Survey Shows Gain in Market Conduct Uniformity

December 6, 2004

An industry survey of property/casualty, health and life insurance companies regarding market conduct examination practices claims to demonstrate that state insurance regulators are striving to adhere to uniformity standards, but some areas in the process still need improvement.

Results of the survey were reported during the Uniformity Working Group meeting of the National Association of Insurance Commissioners (NAIC) during its winter meeting in New Orleans, Dec. 4-7. The purpose of the survey was to obtain information on how closely state insurance regulators adhered to the NAIC Market Conduct Uniform Examination Outline adopted in 2002.

Approximately 192 market conduct exams were reviewed and conducted in 35 states. Of the exams conducted, 86 were reported as targeted exams and 106 as comprehensive. Of the exams reported, 64 involved the use of outside contract examiners. Survey results pertain only to market conduct examinations begun on or after Jan. 1, 2003.

According to results of the survey, approximately one-third of the exams deviated from the NAIC uniformity standards and the deviations were in areas that were considered by respondents to be the most important features of the market conduct exam.

The most important uniform procedures identified by survey respondents are:

-Use of a standardized data call;
-Use of the standard/uniform processes for conducting the exams (particularly pre-examination procedures and use of the Handbook);
-Adherence to timeframes set forth in the uniform procedures;
-Use of an information exchange system for advising companies of deficiencies/problems that include a specific statutory or regulatory basis; and,
-Communication of basis for penalties, communicated enforcement procedures and policies.

Of the top 20 deviations from uniform standards, the failure to identify items to be billed and billing procedures and failure to provide time and cost estimates, as well as to provide a draft report within 60 days were voted as the top areas of departure from uniform standards. Failure to follow the NAIC standardized data call and the NAIC Market Conduct Examiners Handbook were listed in the top 10.

However, the survey results indicated insurance regulators generally did follow most of the NAIC uniform procedures in the majority of the examinations.

The survey of companies was conducted by the American Council of Life Insurers (ACLI), the American Insurance Association (AIA), the Blue Cross and Blue Shield Association (BCBSA), the Insurance Marketplace Standards Association (IMSA), the National Association of Mutual Insurance Companies (NAMIC), and the Property Casualty Insurers Association of America (PCI).

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