Insurers Urge NAIC to Openly Discuss Market Conduct Pilot Project Before Moving On

The property/casualty industry has called on the National Association of Insurance Commissioners (NAIC) to make time on its winter national meeting agenda next month to have a cost-benefit discussion about Phase II of its market conduct annual statement pilot project.

The Alliance of American Insurers, the American Insurance Association, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies sent a letter this week to the NAIC Market Conduct Annual Statement Working Group saying that Phase II of the pilot project should not begin until an analysis of the results from the first phase is completed and fully discussed.

Attached to the letter is a report with the results of an informal survey showing that the total actual costs of companies participating in the first phase of the pilot project fall somewhere between $9.7 and $24.2 million. The report covers a discussion of startup and ongoing costs, and also provides details on how the requested data were retrieved, which data elements caused problems for insurers and what are likely to be the additional cost drivers if the NAIC moves forward with Phase II of the pilot project.

The property/casualty trade associations’ letter noted that, “These actual costs represent an enormous expense to the property/casualty industry in general, and for companies individually. Furthermore, insurers expect to incur additional costs if Phase II is undertaken and other states join the project.”

The trade associations reportedly emphasized that the NAIC needs to have a discussion to weigh the costs identified in the survey against any benefits identified by doing the annual statement.

Further, the trades stressed that the discussion should take place in a public forum, and it should also address “whether any new information was uncovered from the pilot project that otherwise could not have been discovered by simply reviewing departmental complaint files.”

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.

The property/casualty trade associations reportedly believe that only after the data from the first phase of the pilot project has been analyzed and discussed can regulators determine whether embarking on Phase II would be worth the cost.

In addition, regulators reportedly need the first phase data to answer 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.