Market Conduct Pilot's Cost Concerns Insurers

The extension of the deadline to 90 days allows companies to prepare data but not pull IT resources from other projects, she says.

Henstrand also cites positive practical points such as putting spread sheets that companies will need to use on the NAIC Web site, www.naic.org, and designating a specific person at each participating insurance department as the contact on the pilot for that state.

For a company, like MetLife, according to Henstrand, the success of streamlining the market conduct exam process is important because it saves time, money and resources. Given its size, MetLife is the subject of a number of exams and requests can differ, increasing costs, she says.

In a survey of 63 companies conducted by a joint property-casualty trade group that includes the Alliance of American Insurers, Downers Grove, Ill.; the American Insurance Association, Washington; the National Association of Independent Insurers, Des Plaines, Ill.; and the National Association of Mutual Insurance Companies, Indianapolis; cost was found to be a major concern.

Responses from the joint groups survey found that the cost per company would range between $10,000 to $25,000, according to Lenore Marema, vice president–legal and regulatory affairs with the Alliance. The responses, according to Marema, did not vary by premium volume, so it is not a big company, small company issue.

What is important to companies, she continues, is that the cost to some roughly 800 P-C companies be justified by benefits such as focusing resources on targeted rather than on comprehensive exams.

The survey of 63 companies, conducted in early August, included results from 50 companies on cost and suggests that data gathering could cost 800 property-casualty companies approximately $16 million, according to Don Cleasby, NAII assistant general counsel.

Among some of the surveys other findings was that “the stretch on the IT staff would be very difficult for companies,” he says.

Indeed, the survey results pointed to this difficulty. It asked respondents if companies that are part of a group use the same data systems. Thirty of 50 companies responded that they were part of the same data system. Cleasby says that the 40% of companies that are not part of the same system have slightly or conceivably very different data systems, complicating data call efforts.

Several questions addressed the issue of whether companies retrieved information electronically, manually or through both means.

Although a decision was made not to include claims data in the data call, the survey includes information on claims.

For example, a question on claims information available found that 68.4% would retrieve information electronically, but 31.6% would use a combination of both electronic and manual retrieval.

When asked what kind of claims information is available, with multiple answers, an acceptable response, 57 of 63 companies said that information is available on the date a claim is made or opened; 38 on the date of a claims settlement; 54 on the date a draft or check was issued; and 55 on the date a claim file was closed.

When asked if companies track information on the number of claims closed without payment and the number of claims denied within certain time periods, companies, which could offer multiple answers, responded as follows: 19 tracked the information in a 0-30 day period; 19 within 31-60 days; 18 within 60-90 days; 18 within 91-180 days; 18 within 181-365 days; 17 in over 365 days; and 34 tracked none of the above or do not have claims aging data.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 2, 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.