Insurers Ask NAIC to Nix Plans to Extend Pilot Project

The property/casualty industry voiced its “strongest objections” to any decision by the National Association of Insurance Commissioners (NAIC) to extend the annual statement data collection parameters of their market conduct pilot project beyond the agreed upon time frame.

The Alliance of American Insurers, the American Insurance Association, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies reportedly sent a letter to the NAIC Market Analysis Working Group saying that “any change in parameters at this time is tantamount to changing the rules of the game in midstream.”

The NAIC has conducted an annual statement pilot project to determine whether data collected-largely on claims practices, cancellations and non-renewals-will help it better target companies for examinations.

During a recent conference call the NAIC suggested that because of problems with the initial data collection from life insurers it might consider going forward to conduct a second annual statement pilot before results of the first project have been collected and analyzed.

“We want to re-emphasize that the Working Group should complete the property/casualty pilot project and fully evaluate its results, including the costs of completing the project, before launching into any discussion about a second pilot,” the industry letter read.

The letter said that during a Working Group interim meeting in August 2002 the trade associations explained that having companies collect data on a retrospective basis would pose a hardship for many of the companies and could result in data problems. The industry also presented the results of an informal survey showing that collective costs to insurance companies for the pilot project could exceed $20 million.

Based on those arguments, the letter said, it was agreed by the industry and the NAIC that notices to the property/casualty companies involved in the pilot would be mailed by October 2002 and the project would commence Jan. 1, 2003 and end on June 30. Property/casualty insurers would then submit their data to the nine participating states by Sept. 1, 2003. The nine states would
analyze the data and prepare a report by December 2003.

“We believe the Working Groups should adhere to this original timeline and should refrain from making preliminary judgments about the value of the quality or quantity of the property/casualty data until after the data from Phase I has been submitted and analyzed. It seems that only after this data has been collected can regulators address the other important questions raised by the Working Group; namely, what companies take the longest to pay claims and what companies may have a disproportionate number of cancellations and non-renewals,” the letter said.

The letter also reportedly emphasized that until the property/casualty pilot projects are completed and the results tallied any discussion about a second pilot project is premature.

The NAIC Market Analysis Working Group will address this issue at the NAIC Summer Meeting in New York, June 20-24.