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How To Ace That Market Conduct Exam

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Honey works better than vinegar for insurers undergoing market conduct exams, panelists said here at a New York City Bar Association insurance regulation conference.

When involved with market conduct exams, “treat examiners the way you would want to be treated,” David Kenepp, manager of market conduct services Liberty Mutual Group, Boston, said at a conference session on the exam process. “If you start off in a bad position, it is very hard to get back on track.”

One key to maintaining a strong relationship is to respond to requests for information in a timely manner or to give a reason why that is not possible, Kenepp said.

Kara Baysinger, vice chair of the insurance practice group in the San Francisco office of Sonnenschein Nath & Rosenthal L.L.P., also talked about the need to avoid starting off an examination with a confrontational attitude.

“Sloppy half answers” and a “treasure hunt” for documents that an examiner needs are things that a company should try and avoid, Baysinger said.

But Baysinger said an insurer might have to take a more rigorous approach as an exam progresses, and panel participants agreed that the quality of the examiners – and especially contract examiners – varies widely.

Some examiners are learn quickly about a company and its products, but others “have a vendetta against the company or a huge ramp up time,” Baysinger said.

Rosanne Mead, assistant insurance commissioner with the Iowa Insurance Department, recommended that insurers take a balanced approach to handling concerns about examiners.

If there is a problem with a contract examiner, the company should talk to the agency that sent the examiner, Mead said.

“I have fired contract examiners because they ran up the bill,” Mead said.

But Mead noted that some companies keep time sheets and have a lawyer present every time a staff person is interviewed.

“If you take an aggressive stance, that’s OK, but it is going to take longer,” Mead said.

Mead warned against being overly obsessive about reporting complaints about time.

“Don’t call and say, ‘[The examiners] are 5 minutes late today,’” Mead said. “That gets old. Maybe they’ll be 5 minutes early one day.”

One way to control the amount of time that an exam takes is to start off by establishing the scope of the exam, Baysinger said.

“It amazes me how many times this is not done,” Baysinger marveled.


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