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Faster Examinations A Focus Of Market Conduct Work

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Faster Examinations A Focus Of Market Conduct Work



Work on market conduct streamlining is taking place on several regulatory fronts, including a coordinated market conduct exam among state insurance departments.

Regulators are stressing efficiency. “We need to target our resources appropriately,” said Joel Ario, administrator with the Oregon insurance department.

During the winter meeting of the National Association of Insurance Commissioners last month a pilot project was unveiled. In the pilot, four insurance departments will dramatically cut the time for market conduct exams, according to Ohio Director Lee Covington. Ohio, the department leading the exam, is participating in the pilot with Illinois, Nebraska and Oregon. A late January or early February time frame is anticipated.

Covington says the hope is to conduct the on-site market conduct review in two weeks, cutting down dramatically on a process that can normally take as long as two to three months. Pre-exam prep work will cut down on the on-site exam time.

The coordinated effort will use common standards for each issue looked at during the market conduct exam rather than four separate state standards. The common standards will include legal standards.

Issues to be examined include sales illustrations, replacement of policies, interest on death benefits and policy loans and cancellations.

During discussions with regulators over what is important for companies as market conduct exams are developed, Linda Lanam, vice president and deputy general counsel with the American Council of Life Insurers in Washington, said it is important that a company be able to specifically connect a penalty with a company action that comes to light during a market conduct examination.

She told regulators that when she worked for a company, it was difficult to discuss company concerns with a department representative unless a company representative attended an administrative hearing.

On the issue of data, Mike Velotta, senior vice president, secretary and general counsel with Allstate Life Insurance Company in Northbrook, Ill., said it is critical to draw a distinction between underlying data and what needs to be protected, which is a company’s evaluation of that data.

The issue of self-critical analyses and the ability to keep those reports confidential have been part of an ongoing discussion between regulators and insurers. Regulators have argued that they need access to such reports while insurers say that if proper protections are not afforded, efforts to root out problems will leave them vulnerable to class action lawsuits.

Steph Zielezienski, assistant general counsel with the American Insurance Association in Washington, said it is necessary to protect both the self-critical analysis and the company representatives who developed that analysis.

The concern, according to Zielezienski, is that without proper laws in place, if regulators in one state share information with regulators in another state, then the privileged status of those reports would be forfeited and the documents could become public.

Reproduced from National Underwriter Life & Health/Financial Services Edition, January 7, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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