Market Conduct Pilot Launches This Week

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A data collection project that could be used as a basis for targeting market conduct examinations is ready to launch this week.

The pilot is being developed by the National Association of Insurance Commissioners, Kansas City, Mo. It is one of several efforts by regulators to streamline the market conduct process so that resources can be used more efficiently. Another effort under way is a How-to guide that would offer regulators guidance on market conduct compliance by focusing on complaints, market share and supplemental pages filed with an insurers annual statement.

The launch will include a Web site devoted to the data call project. Companies will be able to download documents and send data through the site. The NAIC site will also list contacts in nine states that are participating in the pilot.

Initially, 10 states were scheduled to participate in the pilot. However, the Arizona insurance department said it could not guarantee that data that companies submitted to it through the NAIC site could be kept confidential because of state laws on public information.

The issue of confidentiality was one of the major concerns of insurers as the details of the project were advanced. Insurers told regulators they were concerned that trade secrets and other information could become public and that information could be used by class-action attorneys against companies.

Because of this concern, the data will be passed on through the site to individual state insurance departments which will analyze the data for market conduct outliers. Regulators have said they are confident that in this way, they can protect information and allay insurers concerns.

Letters will go out this week to insurers presidents or the executive with the next ranking as listed on the last annual statement. The pilot will start with life insurance companies, which will have 90 days to complete the request. A report is expected early in 2003.

The American Council of Life Insurers, Washington, has been in contact with members alerting them to the project and the data call, according to representatives.

Insurers have asked for clarification on certain points in the data call, says Linda Lanam, ACLI vice president and deputy general counsel.

For instance, she says, a question on surrenders led to a request for clarification on whether a conversion of a term insurance contract would be considered a surrender.

Another request for clarification on whether replacements applied to groups was answered by regulators who said it was not directed to group contracts.

In general, life insurers have the data, Lanam adds. But in certain cases, it could require a need for reprogramming computer systems. For instance, Lanam explains, if data has been collected in the aggregate and state specific data is requested, that could result in reprogramming. Companies have been asked to keep track of costs associated with reprogramming so that information can be included when a report is prepared, she says.


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