Market Conduct Reform? Yes, But How?

NU Online News Service, Dec. 2, 2003, 8:33 p.m. EST – Everyone agrees that insurance market conduct oversight could be better, but the insurance industry representatives, regulators, legislators and consumer advocates who are gathering this week for the winter meeting of the National Association of Insurance Commissioners, Kansas City, Mo., continue to wrestle with the details.[@@]

Federal regulators and members of Congress are calling for action on the market conduct issue, and a recent report issued by the General Accounting Office echoed that call.

Here are some comments on the market conduct issue from the participants in the debate:

- Joel Ario, NAIC secretary-treasurer and Oregon insurance administrator, lists market analysis through the effective use of data, uniformity and collaboration among states as the three pillars of market conduct oversight.

Ario says a market analysis handbook, a compilation of tools that regulators have been using to monitor market conduct, is now ready for use. Regulators’ efforts to use data calls to analyze market analysis are making strides, but the idea still needs further testing, he adds.

Any market conduct reforms should retain a commissioner’s authority to make a decision on a market conduct issue, Ario says.

On the issue of domestic deference, which allows the state where a company is domiciled to take the lead on market conduct matters, Ario says there is an evolution toward a modified approach.

The modified approach would give nondomiciliary states flexibility to take action on issues that a domestic state is not acting on, Ario says.

- Tim Tucker, director of state-federal affairs at the National Conference of Insurance Legislators, Albany, N.Y., says domestic deference is an issue that will receive more thorough review as NCOIL moves its Market Conduct Surveillance model law forward. Supporters of the model hope NCOIL will adopt it in February 2004.

- Nancy Davenport, a senior counsel at the American Council of Life Insurers, Washington, says that the NCOIL model is making good progress but that the issue of domestic deference still needs to be discussed.

Questions about topics such as whether a larger state would enact a model law that incorporates domestic deference need to be answered, Davenport says.

- Lenore Marema, vice president-legal and regulatory affairs with the Alliance of American Insurers, Downers Grove, Ill., says regulators should explore an alternative to mandatory domestic deference. She says, for example, that the emphasis could be on cooperation among states.