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Regulation and Compliance > State Regulation

Market Conduct Model Tennis Match Continues

By Jim Connolly

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Market Conduct Model Tennis Match Continues

By

San Francisco

A market conduct surveillance model act is back at its source following a decision by state insurance regulators to offer recommendations to state insurance legislators.

State insurance commissioners adopted changes to the Market Conduct Surveillance model act that was developed by the National Conference of Insurance Legislators, Albany, N.Y.

The changes were adopted by the National Association of Insurance Commissioners during its summer meeting here. Those changes are being offered to NCOIL as recommendations. NCOIL will look at those recommendations during its summer meeting next month and decide if they should be incorporated into the model it initially developed and adopted in February.

A finalized NCOIL model will then be returned to the NAIC for an up or down vote, although, NAIC Secretary Treasurer and Oregon Administrator Joel Ario noted that it is conceivable that when it is returned to state regulators someone could offer an amendment.

Wisconsin Insurance Commissioner Jorge Gomez expressed disappointment that a document reached by consensus of state insurance regulators was not going to be adopted.

Ario explained that if the NAIC adopted its version of the model rather than send it back to NCOIL, there would be 2 versions of the model before state legislators. “The industry has played the 2 organizations off of each other,” Ario said. By working to create a single model that everyone signed onto, it would be more likely that the model could be enacted, he explained.

The remarks echoed earlier remarks made by State Senator Steven Geller, Fla., NCOILs president. During a consumer liaison meeting, Geller said, “Candidly, a lot of folks would prefer to put NCOIL and NAIC at each others throats.” The reason, he said, was they could argue that regulators and legislators could not get along and consequently, some federal oversight was needed.

Later, Geller told National Underwriter, “NAIC and NCOIL decided we are not going to play that game. Were invoking the no gaming rule.”

When NCOIL addresses the market conduct model next month, said Tim Tucker, an NCOIL spokesperson, it might revisit requiring companies to have internal systems in place to verify compliance with market conduct requirements. The possible rub, he said, would be if regulators wanted broader authority.

The point will not slow down advancement of the model, Tucker said. It is the third leg of a three-leg approach that includes market analysis, a targeted exam and a self compliance mechanism, he added.

Birny Birnbaum, executive director of the Center for Economic Research, Austin, Texas, and an NAIC-funded consumer representative, said it is important that the model advances. He noted that neither consumers nor insurers are happy with existing market conduct regulation. “It is ready for reinvention,” he added.

“This could be the issue that demonstrates to Congress that there is a reason for state regulation,” he said.

If regulators can show that they have “the skill and will to do it, it should put to rest questions about state regulation that come up before Congress,” he added.

The American Council of Life Insurers, Washington, believes the NCOIL model is a good base to work from, said Linda Lanam, vice president-annuities with ACLI.

ACLI, she said, is “very concerned about some of the comments made that industry wants nothing to happen.” She said ACLI is “very supportive” of the efforts.

ACLI would like to see market analysis be the focus of market conduct exams, Lanam said.

In the long term, ACLI would like to see market conduct include deference to market conduct initiatives taken by a companys state of domicile, Lanam said.

The Property Casualty Insurers Association of America, supports an NCOIL model as a basis to work toward market conduct reform, said PCI representative Lenore Marema.

Inclusion of a due process such as an arbitration provision is something PCI would like to see, she added. What is needed is maximum effectiveness and either version of the model will have to be amended to achieve that, she said.

Laura Kersey, a representative of the American Insurance Association, Washington, said AIA is supportive of the NCOIL model. Domestic deference is an important point, she added.

Reproduced from National Underwriter Edition, June 18, 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.

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