Market Conduct Pilots Cost Concerns Insurers
A data collection pilot project that could help regulators target market conduct exams is still raising cost-benefit concerns among insurers.
Initial reaction to an interim meeting held in Chicago on Aug. 22-23 by the National Association of Insurance Commissioners, Kansas City, Mo., indicated that while the American Council of Life Insurers, Washington; Metropolitan Life Inc., New York; and property-casualty trade groups support the goals of the project, there is concern that costs will outweigh benefits.
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The data call for life insurers will be made after the fall NAIC meeting, which will be held in New Orleans next week. The life insurance industry will report on data from Jan.-June 2002 with a year-end 2002 report anticipated and an analysis by regulators due out sometime in early 2003.
The property-casualty industry will begin data gathering from Jan.-June 2003 and will submit reports to all states in the pilot project by September 2003. A report will then be developed and presented by regulators by December 2003.
Discussions during the interim meeting suggest that target areas for the data call are replacements, claims and complaints, according to Linda Lanam, ACLI vice president and deputy general counsel.
The ACLI, according to Lanam, supports the goals project of using data to target outliers. On the issue of data, she continues, the ACLI has two points of interest.
The first point is that a request for data also used on a financial statement directly parallels information contained in the financial statement, Lanam says.
Consequently, it is a good thing that regulators are concentrating on the schedule F data in the financial statement, she continues.
If new information is required, there needs to be more discussion of the marketplace problem to be identified, she adds.
Regulators have indicated that they will be as flexible as possible in asking for data that companies keep and will try to avoid the need for companies to make major systems changes, according to Lanam.
Each state in the pilot program will issue the data call, and the presumption insurers are operating under is that the data provided will be protected as part of working papers of each states market conduct exam, Lanam says.
Insurers have noted, however, that there is not a lot of research available on this issue and that there is not a consistent opinion on the degree of protection afforded, she adds.
“Very real progress was made at the meeting,” says Ann Henstrand, a vice president of government affairs with MetLife Inc., New York.