NATIONAL CONFERENCE OF STATE LEGISLATURES
December 7, 2005
Susan Voss, Insurance Commissioner, Iowa
The NAIC is implementing a more effective and efficient market regulatory system based upon the following primary elements: (1) structured and uniform market analysis, (2) uniform examination procedures, (3) interstate collaboration and (4) a broader continuum of regulatory responses.
Market Analysis
The NAIC’s has established a framework for uniform analysis to identify, assess and prioritize market conduct problems that have a substantial adverse impact on consumers, policyholders and claimants. In 2004, the NAIC published the Market Analysis Handbook, with procedures for data collection and systematic market analysis of consumer complaint trends, financial data and other relevant market data that will lead to nationally-coordinated state market analysis programs. The analysis procedures in the handbook were implemented in 2004.
Moving forward, states then utilized a newly developed “Level 1 Checklist” to further analyze companies and regulatory concerns for further coordination through MAWG. This checklist provides a uniform method through which states review complaint activity, regulatory actions, changes in premium volume and other key market indicators. In 2004, state market analysts and NAIC staff completed 1,865 “Level 1 Checklists” on companies that represent approximately 85% of the market for five key lines of business. This increased analysis, targeting, and coordination has resulted in more effective and efficient targeting of state resources and fewer duplicative regulatory efforts. This effort continues to be a top priority of the NAIC with the automation of this process, which has lead to the better sharing of state analyses.
Uniformity
In 2002, the NAIC adopted a comprehensive set of Uniform Examination Procedures, to which 42 states have certified compliance. Use of uniform procedures makes exams more efficient and plays a key role in enhancing collaborative efforts. To ensure public accountability, the NAIC adopted a process for resolving complaints about state non-compliance with Uniform Examination Procedures.
In 2006, the NAIC is moving forward with the refinement of existing standards and the development of new uniform standards for the following areas: (1) market analysis, (2) broader continuum of regulatory responses, (3) state authority to analyze, investigate and examine companies and (4) interstate collaboration.
Interstate Collaboration
There have already been several examples of collaborative successes such as one effort that resulted in a settlement requiring a major insurer to change its claims practices and to re-assess claims going back several years. This settlement occurred without the need for an examination. All fifty states and the District of Columbia participated in the effort.
To further facilitate collaboration, the NAIC has formed a high level working group to provide policy direction for collaborative actions, facilitate interstate communication and coordination of collaborative actions, recommend appropriate corrective actions and common solutions to multistate problems, and promote the use of a cost effective continuum of regulatory responses to common problems.
Market Regulation Accomplishments
I. Market Analysis
The NAIC’s Market Analysis (D) Working Group (MAWG) has established a framework for uniform analysis of insurance companies. The framework includes processes and systems for identifying, assessing and prioritizing market conduct problems that have a substantial adverse impact on consumers, policyholders and claimants.
Market Analyst’s Scorecard
Many of the market analysis successes were documented at the NAIC’s Winter National Meeting where MAWG released the 2005 Market Analyst’s Scorecard.
Level 1 Analysis
MAWG created Level 1 Analysis, which consisted of 16 uniform questions that could be completed by analysts without the need to contact companies for additional information. For 2005, the Market Analysis Review System (MARS) application automated the questions and provided states with access to see analysis performed by other states.
Level 2 Analysis
For 2006, states will have a guideline to aid them in conducting Level 2 Analysis. The Guide will provide analysts with detailed recommendations concerning additional places to obtain crucial information on insurers, both from within and outside the insurance industry.
Company Listing Prioritization Tool
The Market Analysis Tools Automation Ad Hoc Technical Group (MATA) is creating a baseline prioritization tool that will aid analysts in identifying outliers for various measures.
MIS Data
MAWG has increased its efforts to ensure states are fully participating in all of the NAIC’s Market Information Systems (MIS) databases.
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Handbook
- The NAIC has developed the Market Analysis Handbook in order to assist states in developing, implementing and coordinating market analysis programs.
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Market Conduct Annual Statement (MCAS)
- The MCAS was developed with the input of state regulators and industry representatives in order to provide an analysis tool for certain key market performance issues that will help regulators allocate market analysis resources where they can be most effective. Nineteen states are participating in the MCAS with the 2005 data.
II. Uniformity
Core Competencies
The NAIC’s Uniformity (D) Working Group expects to adopt the first set of core competencies for state insurance department market regulation activities at its December meeting. The core competencies are standards a state’s market regulation division should follow to ensure adequate supervision of the marketplace.
III. Collaboration
MAWG has established procedures to communicate and coordinate market conduct actions with other states through Collaborative Actions Designees (CADs), MAWG, the NAIC’s Bulletin Boards, the MARS application and the forthcoming Market Initiative Tracking System (MITS) application.
Continuum and MITS
The NAIC has created and is utilizing a continuum of regulatory actions that describes actions that can be taken before an exam is called. Beginning in the spring of 2006, all states will have the ability to enter market regulatory actions into a database call the Market Initiatives Tracking system (MITS).
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