NU Online News Service, Dec. 10, 2003, 9:23 a.m. EST, Anaheim, Calif. – An official from the U.S. General Accounting Office talked about the insurance market conduct system here at the winter meeting of the National Association of Insurance Commissioners, Kansas City, Mo.[@@]

Lawrence Cluff, the GAO’s assistant director-financial markets and community investment, told meeting attendees that an effective market conduct system has three components: a functional and comprehensive market analysis system; targeted examinations for companies that appear to need further attention; and a routine review of a company’s internal controls.

Understanding the meaning of “domestic deference” is a critical point, Cluff added.

Cluff said “domestic deference” means that one state has accountability, not that one state has complete authority over other states.

Routine reviews of internal controls should be handled by regulators and not by industry organizations such as the Insurance Marketplace Standards Association, Washington, Cluff added.

Cluff praised IMSA’s work, but he said an IMSA designation might be one factor that a regulator would consider rather than a substitute for regulatory oversight.

Companies do not want additional oversight, but they “just need to read the papers to realize that, in the world we live in today, people look at the way that a company does business,” Cluff said. “Getting caught doing something wrong costs more.”