The right of an insurer to arbitrate market conduct decisions that it disputes has regulators and the industry on opposite sides of the issue just 2 weeks before a model act comes up for possible adoption by legislators.
The National Conference of Insurance Legislators, Albany, N.Y., has put its Market Conduct Surveillance model act draft on a fast track for adoption. The group of insurance legislators maintains that a model act enacted by state legislatures is an effective way to quell criticism that states are not effectively regulating insurers market conduct activities.
Toward that end, a vote is possible at the organizations spring meeting in San Antonio, Texas, later this month.
Companies are concerned that an insurance department has the potential to be a “prosecutor, judge and jury,” according to Don Cleasby, assistant vice president and assistant general counsel with the Property Casualty Insurers Association of America, Des Plaines, Ill. In such cases, there is a cost to litigate a dispute, he continues, so there needs to be an avenue of redress that is “short of full-scale litigation.”
Such a system would not be a delegation of a commissioners authority because it could only be used if a component of a market conduct review was outside of that authority, he explains.
Cleasby notes the precedent of such a provision in Florida. However, Sen. Steven Geller, D-Hallandale Beach, Fla., said the language under discussion is a lot broader than the Florida arbitration provision.
In fact, the commissioner in Florida actually is trying to have the arbitration law repealed, Geller noted.
“I trust you are not saying that if there is a finding of actual wrongdoing, that you should toss out that finding of wrongdoing,” Geller said.