2008 10 – CCIR – An Approach to Risk-Based Market Conduct Regulation – Final Report – 11p

  • 2008 10 – CCIR – An Approach to Risk-Based Market Conduct Regulation – “The Approach” – Final Report  —  [BonkNote]  —  11p
  • History of Risk-based market conduct regulation (RbMCR) project
  • In undertaking this work CCIR determined that applying risk-based methodologies to market conduct regulation provides some challenges not present in prudential regulation:
    • First, whereas prudential regulators deal solely with insurers, risk based market conduct regulation may also have to encompass different product distribution channels and potentially thousands of intermediaries who are the face of the insurance industry to many consumers
    • Second, there are a fairly small number of well-defined risks in solvency regulation. Market conduct risks tend to be much more difficult to define and quantify.
    • Third, market conduct regulators may be charged with looking after a number of functions that do not fit well within a risk-based model. For instance, significant aspects of the regulatory structure around automobile insurance provisions and rate reviews do not lend themselves to a risk-based regulatory approach.
  • Nevertheless, we are now proposing an approach which could form the basis for a framework for applying risk-based market conduct concepts to the ongoing work of regulators in Canada which is presented in this paper.
  • Defining Market Conduct Regulation
    • “Market conduct” encompasses any product or service relationship between the insurance industry, insurers, agents and individuals alike, and the public.
      • It is influenced by many factors including: laws, established best practices, codes of conduct, and consumer expectations.
    • To protect the public from unfair market practices, CCIR members oversee a wide range of company and intermediary practices (e.g. sales, underwriting, and claims processing) through a variety of regulatory activities such as licensing, consumer complaint reviews, and on-site examinations.
    • Taken together, these regulatory practices are referred to as market conduct regulation.
  • Defining Risk-based Market Conduct Regulation
    • Risk-based Market Conduct Regulation means directing regulatory efforts to the most significant issues that either have the greatest potential for consumer harm or that could weaken public confidence if left unchecked.
    • In a risk-based approach, regulators prioritize issues based on their potential impact (risk) to the achievement of desired regulatory outcomes.
    • For example: Legislation may indicate that insurers must honour legitimate claims within a certain period of time after completed claims forms are filed. A risk-based approach could be used to focus regulatory attention on insurers where indicators suggest there is a high risk of non-compliance with the legislation rather than giving every insurer equal weight and examining them all.
  • Marketplace Outcomes that Market Conduct Regulation seeks to achieve
    • In its work to date CCIR has considered numerous mission statements and goal documents from around the world and we believe that the following marketplace outcomes (or public policy goals) describe the goals of market conduct regulation in Canada.
    • These desired marketplace outcomes include both micro-level outcomes that are within the control of individual firms or intermediaries and broader systemic level outcomes that can only be achieved though the collective actions of the entire industry. It is expected that the micro-level outcomes must be achieved before the systemic outcomes can be fully realized.
      • Micro-level outcomes:
        • Fair treatment of consumers and claimants – Ethical and honest behaviour should be the accepted norm among market participants.
        • Disclosure of information to enable consumers to make informed decisions – In keeping with fair treatment, consumers should have access to simple, easy to understand information.
        • Compliance with laws – Market participants must comply with statutory, legal and corporate obligations.
        • Good corporate governance – Companies should identify and manage risks through internal controls, risk management and business oversight mechanisms.
      • Systemic level outcomes:
        • Stable marketplace – In which the needs of consumers for understandable, available, accessible and affordable insurance are met;
        • Proactive identification of issues – Collaboration between industry and regulators to prevent issues from arising rather than merely fixing problems after they happen; and
        • Fair Dispute Resolution – A process by which disputes are dealt with by participants in a fair, timely and responsive manner.
      • Below is a graphic representation of our vision of how these various aspects fit together into an ongoing system.

2022 – FSRA – Principles of Conduct for Insurance Intermediaries

  • [  ] – 2022 – FSRA – Principles of Conduct for Insurance Intermediaries – No. PC0044INT  —  [BonkNote]  —  [link]  —  21p
    • Appendix B: Examples of conduct contrary to the Principles of Conduct
      • The following is a non-exhaustive list of conduct FSRA has observed that would be considered failures in following the Principles of Conduct.
    • References
    • CISRO Principles of Conduct for Insurance Intermediaries – 3p
    • 2018 09 – CCIR-CISRO Guidance on Conduct of Insurance Business and Fair Treatment of Customers – 28p
    •  FSRA Guidance on the Fair Treatment of Customers in Insurance
      • fsrao.ca/regulation/guidance/fair-treatment-customers-insurance
      • Superintendent’s Guideline No. 03/18: Treating Financial Services Consumers Fairly, issued by the FSRA’s predecessor agency the Financial Services Commission of Ontario (FSCO), remains in place for the supervision of conduct in the mortgage brokering, loan and trust, and credit union and caisse populaire sectors.
    • IAIS ICP 18 Intermediaries and ICP 19 Conduct of Business
    • RIBO Guidance on the CISRO Principles of Conduct for Insurance Intermediaries
  • 2022 – FSRA – Comments – Consultation on Proposed Principles of Conduct for Insurance Intermediaries  —  [BonkNote]  —  [link]
    • ID: 2022-007
    • Comment Due Date – May 3, 2022

Market Conduct - Documents

  • 2016 - NCOIL - Market Conduct Surveillance Model Law - 17p
    • Adopted by the NCOIL Executive Committee on November 11, 2006.
    • Readopted by the NCOIL Executive Committee on November 20, 2011 and November 20, 2016.
  • 2019 1014  - NAIC - Guidelines - Voluntary Market Regulation Certification Program, Self-Assessment Guidelines, Checklist Tool and Implementation Plan, Revisions Recommended by Pilot Jurisdictions - 38p
    • Draft: 10/14/19
      • Implementation Plan adopted Market Regulation and Consumer Affairs (D) Committee - Nov. 30, 2016
      • Implementation Plan adopted by the Market Regulation Certification (D) Working Group - Nov. 3, 2016
      • Guidelines and Checklist adopted by the Market Regulation and Consumer Affairs (D) Committee - Aug. 27, 2016
      • Guidelines and Checklist adopted by the Market Regulation Certification (D) Working Group - July 28, 2016
    • https://content.naic.org › inline-files › Redline_When conducting examinations or continuum activities, does the department incorporate applicable Market Regulation Handbook review standards and related ...
  • Market Conduct Uniform Examination Outline

1970s

  • 1974 - Report - Strengthening the Surveillance System: Final Report, McKinsey & Company, Inc. - 126p

1980s

  • 1981 - NAIC - Market Conduct and Trade Practices (B1) Subcommittee 
  • 1981 - NAIC - Market Conduct and Consumer Services Task Forces 
  • 1981 - NAIC - Background Paper on the Status of the Regulation of Market Conduct in the Insurance Industry, NAIC Market Conduct and Trade Practices (B1) Subcommittee Attachment Five - 17p
    • This paper describes the history of the examination process, summarizes the 1974 McKinsey evaluation of the examination system, outlines market conduct developments since the McKinsey study and identifies current market conduct issues.
  • 1981-2, NAIC Proceedings - Survey of Industry Experience with Market Conduct Examinations, June 7, 1981, Attachment Four and Four-A (Questionnaire) - p448-
  • 1982 - NAIC - Report of the National Association of Insurance Commissioners Special Joint Committee on Examinations - 306p
  • 1984 05 - NAIC - Report of the (EX3) Market Conduct Surveillance Task Force Working Group on Consumer Complaint Analysis - 26p
  • 1988 - NAIC - Complaint analysis questionnaire: survey conducted by the Subgroup on Market Conduct Data, Complaints and Examinations of the Market Conduct Surveillance (EX3) Task Force

1990s

  • In 2011, the NAIC introduced a new Market Conduct Annual Statement (MCAS) collection system
  • 1995 - JIR / NAIC - Symposium on the Regulation of Life Cost Disclosure and Market Conduct, by Tom Foley and Carolyn Johnson - 48p
  • 1998 - SOA - Market Conduct: A New Actuarial Frontier, Society of Actuaries - 20p

2000s

  • 2000 - NCOIL - Reforming Insurance Regulation: Making the Marketplace More Competitive for Consumers - <WishList>
    • 2003 1105 - GOV (House) - Reforming Insurance Regulation: Making the Marketplace More Competitive for Consumers, Richard H. Baker (R-LA) - [PDF-200p, VIDEO-?]
  • 2003 09 - GAO - Common Standards and Improved Coordination Needed to Strengthen Market Regulation - 53p
  • 2003 0506 - GAO - Insurance Regulation: Preliminary Views on States' Oversight of Insurers' Market Behavior, Statement of Richard J. Hillman, Director, Financial Markets and Community Investment   -  gao.gov/products/gao-03-738t  --- Full Report:  15p
  • 2003 0701 - Report - For NCOIL - The Path to Reform - The Evolution of Market Conduct Surveillance Regulation, by PricewaterhouseCoopers and Georgia State University - 117p
  • 2004 - NAIC - Military life insurance sales regulatory response options, Market Regulation & Consumer Affairs (D) Committee, Market Analysis Working Group, HG 8861 N38  - <WishList>
  • 2004 - NAIC - Market Conduct Examiners Handbook - 1582p
  • 2004 - IMSA - Market Conduct Standards & the Life Insurance Industry, NOLGHA Annual Meeting, October 26-27, 2004 - 26p
  • 2007 11 - Report - For NCOIL - A Study on State Authority: Making a Case for Proper Insurance Oversight, by James W. Schacht Managing Director Navigant Consulting, Inc. and SUNY - 147p
  • 2006 (updated) - NAIC - A Reinforced Commitment: Insurance Regulatory Modernization Action Plan - 20p
  • 2009 - GAO - Insurance Reciprocity and Uniformity: NAIC and State Regulators Have Made Progress in Producer Licensing, Product Approval, and Market Conduct Regulation, but Challenges Remain - gao.gov/products/gao-09-372   ---  Full Report - 57p

2010s

  • 2012 10 - NAIC / CIPR - CIPR Newsletter - 32p
    • (p19-) - The Market Conduct Analysis Framework - Randy Helder
      • Market Analysis Prioritization Tool (MAPT)
        • Because MAPT is a prioritization tool, it does more than just aggregate data for market analysts. Built into the tool is a scoring system.
        • complaint index
        • total number of complaints against a company, the count of confirmed complaints against a company (a confirmed com-plaint is a complaint that was coded with a disposition con-sidered adverse to the company) and the market share of the company.
      • Many analysts refer to MAPT as a "wall of data" because there is so much data provided for so many companies at one time. Nevertheless, MAPT is incapable of identifying, with certainty companies that are misbehaving in the market. Its primary purpose is to prioritize the companies for more in-depth analysis.
      • Regulators and NAIC staff developed MAPT with a heavy emphasis on the data available at the NAIC. At that time, much of the data at the NAIC was financial data. Data that could be considered strictly market conduct-related data was limited to complaints, market regulatory actions taken by the states and demographic information. Beginning in 2008, however, the NAIC became the central repository of data gathered through the Market Conduct Annual State-ment (MCAS.) This has greatly increased the scope of data available to market analysts.
        • The current form of the MCAS was first collected in 2002 by eight states.
    • For the life and annuity lines of business, MCAS collects information on new and replacement activity with a focus on the age of the insured/annuitant and surrender activity, particularly of policies that may incur a surrender charge. There are also claims questions for the life products that address the speed of claim settlement and the percent of claims compromised or denied. Suitability and policyholder service are the focus of the life and annuity MCAS.4
    • An analyst can also compare the data to the types of complaints filed against a company. The analyst may find correlations between the complaints and the reported data that substantiates consumer concerns.
    • Level 1 - Prior to any examination or audit of a company, an insurance department has to know what they need to focus on during the examination or audit. This requires reviewing a company's financial statements, the company's communi-cations with the insurance department and consumers' communications with the insurance department.
  • The analyst accesses this template through the NAIC Market Analysis Review System (MARS).
  • "Continuum activity" - Continuum activity is any regulatory response to a market conduct issue. The range of possible responses is referred to as a continuum because of the multitude of possible ways to work with companies in understanding and resolving market conduct concerns. The possible responses can range from a telephone call or letter to audits and examinations and every-thing in between, such as an interview or survey.
  • Conclusion
  • The States regulate insurance entities to help ensure financial solvency and to promote a fair and competitive market-place. Regulators rely on data gathered from a variety of sources to monitor the marketplace. The goal is to spot dis-ruptions as early as possible and resolve them effectively and efficiently. To do so, the data must be organized, ana-lyzed and evaluated. This is the responsibility of financial and market analysts.
    • Market analysis does not, and maybe cannot, have the same exactness of financial analysis because of the nature of what it is attempting to analyze: human behavior and the arena in which it takes place-56 NAIC jurisdictions with distinct and occasionally different market conduct regula-tions. Market analysts, however, continue to refine their methodologies in an attempt to be predictive. Regardless of the methodologies, predictive analytics are not possible without adequate data. The only data adequate to the task is transaction-level data. Regulators, particularly market analysts, must continue to push for greater access to trans-action-level data from companies.

Premiums, Costs, Values and Benefits – Market Conduct

  • In its June 7, 1994 Consent Order #94-102, the NJDBI cited N.J.S.A. 17B:30-3 and N.J.A.C. 11:2-23.4 and subsequently fined MetLife $965,555 for MetLife’s practice of misrepresenting life insurance to be retirement or savings plans, particularly in advertisements sent to nurses and other professionals. 

Report of the Metropolitan Life Insurance Companies located in New York, New York as of December 31, 1998 – 44p

  • Statement on Behalf of the American Council of Life Insurance to the NAIC Market Conduct Surveillance (EX3) Task Force, June 13, 1988 – Attachment Two
    • …..provide illustrations based on different assumptions. 
    • This would serve to demonstrate to the consumer the effect on future benefits of changes in assumptions.

Proposed Amendment To NAIC Model Advertising Rules

1988-2, NAIC Proceeding

  • IAIS – ICP 19 Conduct of Business
    • The supervisor requires that insurers and intermediaries, in their conduct of insurance business, treat customers fairly, both before a contract is entered into and through to the point at which all obligations under a contract have been satisfied. – [link]
 
  • 6. Agreed to Discuss Universal Life Policies
  • Kim O’Brien (Americans for Asset Protection-AAP) said:
    • … there is a growing problem with universal life insurance policies that is hitting the elderly particularly hard.
    • Due to the low interest rate environment, policies purchased 10 and 20 years ago require additional premiums to stay in force, and the premium hikes are particularly difficult for the elderly to pay.
    • Commissioner Doug Ommen (IA) said:
      • … he would put the issue on the agenda for a future meeting.
      • the issue might be one for the Market Regulation and Consumer Affairs (D) Committee, as well.

2018-3, NAIC Proc. –  (LIAC) Life Insurance (A) Committee

Conduct – Index

Market Conduct Regulation vs. Solvency Regulation

  • In guarding the public against insolvent insurance companies state supervision has been eminently successful.
  • In protecting the people against frauds, impositions and abuses by solvent companies it has been only partially successful.  

“Deceptive Insurance Methods –The Cure”, By Mr. E. E. Rittenhouse (Insurance Commissioner of Colorado) – (p215-228)

1907-0, NAIC Proceedings

  • (p12) – Daniel Schwarcz (Associate Professor, University of Minnesota Law School:
    • So, notably, you will see that my testimony was focused on different issues than many of the other witnesses, and that is because it is true that solvency regulation is in many ways the core of insurance regulation.
    • Now, I say this to contrast it with market conduct and other forms of consumer regulation…. 
  • (p13) – Terri Vaughan (NAIC-CEO / IA)
    • The first thing I want to say, I agree with Professor Schwarcz that the level of our collaboration in market regulation is behind the level of collaboration in solvency regulation and that is something we have been working on for a number of years, to try to increase the collaboration.  

2011 0914 – GOV (Senate-Banking/SII) – Emerging Issues in Insurance Regulation, Jack Reed (D-RI)  —  [BonkNote]

ICP 19 - Conduct of Business (COB) - IAIS

  • ....in the United States, the term "market conduct" instead of "conduct of business" is more widely used.

2015 0501 - AAA to IAIS - Committee Comments To IAIS On Conduct Of Business Risk Draft Paper - 4p

IAIS - ICP 19 Conduct of Business

  • The supervisor requires that insurers and intermediaries, in their conduct of insurance business, treat customers fairly, both before a contract is entered into and through to the point at which all obligations under a contract have been satisfied. - [link]

Sources of conduct of business risks

  • conduct of business risk can arise from multiple sources, including factors inherent to insurance markets, the insurer's or intermediary's governance and business processes, and broader economic and environmental factors
  • conduct of business risk includes risks arising from poor business conduct to which insurers, intermediaries and the insurance sector itself are exposed, but importantly also risks to which insurers and intermediaries expose their customers.

2015 0617 DRAFT - IAIS - Issues_Paper_on_Conduct_of_Business_Risk_and_its_Management - 45p

Conduct of Business - ICP 19

  • 2014 10 - IAIS - Application Paper on Approaches to Conduct of Business Supervision - 59p
  • 2015 0717 (Draft) - IAIS- Issues Paper on Conduct of Business Risk and its Management
  • 2015 0815 - IAIS - Compiled Comments on Consultation Document: Issues Paper on Conduct of Business Risk and its Management- 01-Jul-15 to 14-Aug-15 - Comments as compiled on 15 August 2015
  • 2015 11 - IAIS - Issues Paper on Conduct of Business in Inclusive Insurance - [download link - 55p]

Typical risks found in inclusive insurance business models

Six common risks34 can be identified that have a distinct manifestation in inclusive insurance distribution: • Prudential risk35 is the risk that the insurer as risk manager is not able to keep its promises and deliver benefits to the beneficiaries. Prudential risk derives largely from the features of the insurer's operations and management and therefore a lack of capacity of the insurer and a lack of regulation and oversight regarding the management of insurers heightens prudential risk.
• Aggregator risk is the risk of reduced customer value and inappropriate products being sold to customers when an insurer accesses the aggregated customer base of a non-insurance third party to sell its products through that channel.
• Sales risk is the risk that the salesperson will misrepresent the product to the customer or sell a product that the customer does not need. Reduced customer value or inappropriate product choice can also be the result of sales risk.
• Policy awareness risk is the risk that the insured is not aware that he or she has insurance cover and is therefore unable to lodge a claim should the risk event occur. The manner in which insurance is sold through certain inclusive insurance business models can heighten the risk that policyholders are unaware that they have insurance coverage. There is also the risk that the insured is not fully aware of the terms and conditions of the insurance or does not know how to make a claim.
• Payments risk is the risk that the premium will not reach the insurer, that the premium will not be paid on the due date or that the cost of collecting the premium is disproportionate. Payments risk means there is a heightened possibility that premiums are not regularly received by the insurer.
• Post-sales risk is the risk that customers face unreasonable post-sale barriers to maintain their cover, change between products, make enquiries, submit claims, receive benefits or make complaints. It therefore refers to the risk of poor service and the potential disincentive for insurers and intermediaries to be efficient in claims processing and service provision.

See the annex for more details. (p17)

33 Paragraph 11 of the Issues Paper on Conduct of Business Risk and its Management indicates that Conduct of business risk can be described as "the risk to customers, insurers, the insurance sector or the insurance market that arises from insurers and/or intermediaries conducting their business in a way that does not ensure fair treatment of customers."

2015 11 - IAIS - Issues Paper on Conduct of Business in Inclusive Insurance - [download link - 55p]

  • While the dramatic changes envisaged in the scenarios presented to us might generate immediate and drastic response by a firm in another industry, in the life insurance industry the response -- if any -- comes at a more measured pace.
  • The crisis reaches its peak before the industry begins to respond effectively to the problem.
  • By the time response is forthcoming, the crisis is past and another issue begins to pick up steam to take its place.
  • The financial momentum of the business enables companies to sail by the crisis peak, if I may mix a metaphor, and on into other troubled waters.
  • The slower, more deliberate reaction of the life industry enables the necessary changes to be made over longer periods of time, thereby gradually improving performance.
  • So far, this general avenue of conduct has been successful.
  • Will it continue to be so in the 1980's?

-- John R. Gardner

1980 - SOA - The Future of Permanent Life Insurance, Society of Actuaries - 28p

Selected reference to international standards or material on COB supervision:

• AMF, Quebec: Sound Commercial Practices Guideline (June 2013)
• EIOPA: Guidelines on Complaints Handling by Insurance Undertakings (June 2012)
• EIOPA: Report on Best Practices by Insurance Undertakings in handling complaints (June 2012)
• EIOPA: Report on Good Practices on Comparison Websites (January 2014) FCA, UK: Journey to the FCA (October 2010)
• FCA, UK: Applying behavioural economics at the Financial Conduct Authority (April 2013)
• FSA, UK: Mystery Shopping Guide (November 2006)
• FSA, South Africa: Implementing a twin peaks model of financial regulation in South Africa (February 2013)
• NAIC: Market Regulation Handbook (2013)
• OECD: G20 High-level Principles on Financial Consumer Protection (October 2011)

2014 10 - IAIS - Application Paper on Approaches to Conduct of Business Supervision - 59p

Q: What Policies lead to Confusion / Market conduct issues / Lawsuits?

More complex products sold to individual consumers (e.g., universal life policies) tend to generate more market conduct problems than simple products (e.g., term life insurance).

2003 0701 – NCOIL – The Path to Reform – The Evolution of Market Conduct Surveillance Regulation – [PDF-117p]

  • <Mr. Lovendusky – ACLI> said the ACLI work group thinks that most confusion for consumers involves complex products like universal life, and not Simple products like term life.
    • He said consumers are mostly confused about options, guarantees and riders.
  • The ACLI work group was considering asking the life insurance and Annuities (A) Committee to narrow the charge to look at only products with options, guarantees and riders, but Ms. Cude said she thinks that it is important to consider how the disclosures for all products could be improved.

2016 0403 – LIIIWG CC, NAIC Proceedings

Market Conduct

  • The NAIC Examination (A6) Subcommittee, in 1974, recommended the establishment of a “separate and distinct” program of surveillance to ensure fair treatment of policyholders.
    • Thus was “market conduct” born.
  • The term “market conduct” has, however, fallen upon bad times. 

1991-2A, NAIC Proceedings

  • (p13) – Terri Vaughan (NAIC-CEO / IA)
    • The first thing I want to say, I agree with Professor Schwarcz that the level of our collaboration in market regulation is behind the level of collaboration in solvency regulation and that is something we have been working on for a number of years, to try to increase the collaboration.  

2011 0914 – GOV (Senate) – Emerging Issues in Insurance Regulation – Senator Reed (D-RI)   —   [BonkNote]  —  [PDF-51p,  VIDEO-Senate] 

  • No one could deny that State insurance commissioners have a poor record when it comes to market conduct oversight of the insurance industry, and consumers have been abused as a result.
  • We could go through many examples.  (p13)

It is hard to fix a system that has not been analyzed.  (p14)

  • There should be suitability rules in place, particularly for cash value life insurance policies to assure that sales of proper products are made.  (p14)

—   J. Robert Hunter, Director of Insurance, Consumer Federation of America  

2003 0506 – GOV (House) – Increasing the Effectiveness of State Consumer Protection, Sue W. Kelly (R-NY)  —  [BonkNote]

  • 1998 – SOA – Market Conduct: A New Actuarial Frontier, Society of Actuaries – 20p
  • 1998 – SOA – Market Conduct Issues for Product Development Actuaries, Society of Actuaries – 27p
    • Summary: Market conduct issues are perhaps one of the most serious facing the life insurance industry today. How did we get to this point? And more importantly, what actions are companies taking to address these issues?
  • A recent class action suit against Prudential Insurance Company provides further evidence of the need for enhanced market conduct regulation.
  • More than eight million claimants from all fifty states and the District of Columbia alleged fraudulent and deceptive sales practices against Prudential.234
  • The first exposure of Prudential’s illegal activities began early in 1994 when the first lawsuits were brought against it.235
  • The New Jersey insurance commissioner organized the Multi-State Task Force on April 25, 1995, to conduct an examination of Prudential’s sales practices.236
  • The Task Force issued its report in July 1996 and cited widespread evidence of fraudulent sales practices by agents, evidence of management’s knowledge of those practices, and failure to investigate or discipline violators.237
  • State regulators failed to detect ongoing, widespread fraud and failed to act until prompted by the plaintiff’s bar and the media exposure of Prudential.238

1999 – LR – Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners, by Susan Randall – 77p

  • (p8) –  Our job is to follow those complaints and address them in our marketplace and make that marketplace work for consumers at the local level.

NAIC – Joel S. Ario, Insurance Administrator, Oregon Insurance Division, Secretary Treasurer, National Association of Insurance Commissioners

2003 0506 – GOV (House) – Increasing the Effectiveness of State Consumer Protection, Sue W. Kelly (R-NY)  —  [BonkNote]  —  [PDF-123p, 

  • They have market conduct studies. They should have caught this. They go in with these market conduct and financial investigation studies and they catch nothing.
  • The same thing happened with life insurance abuses a few years ago, when Prudential and all ended up having to pay billions because of lawsuits. They don’t catch anything.  (p40)
    • [Bonk: They = States / NAIC]

—  J. Robert Hunter, Director of Insurance, Consumer Federation of America 

2004 1116 – GOV (Senate) – Oversight Hearing on Insurance Brokerage Practices, including Potential Conflicts of Interest and the Adequacy of the Current Regulatory Framework, CSPAN (Insurance Brokerage and Regulation Practices) – [PDF-166p, VIDEO-CSPAN] 

  • (p12) – Daniel Schwarcz (Associate Professor, University of Minnesota Law School:
    • So, notably, you will see that my testimony was focused on different issues than many of the other witnesses, and that is because it is true that solvency regulation is in many ways the core of insurance regulation.
    • Now, I say this to contrast it with market conduct and other forms of consumer regulation…. 
  • (p13) – Terri Vaughan (NAIC-CEO / IA)
    • The first thing I want to say, I agree with Professor Schwarcz that the level of our collaboration in market regulation is behind the level of collaboration in solvency regulation and that is something we have been working on for a number of years, to try to increase the collaboration.  

2011 0914 – GOV (Senate) – Emerging Issues in Insurance Regulation – Senator Reed (D-RI)   —   [BonkNote]  —  [PDF-51p,  VIDEO-Senate] 

  • 1995-4, NAIC Proceedings – Market Conduct Regulation Guidelines Working Group of the Market Conduct and Consumer Affairs (EX3) Subcommittee, November 13, 1995 – 6p
    • 1995-4, NAIC Proceedings – 1995 1205 – Attachment Four-A – NAIC Market Conduct Regulation Guidelines, Final Draft: Dec. 5, 1995
      • …market conduct regulation deals with the treatment of people.
  • 2008-3v1 – Consumer Protections and Innovation (D) Working Group
  • VIETNAM DELEGATION MEETS WITH NAIC EXPERTS IN KANSAS CITY
    • Tim Mullen, NAIC’s Director of Market Regulation, provided a presentation on agent professionalism: licensing, training, administrating and requirements for agents who sell universal life products and variable life products.

2008-2, NAIC Proceedings

  • Public interest in various aspects of insurance regulation has risen and fallen over its history, but one area that has remained obscured is market conduct regulation.

2001 – JIR / NAIC – An Assessment of Insurance Market Conduct Surveillance, Vol. 20, No.1, by Robert W. Klein, James W. Schacht – 44p

More complex products sold to individual consumers (e.g., universal life policies) tend to generate more market conduct problems than simple products (e.g., term life insurance).

2003 0701 – NCOIL – The Path to Reform -The Evolution of Market Conduct Surveillance Regulation –  Prepared for the Insurance Legislators Foundation by PricewaterhouseCoopers LLP and Georgia State University – 117p

 

ATTACHMENT FOUR-A – NAIC Market Conduct Regulation Guidelines – Final Draft: Dec. 5, 1995

It is apparent that consumers place strong emphasis on market conduct regulation.

  • Dissatisfaction with perceived market practices has been the driving force behind the initiatives in a number of states.
  • It was a reaction to the constriction of the insurance marketplace in 1985-1986 that caused many to criticize the effectiveness of state regulation and call for federal involvement.
  • Consumer demands continue to place emphasis on this form of regulation.

1995-4, NAIC Proceedings

  • Mr. DeAngelo (Commissioner-NJ) said he did not recall seeing incorrect or misleading training materials, so this is somewhat a theoretical question.
  • Mr. Hanson responded that he had seen misleading materials in market conduct examinations. 

1999-4, NAIC Proceedings

  • In its June 7, 1994 Consent Order #94-102, the NJDBI cited N.J.S.A. 17B:30-3 and N.J.A.C. 11:2-23.4 and subsequently fined MetLife $965,555 for MetLife’s practice of misrepresenting life insurance to be retirement or savings plans, particularly in advertisements sent to nurses and other professionals. 

1998 / 2003 – Report of the Metropolitan Life Insurance Companies located in New York, New York as of December 31, 1998. By Examiners of the State of New Jersey Department of Banking and Insurance Division of Enforcement and Consumer Protection Market Conduct Examination Unit – 44p

Problems spotted during a market conduct review can be a precursor to financial solvency concerns. 

 content.naic.org/cipr_topics/topic_market_conduct_regulation.htm
  • Legal Actions
  • Monitoring of litigation may alert regulators to issues that the regulatory system has not yet addressed.

2008-3, NAIC Proc. 

  • c. Adopt Recommendation for Market Conduct Examination Oversight (EX3) Task Force as NAIC Standing Technical Committee
    • Commissioner Weaver asked Mr. Chartrand to review the proposal.
    • This need is particularly important as the subcommittee would continue to focus on issues of policy, law and model legislation while the new task force would be concentrating on matters directly related to the examination processes.
    • Mr. Synnott replied that he concurred and that he had already been approached by members of the industry interested in serving on such an advisory committee.

1991-1A, NAIC Proceedings

  • A preliminary meeting of the Market Conduct Task Force was held at the Zone III meeting in Springfield in October.
  • At that meeting there was a general discussion of the objectives which the task force should pursue.
  • A number of possible areas for consideration in regard to market conduct examinations were mentioned, including the following:
    • 1. Examination funding standards,
    • 2. Examination skills relating to market conduct, for example, development of uniform standards to test market conduct performance,
    • 3. Revision of the NAIC Market Conduct Handbook,
    • 4. Creation of a system for surveillance of claims handling,
    • 5. Establishment of an “Annual Statement” for market conduct or some form of annual performance statement,
    • 6. Inquiry into alleged abuses of the market conduct examination process and ways to correct or prevent such abuses,
    • 7. Development of a questionnaire to survey Regulators and industry about concerns with market conduct examinations.  (p317)

1981-1, NAIC Proceedings 

  • Responding To Market Conduct Problems (Section VI)
    • Self-Audits
    • States may monitor company self-audits.
    • “Best practices” organizations or independent standard-setting organizations, such as IMSA in the life insurance industry, promote self-audits or self-evaluative activities and mandate corrective actions on the part of their members.

2005-2, NAIC Proc.