MarketConductIssues

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A new, simpler Fingerprint Model Act and preliminary industry findings on the effect of a market analysis program were a few of the market conduct initiatives that received an airing during the spring meeting of the National Association of Insurance Commissioners here.

During the Market Regulation and Consumer Affairs “D” Committee, the simplified Fingerprint Model Act was unveiled by Iowa Insurance Commissioner Susan Voss, chair of the Market Regulation and Consumer Affairs “D” Committee and North Dakota Insurance Commissioner Jim Poolman. After an overview of the changes, the model was adopted out of “D” Committee to the Executive Committee and Plenary.

The new model will eliminate the requirement that officers and directors of companies submit to fingerprint requirements that producers will be required to provide. The new model also will not include provisions for a central repository for fingerprints housed with the NAIC. And, the stripped down version of the model eliminates an exemption for those producers registered with the National Association of Securities Dealers, Washington.

These provisions had caused consternation among industry trade groups. Recently, when a request was made to advance the model, no motion was made by regulators.

In describing the changes, Poolman said that “everyone had added an ornament to the Christmas tree” and the simplified version of the model removed those ornaments.

During the spring meeting, trade groups also offered preliminary results from member polls on the effectiveness of the NAIC’s market conduct analysis program.

Preliminary results are showing mixed results, according to Don Cleasby, vice president, regional manager and counsel with the Property Casualty Insurers of America, Des Plaines, Ill.

The preliminary results are from 15 PCI member companies or member groups. Cleasby said that other PCI companies still need to submit results and the results of other trade groups including the American Insurance Association, the National Association of Mutual Insurance Companies, Indianapolis, and the American Council of Life Insurers, Washington, still will have to be collected and reviewed.

But to date, the preliminary data shows that there were 27 regulatory activities in 2003, 51 in 2004, and, 41 in 2005. In 2003, the PCI survey indicated that the activities were broken out as follows: 2 correspondence, 4 targeted information gathering, 6 desk audits, 1 investigation, 5 targeted exams and 9 comprehensive exams. In 2004, the breakout was as follows: 12 targeted information gathering, 2 policy and procedure reviews, 2 interrogatories, 8 desk audits, 1 self-audit, 10 targeted exams and 16 comprehensive exams. And, in 2005, the results looked as follows: 1 correspondence, 8 targeted information gathering, 2 interrogatories, 7 desk audits, 2 self-audits, 1 investigation, 7 targeted exams and 13 comprehensive exams.

All of the reported targeted examinations, according to the PCI, were single state. Three of the comprehensive exams, it continued, were multistate, and all others were single state.

Five companies reported some improvement in market regulation over the past 3 years, 5 some improvement, 3 said there was minimal improvement, and, 3 reported no change.

Preliminary data, according to Linda Lanam, ACLI vice president-annuities, Washington, suggests that the number of examinations have come down slightly. There is some reduction in the total number of examinations, she continued, but there are still a significant number of them. But she says information from a few more companies must still be collected and other information evaluated before a full report of the findings can be detailed.

The goal for both regulators and companies should be the same, namely how to improve companies results when market conduct criteria are applied, said Lanam. In order to achieve this, insurers need a clearer idea of what the data means. So, for instance, if there is a ratio, what does the ratio mean and in the context of other companies and their market analysis findings, she explained.

Another issue that continues to be of concern, according to Lanam, is the confidentiality of market conduct data for companies.

Cate Paolino, AIA senior counsel, says issues that are important to AIA members include the confidentiality of company information and uniformity in definitions. For instance, she explained, it is important that the definition of complaint is uniform so that companies can look at information uniformly across state lines. “How it is defined will be an extremely crucial discussion. Only verified and justified complaints should be included.

On the issue of market analysis, Paolino said that “an insurer should know what specific information triggers an examination and it should have access to information about it within the NAIC databases.”