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NAIC Gets Earful Over Market Data Collection And Storage

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A controversial proposal to collect market conduct data as part of the annual statement process and house it in a centralized data bank drew over 100 participants including Frank Keating, the president and CEO of the American Council of Life Insurers, to a conference call.

The issue pits those who are raising concern over the confidentiality of data as well as how it would be treated if released, with consumer advocates who say that data should be public because it will benefit consumers and even keep the insurance market healthy.

The call was held on May 28 by the Executive Committee of the National Association of Insurance Commissioners, Kansas City, Mo. The proposal must be approved by the executive committee and then the NAIC’s plenary before it becomes NAIC policy.

Sandy Praeger, Kansas insurance commissioner and NAIC president, started the call by saying that regulators would not take action on the call and possibly not take action at the NAIC’s summer meeting in San Francisco which starts on May 30. She noted that because of work with vendors on annual statement filings, if action was not taken by July 1, then the recommendations would not be implemented in 2009 but would then be considered for 2010.

The proposal was adopted by the NAIC’s Market Regulation & Consumer Affairs “D” Committee on April 17 explained “D” Committee chair, John Morrison, Montana insurance commissioner.

Among the elements of the proposal that Morrison detailed are: a centrally stored facility, collection of data through a supplemental filing, a May 1 deadline rather than a March filing required for financial information, and a recommendation not to proactively sell data unless the NAIC membership directed the organization to do so.

Morrison also noted that the data elements in the proposal are currently public and any additional data elements would require a review before they could be added.

The proposal was advanced, he said, because it would streamline a system of market data analysis that started on a trial basis in 2002 and became permanent in 2004. Twenty-four states collected market conduct data for 2007 and 29 will collect 2008 data, he said. Rather than providing data to individual states, a company could make one filing, he explained.

State Rep. Robert Damron, D-Nicholasville, Ky., and the president elect of the National Conference of Insurance Legislators, Troy, N.Y., said that states needed more time to look at the issue before they could decide if it was a policy that they would support.

In an unusual move, the ACLI’s Keating participated on the call, commending regulators for their efforts to modernize the way data is collected but also noting privacy laws and the possibility that companies could be made vulnerable to lawsuits if information is made public.

The exposure to additional litigation, the way data would be used by class action attorneys and other companies, and even the reason the data needed to be collected, were raised by industry trade groups including the American Insurance Association, Washington; Blue Cross/Blue Shield, Chicago; the National Association of Mutual Insurance Companies, Indianapolis; and the Property Casualty Insurers Association of America, Des Plaines, Ill.

Deidre Manna, a PCI representative, noted that in an NAIC meeting in Washington on May 20-21, PCI President David Sampson urged regulators not to proceed with the proposal because the NAIC authority over preserving and protecting such information was still unclear. Additionally, she raised the question of why the data was being collected. Originally, she said, the purpose was to collect data so that there would be fewer market conduct examinations. However, 5 years later, Manna added, insurers had not been shown specific tangible benefits.

Companies that testified included: Aegon, Baltimore; Farmers Insurance, Los Angeles; Liberty Mutual, Boston; Mass Mutual, Springfield, Mass.; Principal Financial Group, Des Moines, Iowa; and, Travelers Group, Hartford, Conn.

The use of publicly available data by competitors, and class action lawyers was mentioned by several who spoke. But, these speakers also said that efforts to streamline the process are a good thing.

NAIC funded consumer representatives Birny Birnbaum, Brendan Bridgeland and Gregory Squires, asserted the importance of having such data available to the public and urged that the project be fully adopted by the NAIC.

Birnbaum said that the only way that there could be true regulatory modernization was if there was data that could be analyzed so that improvements could be made. Consequently, he argued, market conduct analysis and data was needed and should be culled by regulators.

He called the argument that data would be misused “incredibly disheartening,” and added, “I don’t need insurers to tell me and other consumers what information I need to know.”

And, Birnbaum called the idea of insurers waiting over a year to access competitive information in other companies’ data “absurd” because at that point competitive advantages would already be incorporated into company strategy.

Bridgeland argued that available data was actually good for the whole market because if there is a general impression of denial of claims, it could drive down the perceived value of insurance policies. And, Squires suggested that rather than just the choice of no data or abused data, there was in fact a third choice: “conclusive and accurate and informative data.”