NU Online News Service, Feb. 10, 2004, 5:51 p.m. EST – Sparks are flying over a draft of the National Association of Insurance Commissioners’ white paper on best practices organizations.[@@]

The paper focuses on organizations such as the Insurance Marketplace Standards Association, Washington, that develop standards for the life insurance industry. Insurers have argued that regulators could use membership in IMSA to help determine whether insurers’ market conduct compliance programs pass muster.

Birny Birnbaum, an NAIC-funded consumer advocate and executive director of the Center for Economic Justice, Austin, Texas, is sparring with IMSA Deputy Director Don Walters over the wording of Section 3I of the draft. The section would tie the effectiveness of any best practices organization to recognition of that organization.

Walters argues in an e-mail to the NAIC, Kansas City, Mo., that Birnbaum has misrepresented IMSA’s views on how Section 3I should be worded.

“IMSA would like to be on record to refute the assertion in Birny Birnbaum’s recent correspondence that the attachment to his e-mail message delivered earlier today represents ?CEJ’s suggested language’ on Section 3I of the draft White Paper on Best Practices Organizations,” Walters writes in the e-mail. “The language in the attachment was based upon an initial draft developed by IMSA and modified thereafter through a series of e-mail exchanges with Mr. Birnbaum. Through these e-mail exchanges, IMSA’s initial draft was subsequently modified by Mr. Birnbaum to now comprise what he considers to be ?CEJ’s suggested language.’

“We strenuously object to these tactics as inconsistent with high standards of ethics, good faith and fair dealing. IMSA will submit its proposed language under separate cover.”

When contacted by National Underwriter, Birnbaum said he was puzzled by Walter’s “flaming” reaction. “I’m stunned,” Birnbaum said. “This is really beyond belief. All those accusations are just ridiculous.”

Birnbaum adds that that the Center for Economic Justice and IMSA had made progress on reaching consensus but could not agree on a phrase concerning measuring the effectiveness of best practices organizations on market conduct.

A solution offered by Birnbaum, he says, was to keep the body of the language and then have a note addressing the phrase, saying that Center for Economic Justice supported it and IMSA did not.

Following this suggestion, he says, he received a private e-mail from Walters expressing his disappointment and then received an e-mail that was generally distributed.

Walters sees the matter differently. After the NAIC winter 2003 meeting, both organizations exchanged e-mails in an effort to create consensus language, he says. IMSA drafted language and e-mails were exchanged on changes to the wording, Walters adds.

Walters says the draft attempts to address 3 points:

- Does an organization’s standards promote good market conduct practices?

- Is there a way to review companies for compliance with these standards?

- Is there evidence of improved market conduct practices?

Walters says language suggested by the Center for Economic Justice encourages measurement of the extent of improvement in market conduct rather than stating whether improvement has, in fact, taken place. Requiring measurement of effectiveness could create 50 different standards, and thus a lack of national uniformity, he says.