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NAIC Gets Closer To Market Conduct Adoption

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NU Online News Service, June 2, 2004, 6:23 p.m. EDT – The National Association of Insurance Commissioners may be getting closer to adopting a market conduct surveillance model act.[@@]

Joel Ario, secretary-treasurer of the Kansas City, Mo., group, says the NAIC probably will adopt a market conduct model at its upcoming June 9-15 meeting, or even earlier.

The draft model before the NAIC executive committee is based on a model that was adopted by the National Conference of Insurance Legislators, Albany, N.Y., in February. It contains changes to the NCOIL model that received significant comment from regulators, NCOIL and both life and property-casualty insurers.

Ario, the Oregon insurance administrator, who is spearheading the market conduct effort, says all interested parties are part of the discussion and that changes in the NAIC version of the model were really clarifications of points that had been left vague in order to reach consensus when NCOIL was putting the model together. The NAIC draft is an effort to drill down on those points, Ario says.

He says, for example, that discussion continues about whether the model should be worded so that changes to a handbook for market conduct would be automatic when the NAIC makes changes, or whether action would have to be taken by state legislators in each state.

If no consensus is found with the current draft, one option would be to adopt the NCOIL version of the model, Ario says. However, there are changes that regulators felt should be made, so there are differences with the legislators’ version of the model, he says.

But Ario says the core principles are the same for both versions: market analysis is the foundation of the program, and the use of resources is based on market analysis.

“We are urging the NAIC to adopt the NCOIL model that was adopted by us in February,” says Tim Tucker, NCOIL director of state-federal affairs. “It is a good compromise that will improve market conduct exponentially.”

If changes are made to the model, there could be a loss of broad support, but there are some small, technical changes that NCOIL is willing to consider, Tucker says.

NCOIL intends to include its market conduct model in a legislative package that also addresses rates and the Interstate Compact, an NAIC initiative that is attempting to create a single point of filing for some life insurance products, Tucker says.

During the development of the NAIC draft, some regulators, including Jorge Gomez, Wisconsin insurance commissioner, expressed concern over the new wording.

A spokesperson for the Wisconsin department, Eileen Mallow, says Gomez has not seen changes made since the model was adopted by the NAIC’s “D” committee. She says the commissioner’s concern is that “the authority of state regulators not be gutted in the model.”

Ario says the market conduct model is one piece of a comprehensive program to create a better system of market conduct regulation.

That system includes a market conduct examiners handbook, collaborative interstate efforts of 20 states, the appointment of market conduct coordinators in each state, and a data call project, according to Ario.

A recent training session for the new market conduct coordinators drew 89 attendees, Ario reports.