NCOIL And NAIC Split

Over Market Conduct Model

By

State legislators continue to urge insurance regulators to adopt a proposed market conduct model developed by the National Conference of Insurance Legislators as NCOIL wrote it.

On April 29, regulators at the National Association of Insurance Commissioners, Kansas City, Mo., advanced their version of an NCOIL model, the Market Conduct Surveillance model law, which NCOIL adopted on Feb. 27.

NCOIL reiterated its stance that changes made by state insurance regulators are substantive rather than technical in nature. On April 6, state Sen. Steven Geller, D-Hallandale, Fla., and state Sen. James Seward, R-Oneonta, sent the NAIC a letter expressing NCOILs concerns.

Those concerns were reiterated by Tim Tucker, NCOILs director of state-federal affairs in Washington, who says the original NCOIL model has broad support and should be adopted by the NAIC. The issue may receive further discussion at NAICs executive committee and NCOIL hopes to provide input, he says. He notes that the original NCOIL model has been introduced in both the New York Senate and Assembly and has received a hearing in Nebraska and is likely to be introduced in the next legislative session.

NAICs version is set to go before its executive committee and then on to plenary for full adoption.

Joel Ario, NAIC secretary-treasurer and Oregon insurance administrator, says the changes made by NAICs Market Regulation and Consumer Affairs “D” committee are technical in nature and have strong support among regulators, as the 10-0 vote with 3 abstentions indicates.

NAIC will be working with NCOIL, he says, and when the changes are examined, NAICs version is really not that different from NCOILs.

The important thing, according to Ario, is to take the time to “get it right.” He says he believes this can be done so the model can be adopted by NAICs summer meeting in June.

Once it is available to regulators, it will make it easier to detect potential problems such as market timing in variable products and any other market conduct issues that arise, he says.

The American Council of Life Insurers will be meeting with members to review both the original NCOIL model and NAICs version, says Linda Lanam, ACLI vice president-annuities.

What is important, she explains, is to have a clear understanding of what the language means. For instance, she says a reference to language such as confirmed and unconfirmed complaints is new and needs to be understood. Understanding exactly what the language in the model means is important in ensuring that companies will not face issues such as due process concerns, Lanam adds.

Lenore Marema, vice president-legal and regulatory affairs, with the Property Casualty Insurance Association of America, Des Plaines, Ill., says PCI still has 2 concerns. One, she says, is that companies will not have sufficient due process. Regulators voted to allow informational hearings for insurers that had questions about a market conduct examination. However, Marema says there could be different approaches to the definition of informational.

Marema says it is also important that there be a work plan and a budget so everyone is aware of the costs associated with a market conduct exam.

Most troubling, according to Marema, is the lack of support among some states for the NAIC version of the model that was just advanced.


Reproduced from National Underwriter Edition, May 7, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.