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Model Audit Rule

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Confidentiality of an auditor’s documents is one issue insurers are raising with regard to the development of amendments to a Model Audit Rule that state insurance regulators are currently working on.

The changes to the rule are being examined by the NAIC/AICPA working group of the National Association of Insurance Commissioners, Kansas City, Mo.

During a recent discussion on amendments, Randi Reichel, a state affairs representative for America’s Health Insurance Plans, Washington, stressed that enhanced reporting requirements should be accompanied by changes that would ensure that confidential information is protected.

It is important that there be protections in place to keep confidential documents from purview under Freedom of Information Act requests, she continued.

Of concern, is the Section 11 report, Reichel said. “It is really critical that this information be kept confidential.”

Section 11 of MAR addresses the accountant’s report on internal controls. The draft requires a written report describing unremediated material weaknesses in an insurer’s internal control structure.

Doug Stolte, chair of the NAIC/AICPA working group and deputy insurance commissioner in Virginia, said he understands why companies would be concerned that class action attorneys might use information meant for regulators. In Virginia, he continues, an item such as a significant deficiency in internal controls are considered part of a company examination which would have confidentiality protections.

Reichel responded that in states such as Virginia where such protections exist, that is a positive for companies. However, she continued, that is not uniformly true across states.

“It is really critical that this information be kept confidential.”