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Regulation and Compliance > State Regulation

Debate Continues On NAIC's Market Conduct Data Collection Project

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As state insurance regulators prepare to consider a centralized market conduct data bank during a conference call on July 8, industry representatives are arguing that more time is needed to ensure data confidentiality as well as the proposal’s proper interaction with state laws.

Work on a market conduct data base has been underway at the National Association of Insurance Commissioners, Kansas City, Mo., over the last year. As part of that work, state insurance commissioners are considering collecting data and storing it in a central place.

The project under consideration comes at a time when Congress is considering the Insurance Information Act, or H.R. 5840, would establish an Insurance Information Office within the Treasury Department. The Capital Markets Subcommittee of the House Financial Services Committee has tentatively scheduled action on July 9 (see related story on page 6) and some insurers are waiting to see how the bill will ultimately treat collection of both financial and market conduct data.

The NAIC executive committee and plenary are holding a July 8 call to discuss and conceivably vote on the project. And the NAIC’s Market Regulation and Consumer Affairs “D” Committee may adopt both the life and annuity, and property-casualty market conduct annual statement blanks and instructions that would be used for the collection of market conduct analysis statement data.

But during a July 1 NAIC call, industry representatives from insurance trade groups including the American Insurance Association, the American Council of Life Insurers, both in Washington; the National Association of Mutual Insurance Companies, Indianapolis; and the Property Casualty Insurers Association of America, Des Plaines, Ill., urged regulators to seriously consider both confidentiality issues as well as how the proposal would fit with existing individual state laws.

Insurers want to know why the data needs to be collected, how it will be used and how it will be maintained and protected, according to Deidre Manna, vice president of industry and regulatory affairs with PCI.

Manna maintained that even if the data elements are currently individually available, by being aggregated nationally, they are in fact, new data.

And, the stacking of such data, year after year, would make it possible for competitors to determine an insurer’s strategy, she continued.

The data in market conduct analysis statements would also make it possible for agents, investors and trial lawyers to misrepresent or misuse market conduct data information, Manna added.

Joel Ario, acting insurance commissioner in Pennsylvania, asked whether making the data confidential would make insurance trade groups more amenable to the project. His question was repeated throughout the discussion by other commissioners including Michael McRaith, Illinois insurance director and Thomas Sullivan, Connecticut insurance commissioner.

But Neil Alldredge, vice president of state and regulatory affairs with NAMIC, questioned whether the NAIC actually had the authority to create a central place to hold market conduct data. He called it an “enormous assumption. It would be a big assumption on our part to believe that it could actually happen.”

The NAIC should consider acting in the role of a facilitator much as the state of Ohio did rather than an aggregator of data, he said. For a number of years, Ohio has taken the lead role among participating states in coordinating state efforts.

The NAIC is already acting in the role of a facilitator, says Cate Paolino, AIA senior counsel. It is providing a template and technical assistance, she said. Consequently, there is no urgent need to fill a gap, she said.

David Snyder, AIA Vice President and Assistant General Counsel, said that a lot more legal analysis work needs to be done before any decisions on the project are made.

Utah Insurance Commissioner Kent Michie offered a suggestion to reach accord–finding the state with the most advantageous confidentiality laws for advancing the data project and then having that state act as a central repository for data from other states. The NAIC then would be contracted as a third party provider to handle the data, Michie continued.

Joe Musgrove, an Arkansas regulator, said that regulators can never provide more confidentiality to data than that which is given when the data is first received. The only way to really keep data completely confidential would be through a market conduct examination, he said. So, for instance, in Arkansas, that would require opening up a market conduct examination on every company in the state unless there is a specific statute to the contrary. For example, in Arkansas, there is a specific risk-based capital statute that protects company information.

John Morrison, Montana’s insurance commissioner, told commissioners, “We are not in a position to decide what is confidential and what is not confidential. That standard is governed by state laws and state courts unless there is federal preemption under the supremacy clause. It is not our decision to make.”

Some states permit the access to all information, he continued. So, if a state requires that all information that a state has is public and the state has access to aggregated state data, then that state becomes a “public portal for all information,” according to Morrison.

What state insurance commissioners can do, he continued, is to identify such states and say that they cannot participate in the data collection effort.