some broad indicators to identify insurers with potential market conduct/compliance problems.

In a May 29 letter to the NAIC’s Market Conduct Analysis Working Group, the trade groups pointed out the three types of information states already receive that could be used to give a general indication of companies that may merit further review. These are: complaint data, certain IRIS ratios and changes to Page 14 of the statutory statement. The guide gives an overview of how this information can be maximized for market conduct analysis.

The letter also noted that the guide “presents an analysis that all states can accomplish with their current resources, regardless of whether or not they have a market conduct examination unit. It promotes a consistent approach to analysis among the states, the net result of which could be a more rational and effective system of market conduct review and examination. The information to be used under this guide is readily available to all states and covers all companies and all lines. Most important, the joint trade group believes that if all states would do this type of market conduct analysis, change could occur in state insurance regulation in this area in terms of eliminating redundancies and focusing state resources on companies with problems.”

Further discussion will take place during the Market Conduct Analysis Working Group’s sessions at the NAIC’s Summer National Meeting in Philadelphia, June 8-11.