Market Conduct Streamlining Focuses On Annual Statement And Reciprocity

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As part of their goal to establish more effective, streamlined market conduct oversight, regulators are advancing projects such as greater coordination among states in preparing market conduct reports and the development of a market conduct annual statement.

Recently, regulators announced a market conduct reciprocity agreement between Kansas and Nebraska. A pilot joint market conduct exam is planned between the two states this fall. One point in the agreement that makes the joint effort possible is a confidential market regulation file on every domestic insurer the departments would retain.

Iowa and South Dakota have also said they intend to join Nebraska and Kansas.

Nebraska Director Tim Wagner says it is “a way to use resources efficiently and to create uniformity. This will help eliminate valid criticisms concerning redundancy. We need to fix the system.”

Wagner says he hopes this will be an effective approach for states to work together, far different from some previous multi-state market conduct exams that sparked criticism over efficiency.

Under the reciprocity agreement, each company domiciled in participating states would be examined every four years, he says. In general, the exam would be conducted by the domiciliary state, although that would not have to be the case, he adds.

However, he emphasizes that the reciprocity agreements are designed to encompass a broad number of states and not just those within a particular geographic zone. Participation in the agreement would not preclude a state with specific issues relating to a particular company from conducting a targeted market conduct exam if needed, he adds.

Oregon Director Joel Ario notes that there are efforts at the National Association of Insurance Commissioners to develop two or three “best practices” market conduct procedures, including reciprocity. They could become an addendum to the Market Conduct Examiners Handbook, he says.

In another development, a market conduct examination of a life carrier conducted jointly by Illinois, Ohio, Oregon and Nebraska is being finalized.

Even as states coordinate their resources for market conduct examinations, work is being done to create a template that would make certain company market conduct information readily available on an annual basis.

A template for the annual statement has been provided to regulators and work on it will continue in preparation for the summer meeting of the NAIC.

One market conduct annual statement approach that has been offered is a working document developed by MetLife.

The approach includes a series of interrogatories derived from the Market Conduct Examiners Handbook and experience, according to Ann Henstrand, a MetLife vice president.