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The market conduct data analysis effort for life and property-casualty insurers recently was discussed prior to the summer meeting next month of the National Association of Insurance Commissioners.

Life insurers data is currently being analyzed, and property-casualty insurers are in the process of completing a data survey for the pilot. The project is being developed as part of an effort to determine whether a market conduct annual statement could be implemented for insurers.

The possibility of the project being extended for a second year is under consideration, according to Sue Stead, the Ohio regulator spearheading the effort. But no decision has been made about the extension or the timing of the project if it is extended, she adds.

A preliminary finding in life insurers submitted data suggested disparity of life insurance replacement ratios. However, Stead cautions that the data is preliminary and that the ratio of replacements to new business could vary because of different definitions of replacements such as whether they include surrenders and 1035 exchanges. A disparity in that ratio does not necessarily equate to a high number of replacements, she added.

At regulators request, life insurers have been tracking costs as measured by employee hours, according to Linda Lanam, vice president and deputy general council with the American Council of Life Insurers, Washington.

Findings suggest the cost so far is largely in programming, and this has been exacerbated somewhat by the fact that this is the first time the project has been done, she says.

The number of employee hours varies from hundreds for smaller companies to thousands of hours for larger companies, Lanam adds.

If the project is continued, cost could be reduced by gathering the data on a calendar year basis along with other systems requirements of a company, she says.

The data gathering requires culling information from current as well as older systems, called legacy systems, she explains. For very small blocks of business, the data is often gathered manually and a manual review of that data follows the initial data gathering, Lanam says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, May 26, 2003. Copyright 2003 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.