NCOIL OKs Market Conduct Model Changes

Just what kind of support would come from the industry troubled some lawmakers.

Geller said the fact that no industry groups expressed outright opposition was important in that they could not support it outright without first checking with their members.

But Lenore Marema, vice president of the Property Casualty Insurers Association of America, took issue with Gellers implication that industry support would be forthcoming.

"At this point, I dont really know how our members will feel about this. And if worse comes to worse we will just write our own model or propose our own amendments to get the piece of legislation we feel is workable," she said.

Issues regarding domestic deference, the scope of market conduct actions and self-evaluative privilege were some of the thorniest areas that parties reached a compromise on.

But the one area the parties could not agree on was how to deal with those sections of the model that refer to NAIC work products and the procedure to follow if those work products should change. Instead there will be 3 options in the model that legislatures will have to choose when adopting.

Industry wanted to make sure regulators were forced to hold an administrative hearing any time a material change was made through NAIC work products, while the regulators wanted to have to go through that process only if such a change would necessitate a change in statute or rulewhich is something they would have to do anyway.

Marema said the regulators proposal "leaves little or no incentive to create a fair and open process for amending its work products, and instead creates an incentive to use the referenced work product to change state law without the scrutiny and accountability of the legislative process."

In regard to domestic deference, in which domiciliary states take on prime market conduct responsibilities, the proposed amendments give the commissioners more discretion in this regard in that they remove the "significant premium volume" requirement for acceptance of another states oversight. They also include references to more interstate collaboration as a first step to creating a more nationalized system of market conduct.

The regulators and lawmakers have been wrestling over the issue of just what kind of actions should trigger market conduct remedies. Industry would prefer a focus on general business practices and compliance activities, while the regulators want more discretion to ensure they could probe any practices that in their opinion cause significant consumer harm.

The regulators also attempted to water down those areas of the law that dealt with both the self-evaluative privilege and third-party best practices organizations. As to the latter, the revised amendment allows commissioners to take into account membership in such groups but deletes the requirement that participation be a mitigating factor when assessing fines.

Reproduced from National Underwriter Edition, July 22, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.