A recently released General Accounting Office’s (GAO) report identified the need for states to develop uniform market conduct
oversight programs that include all states and a program to encourage adoption of these standards.
Action plans on market conduct created by the National Association of Insurance Commissioners (NAIC) and a market conduct model act proposed by the National Conference of Insurance Legislators (NCOIL) are reportedly efforts that address the GAO’s recommendation, according to one national property/casualty trade group.
“Most of our members agree that the NAIC’s efforts to streamline and
modernize market conduct exams and compliance have moved in the right direction. The real issue, as the GAO report points out, is how to motivate states to implement those reforms,” said Don Cleasby, assistant general counsel for the National Association of Independent Insurers (NAII). “A market conduct surveillance model law proposed NCOIL does provide the right mechanism for states to accomplish that goal. However, we still have some lingering concerns about sections of the model.”
Cleasby explained that the NCOIL Market Conduct Regulation Task Force held a conference call last week to discuss industry and interested party recommendations in several sections of the model.
“For example, model language suggests that if a market analysis on a company indicates that the insurance department may need to look closer, the model language implies that the only next step is a market conduct exam,” continued Cleasby. “NAII believes that other valid intermediary steps can be taken before a company undergoes a full blown market conduct exam and that these interim steps need to be included in the model.”
Another suggested change reportedly by NAII is the necessity for clearer language on the section calling for an association reviewer.
NCOIL changed the requirement from a “national” association reviewer to an individual “state” association reviewer, to be chosen by the state insurance department. Concerns linger over how many of these state association reviewers may get involved in any single examination.
While the NAII endorsed may of the recently developed NAIC market conduct or analysis work products, Cleasby expressed concern that the NCOIL model currently incorporates many of these work products by name.
“This implies that should the NAIC change these work products in the future, those changes are already automatically implemented into the law of any state that has adopted the NCOIL model. This situation should not happen without some opportunity for review and comment by legislators or regulators on the changes,” remarked Cleasby.
NAII also raised questions about the timeframe to complete all the revisions to the model.
“The NCOIL Task Force agreed to have all revisions made by October 20th with the goal of adopting the model at the NCOIL meeting in November. NAII sees this time frame as very ambitious and urged the Task Force to allow interested parties more time than the deadline date to provide input on the adopted model, ” added Cleasby.
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