NAIC Discussions Continue On Market Conduct, Nonforfeiture

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With a September 1 pilot launch in sight for a market conduct project, details over how data will be collected are being narrowed down by regulators, insurers and consumer advocates.

The National Association of Insurance Commissioners, Kansas City, Mo., is currently working on streamlining the market conduct examination process as part of an effort to modernize state insurance regulation.

Among the points of detail focused on during mid-July discussions were the number of companies that should be included in the data call and the best approach to analyze and hold data. Insurers favor individual states looking at data and then sharing results with other states.

However, consumer advocate Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, argued for housing data in a central spot.

But Linda Lanam, vice president and deputy general counsel with the American Council of Life Insurers, said insurers had concerns that confidential company information would become public if processed in a central location.

Lanam also said some of the data that would be part of the data call is not currently available in company computers and some required data could necessitate a manual file review. Insurers, she said, want assurances such projects would not be required annually.

Discussions are favoring looking at all companies domiciled in the 10 states participating in the pilot rather than leaving out companies with small amounts of premium. Although the volume of data regulators would receive was cited as a potential problem, several arguments were made for including all companies.

These said the pilots results would be diminished if companies were excused from participating and that total inclusion would provide a complete market picture.

Another NAIC project being discussed is how to approach reserving for nonforfeiture values.

Among the issues here is whether nonforfeiture values should be examined product by product or more generally.

The question of the rate used to determine an annuity nonforfeiture value was also broached. Some regulators maintain the interest rates used to determine minimum nonforfeiture values was more an intermediate than a short-term problem. Changes to regulation that include a 2004 sunset provision are being put in place with some states lowering the interest rate used to 1.5% from 3%.

Some companies are currently crediting rates around 5%, a far cry from 1.5%, and an indication that a potential problem may be overstated, according to Allen Elstein, a life actuary representing the Connecticut department.

Finding a more lasting solution could include either a specific guaranteed rate, an index that would be a guideline for rates, or both, according to discussions of regulators and insurers.


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 5, 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.