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Market Conduct Oversight Initiatives Fine-Tuned At NAIC Meeting

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As regulators renewed their commitment to an action plan to overhaul the current system of state regulation, fine-tuning efforts continue in areas such as market conduct oversight.

Market conduct regulation ranked just behind the number one action plan goal of protecting consumers, according to a regulatory modernization action plan released by the National Association of Insurance Commissioners during its recent fall meeting. The goal of consumer protection in the document references access to information.

During the meeting, insurers asked that the process of bidding–such as the awarding of a privacy market conduct survey to PricewaterhouseCoopers by the District of Columbia department of insurance and securities regulation–be more transparent.

Robert Zeman, senior vice president with the National Association of Independent Insurers, expressed concern that any improvements to regulation include consideration of the use of contract examiners as well as better transparency.

District of Columbia Commissioner Larry Mirel, responded that the process has been an open one in which he was available to respond to industry concerns.

The regulators statement, an update of a commitment plan rolled out three years ago, received general support from attendees at the meeting.

Market conduct streamlining surfaced as a potential test of this regulatory commitment throughout the fall meeting.

There was broad support among industry trade groups for how a market conduct analysis handbook was shaping up. The “How-To Guide” is scheduled to be released in 2004, following a new draft that regulators say will be ready in October.

Regulators says a data call effort is valuable because it provides information that helps them identify problems. But the industry is giving it mixed reviews.

Life insurers are continuing to discuss with regulators what information will be provided in a second round of data gathering that is under way and will be presented to regulators in April 2004. For example, it was agreed not to include data on group annuities because such contracts are usually part of group pension plans and less likely to be affected by market conduct problems.

Lenore Marema, vice president, legal and regulatory affairs with the Alliance of American Insurers, Downers Grove, Ill., shared the findings of a survey of a few insurers on what the data call is costing them.

The companies questioned said that providing data in several of the nine states in the pilot project would cost between $4,500-$10,000. When data was provided in all nine states, the cost ranged from $16,500-$25,000. The findings were in line with an initial survey that projected average costs to be about $16 million based on a joint trade group survey.

There has been discussion of a national system of data storage and that would be a “deal breaker for us,” according to Marema, who expressed concern over protection of trade secrets and proprietary company information. “Some protection is no protection at all.” The concern has been raised by the Alliance and a joint group of trade organizations.

But Joel Ario, NAIC secretary treasurer and Oregon Administrator who is spearheading the effort to overhaul the market conduct system, said during the fall NAIC meeting he believes confidentiality can be maintained.

He noted that confidentiality is maintained on financial data filed with the NAIC. A national system needs to be considered, he said.

Kevin Hennosy, a consumer representative and publisher of, Kansas City, Mo., said there needs to be a national market conduct system. There is no reason not to have a centralized database system, he added.

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


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