State Legislators Eye Market Conduct, Building Codes, Federal Charter

State legislators who deal with insurance issues in their legislatures back home are expected to discuss amendments to their market conduct model law as well as state building codes during their summer meeting that runs today through Sunday in Boston.

The National Conference of Insurance Legislators (NCOIL) is expected to adopt amendments to its Market Conduct Surveillance Model Law originally adopted in 2004. The model law would establish a framework for insurance department market conduct actions, including processes and systems for identifying, assessing, and prioritizing market conduct problems that have a substantial adverse impact on consumers, policyholders, and claimants.

According to the Property Casualty Insurers Association of America, the amendments under consideration would address state collaboration, market analysis procedures, insurance department data requests, confidentiality, department access to third-party information, and review of complaint and other insurer data. At present the model law has not been adopted in any state.

Insurers are generally supportive but will closely monitor the legislators’ action on the amendments.

“The amendments currently under consideration are a major improvement over the original model or the first set of amendments proposed by the National Association of Insurance Commissioners and NCOIL,” said Donald Cleasby, vice president, regional manager and counsel for PCI. “However, our support for the model will be contingent upon its usefulness at the state level. This is a determination that must be made on a state-by-state basis.”

“We look forward to the discussion of important amendments to the NCOIL model,” said Cate Paolino, American Insurance Association senior counsel. “We have some concerns about the confidentiality provisions in the model. Otherwise, by and large, the amendments under discussion seem to be moving the model in the right direction.”

A special meeting July 20 on natural disaster insurance legislation will include a discussion of a proposed resolution on state building codes. Insurers will be watching to see how far lawmakers go in support of a national disaster plan.

“AIA supports measures to strengthen building codes as one component of natural disaster mitigation,” said Tammy Velasquez, AIA vice president and director, state affairs. “However, we continue to caution state legislators and regulators against adopting any natural disaster plans or legislation that ultimately do more harm than good by displacing the private insurance market, which has demonstrated its ability to handle natural catastrophes.”

NCOIL members are also expected to adopt a resolution in support of a workers compensation claims reciprocity model agreement. The International Association of Industrial Accident Boards and Commissions (IAIABC) model agreement is designed to address the coordination of workers compensation insurance requirements for employers and claims for injured workers resulting from temporary employment outside of the home base of employment.

“It is not unusual for employers to have jobs that require their employees to work outside of the state in which they are employed,” said John Lobert, senior vice president state government relations. “When workers compensation laws and regulations across states are not harmonized, it can create a web of complexity not only for employers, but for insurers as well.”

PCI supports the IAIABC Model as “a logical approach in a limited manner to resolve potential regulatory dilemmas that employers, especially small business owners, may encounter when their employees cross state borders on an incidental or temporary basis.”

Lawmakers are also scheduled to discuss making the Insurer Receivership Model Act (IRMA) provisions part of the NAIC accreditation standards. PCI is on record in opposition to this effort. “PCI has expressed strong opposition to inclusion of any or all of IRMA as a specific standard for accreditation,” said Michael Kozoil, assistant vice president and counsel for PCI. “Accreditation relates to assurances of solvency, it makes no sense for it to be expanded to address what a company does when it is insolvent,” said Koziol.

Finally, there will also be a debate over legislation in Washington that would give insurers the option of being regulated under a federal system, rather than under the current system controlled by states.

Stef Zielezienski, AIA senior vice president and general counsel, will be a panelist during a July 22 discussion on the National Insurance Act of 2006 (S. 2509). His group supports the federal charter option contained in that bill but others in the insurance industry, including independent insurance agents, oppose it.