A market conduct report released by the General Accounting Office earlier this month recommended that a mechanism be created for state legislatures and insurance departments to adopt and implement minimum market conduct standards.
The National Conference of Insurance Legislators, Albany, N.Y., supports the findings in the GAO study and is seeking to meet that goal with a Market Conduct Surveillance Model Law, says Tim Tucker, NCOIL director of state-federal affairs.
The latest draft of that NCOIL model was released on Oct. 3, the same day as the GAO report.
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The GAO report also recommends that the National Association of Insurance Commissioners, Kansas City, Mo., and states “give increased priority to identifying a common set of standards for a uniform market oversight program that will include all states.”
The NAIC for its part, has been working on streamlining market conduct procedures for over two years.
Shortly after the reports release, Joel Ario, the Oregon insurance administrator who is spearheading market conduct efforts at the NAIC, told National Underwriter, “This confirms we are headed in the right direction.”
The report mentions greater use of market conduct analysis and more collaboration among states, which regulators at the NAIC are undertaking, he said.
The GAO report cited the broad array of market conduct exam approaches now current. For instance, it cited NAIC data indicating that in 2001, 15 states did targeted exams; four did comprehensive exams; and 22 did both.
The GAO report also found that of the nine states participating in a NAIC market conduct pilot, with the exception of California and Ohio, on-site examinations were performed on less than 2% of the states licensed companies in 2001.
The report found that market conduct examinations differed widely. For example, of 25 companies, 19 had been examined at their offices a total of 106 times during a three-year period. Six had been examined one or two times over the three-year period, and seven others had undergone three to five examinations.
But two companies of those responding to a GAO question had not been examined since 1997, and four others had not been examined at all.
GAO also said the lack of a consistent approach was slowing more effective market conduct oversight.
NCOILs Tucker says a model law will help create more uniformity.