NU Online News Service, Oct. 9, 2003, 9:24 p.m. EDT – Groups representing state lawmakers and state insurance regulators disagree with the American Council of Life Insurers, Washington, about the implications of the new General Accounting Office report on insurance market conduct exams.

Officials at the National Association of Insurance Commissioners, Kansas City, Mo., and the National Conference of Insurance Legislators, Albany, N.Y., say the GAO report supports their efforts to improve state regulation, but an ACLI executive says the report could be used as a base for considering federal oversight.

GAO officials write in the report that a lack of a consistent approach is slowing efforts to make market conduct oversight more effective.

The officials cite a report from the National Association of Insurance Commissioners, Kansas City, Mo., that indicates that, in 2001, several states used on-site exams to review the market conduct of fewer than 2% of the states’ licensed companies.

The GAO officials also note that market conduct exam rates vary widely. When the officials talked to insurers, they found that regulators had examined 19 insurers in the insurers’ offices a total of 106 times during a three-year period. But two companies that responded had not been examined since 1997, and four others had not been examined.

States need a mechanism that can help state legislatures and state insurance regulators adopt and implement minimum market conduct standards, the GAO officials write.

The GAO officials also recommend that the NAIC 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 and NCOIL have both been working on efforts to promote uniformity and streamline the market conduct exam process.

Joel Ario, the Oregon insurance administrator, who is spearheading market conduct efforts at the NAIC, says the GAO report shows the NAIC is 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 already undertaking, he says.

NCOIL supports the findings in the GAO report and is seeking to address the kinds of concerns that the report raises with the Market Conduct Surveillance Model Law, say Tim Tucker, NCOIL director of state-federal affairs.

A model law will help create more uniformity, Tucker says.

GAO officials do not discuss the possibility of turning responsibility for the exams over to the federal government.

But Bruce Ferguson, the ACLI’s senior vice president-state relations, says the fact that the GAO officials leave out the subject of federal oversight does not mean that there is no interest in federal oversight.

The GAO prepared the report to help lawmakers understand the current state of market conduct regulation, and the report could be used as a base for deciding in the future whether federal oversight is needed, Ferguson says.

So far, Ferguson says, he does not believe states have produced meaningful market conduct changes.

The GAO has posted its report at http://www.gao.gov/new.items/d03433.pdf