NAIC Adopts Market Conduct Surveillance Model Law

September 14, 2004

The National Association of Insurance Commissioners has adopted a model law regarding how the states coordinate market conduct surveillance. It is based on a version recently put forth by the National Conference of Insurance Legislators and heavily amended by the NAIC in informal discussions over the last several months

“The NCOIL model is consistent with our own reform efforts, and now that state regulators have had a chance to weigh in, we feel it is ready to be utilized,” said Oregon Insurance Administrator Joel Ario, the NAIC’s secretary-treasurer. “The model is strong. We feel it fortifies market analysis procedures and enhances states’ ability to target the market conduct surveillance process on the most important consumer problems.”

The broad purpose of the model is to establish a framework for insurance department market-conduct action, including a process and system for prioritizing problems, a means by which insurance regulators can remedy problems, and procedures to coordinate and communicate regulatory actions among states. The model clearly creates an enhanced structure for state market regulation and will prove helpful for states going forward, Ario said in a statement.

The model law now will be considered for adoption by the individual states, the District of Columbia and the four U.S. territories. The move comes at a time when Congress has put forth the draft of a bill, the so-called SMART Act, which aims for uniformity and efficiency in the state-system of regulation and which many regulators and legislators believe threatens the estimated $12 billion in annual premium tax revenue the states currently collect. The market conduct model is one of a number of initiatives by the NAIC and NCOIL to prove to Congress that federal direction is unnecessary.

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