By

Anchorage, Alaska

State insurance commissioners adopted by a 31-20 vote a market conduct model law designed to streamline the market conduct process, despite reservations voiced by a number of regulators.

The vote on the National Association of Insurance Commissioners version of a Market Conduct Surveillance Model Act was taken during the fall NAIC meeting here.

The model seeks to establish uniform procedures based on a concept of market analysis and targeted examinations. Among other points, it defines the scope of market conduct examinations and authorizes the acceptance of market conduct examinations by states that have enacted similar laws based on a domestic deference approach.

It was first adopted by the National Conference of Insurance Legislators, Albany, N.Y., in February 2004. The NAIC membership then decided to make changes to the model to allay concerns among regulators that the model would tie their hands in performing market conduct work.

NCOIL had taken the position that if the revised version of the model was not adopted at the fall NAIC meeting, that it would have gone off on its own and adopted its original model.

Many of the elements in the model are incorporated in a new SMART draft proposal released on Aug. 19 by Reps. Mike Oxley, R-Ohio, and Richard Baker, R-La. Streamlining the market conduct process is one area that is considered a way to illustrate the effectiveness of state insurance regulation.

Jorge Gomez, Wisconsin commissioner, expressed his continuing reservations over points in the model that he said would make it more difficult to take market conduct action against companies.

Among his concerns was that language in the model would give insurers the right to challenge statutory authority and that wording in the model would hamper regulators ability to conduct on-site company examinations and limit them to examining companies from department offices.

Language is also unclear, Gomez says, on qualified staff. Hiring a young examiner could be construed as a violation of the model and result in a lawsuit, he says. Departments do not have the staff to handle added litigation in court, he continued, and as a result they might be discouraged from addressing problems in the marketplace.

In response, Joel Ario, Oregon administrator and NAIC vice president, noted the models reliance on market analysis. He also noted that a recent data call on credit scoring was going to be litigated, underscoring that the industry can sue anyway.

Another point raised prior to the vote was whether lawsuits could be brought against commissioners and their representatives for initiating market conduct actions.

Following the vote, Tim Tucker, an NCOIL representative, said that work to get the joint NCOIL-NAIC model adopted in the states would begin right away for the 2005 legislative session. He noted that the model was introduced last session in Nebraska and New York.

After the vote, Ario said it was an “historic joint effort.”


Reproduced from National Underwriter Edition, September 16, 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.