GAO Official Puts Forth Market Conduct Proposal
The market analysis component of state market conduct oversight should be centralized and probably placed in the hands of the National Association of Insurance Commissioners, according to an official with the United States General Accounting Office.
Lawrence D. Cluff, assistant director in GAOs Office of Financial Markets and Community Investments, outlined a 3-part proposal for improving market conduct oversight during a Capitol Hill briefing for Congressional staffers last week. A copy of his presentation was obtained by National Underwriter.
Cluffs proposal could become part of the legislation now being drafted by the House Financial Services Committee aimed at making state insurance regulation more uniform and efficient.
Cluff emphasizes that his proposal represents his own views and are not necessarily those of GAO.
A complete system of market conduct oversight, he says, has 3 major elements. The first, he says, is market analysis. This can be done most effectively if centralized, Cluff says, as opposed to having each state try to do it on its own.
Data would be gathered from all relevant sources and from all states where a company does business, he says, and sent to a central facility, most likely at the NAIC.
The data would be analyzed and compared to other members of a companys peer group to identify outliers needing follow-up. The results would be sent to each state in which a company does business.
The second element involves investigation by the domiciliary state regulator of each company targeted by the market analysis as needing special attention, he says.
If necessary, Cluff says, this could include a targeted examination that would focus on those areas identified by the market analysis but could be expanded should the finding warrant.
The third element, he says, is internal controls by insurance companies and routine examinations of those controls by the domiciliary state regulator.