Legislators Get Earful From Industry On Market Conduct System
Legislators listened to reasons why current market conduct oversight does not work and were offered suggestions for fixing the system.
The fixes called for include coordinating market conduct exams more efficiently, making the system effective as well as efficient, reining in contract examiners and using existing information to create a market conduct picture of a company.
Life, property-casualty and health trade groups as well as consumer advocates and regulators offered legislators representing the National Conference of Insurance Legislators, Albany, N.Y., input during a public hearing that preceded the start of the fall meeting of the National Association of Insurance Commissioners here.
The comments offered some candid assessments of the current state of market conduct oversight of insurers as well as the industry itself. Speakers also urged legislators to work with regulators at the NAIC to create a strong state market conduct system as the Market Conduct Surveillance model law takes shape.
Indeed, even as the NAIC got ready to continue its multifaceted initiative that includes a data call project, development of a “How To” guide that would enable regulators to make better market conduct choices and a program of collaboration among states, criticism was being leveled at regulators.
At one point, Rep. Brian Kennedy of Rhode Island, an NCOIL panel member, questioned Joel Ario, who is NAIC secretary treasurer and Oregon administrator. Ario is overseeing the NAIC market conduct work. Kennedy wanted to know if regulators efforts were being driven by a fear that their market conduct responsibilities would be taken over by the federal government.
“The reason why more resources are being put into this today is because of the threat of federal regulation,” Ario agreed. The NAIC is like any other institution and is impacted by outside pressures, he said. “To be honest, I dont think wed be doing the right thing unless we had our feet held to the fire,” Ario added.
However, that impetus has produced a lot of good initiatives, he said. For instance, he said the better use of data is the starting point being used by regulators to create a good market conduct analysis program. Additionally, he said, advances are being made in collaboration among states.
He cautioned against “enshrining” too much in law because of different concerns among the states. For example, Ario said that terrorism exclusions would be treated differently in New York than in a Midwestern state.
Cost was an issue that came up several times during testimony.
The difficult year that life insurers have had makes it all the more necessary for legislators to develop efficient, low-cost, market conduct practices, said Donald Walters, deputy director of the Insurance Marketplace Standards Association, Washington. “Our member companies are under severe pressure. It has been one of the weakest years in the history of the life insurance industry,” he added.
And yet, Walters continued, “very few practical results were put in place to improve market conduct exams.” One company, he continued, faced more than 200 exams in the past year, at “significant cost” to the company.