Market Regulation and Consumer Affairs (D) Committee
Meeting Date
The Market Regulation and Consumer Affairs (D) Committee met in Washington, DC on October 1, 2007.
During this meeting, the Market Regulation and Consumer Affairs (D) Committee:
Received the Report of the Consumer Protections (D) Working Group on their adoption of the work of the Complaint Handling and Reporting Standards (D) Subgroup. The Subgroup reported that they had adopted coding and dispensation coding changes to CDS, as well as identified duplicative codes.
Received the Report of the Antifraud (D) Task Force that summarized the reports from its six working Groups. The Task Force reported the Producer, Company, Unauthorized Entities and Unlawful Activity (D) Working Group distributed and reviewed final survey results detailing how states identify and address unauthorized activity. The Working Group distributed the first re-drafted copy of the Unauthorized Entities Manual, reviewed sections II through VI and comments were received. The Working Group will open the draft changes to the manual for a 30-day comment period and the manual will be posted on the NAIC Web Site. The Task Force reported the Federal and International Enforcement Coordination (D) Working Group distributed the draft bylaws and work plan for the future development of the International Association of Insurance Fraud Agencies (IAIFA), which had been voted on and unanimously approved by the task force. The Task Force also reported they had received a report from the Senior Issues (B) Task Force on sales and marketing practices of Medicare Advantage and Medicare Part D prescription drug plans. The Working Group and Task Force also received reports from the Federal Bureau of Investigation (FBI) and the Postal Inspection Services. The Task Force also reported the Antifraud Liaison (D) Working Group distributed the final draft of the NAIC Automobile Insurance Fraud Guidelines. The Working Group and Task Force voted unanimously to adopt the guidelines. Howard Goldblatt (Coalition Against Insurance Fraud) provided the Working Group with a state legislative update. The Task Force also reported that they had received an update from the Antifraud Training and Seminar (D) Working Group, who distributed the evaluation report for the 2007 NAIC Insurance Fraud Training Seminar which occurred in July 2007, and that an additional training would be held at NAIC Headquarters in January or February of 2008. The Task Force reported that the Information Sharing and Technology (D) Working Group discussed the NAIC budget proposals to update the NAIC On-Line Fraud Reporting System (OFRS) and database search capabilities, which would allow industry to report suspected fraud referrals by group code as well as NAIC company code (Co-code). Finally, the Task Force reported the NAIC/NASAA Enforcement Coordination (D) Working Group distributed the evaluation report for the 2007 NAIC/NASAA Joint Training Seminar that was held in conjunction with the Summer National Meeting. The Working Group also discussed the merger between the NASD and the New York Stock Exchange (NYSE), creating the Financial Regulatory Authority (FINRA).
Received the report of the Producer Licensing (D) Working Group regarding an update from the Commissioner Roger Sevigny (NH) on the progress of the Producer Licensing Coalition. The Working Group discussed the charge of developing a Producer Licensing Manual, and received a report regarding continuing education issues, such as instructor forms, rosters, and states individual announcements that must be read. The Working Group discussed their intention to bring uniform interpretation to Subsection 13D of the Producer Licensing Model Act in the future. The Working Group secondly received a report from the Independent Adjuster Licensing Guideline (D) Subgroup, the working group will hold a conference call to complete the Guidelines. The Working Group also received an update from NIPR on the Business Rule Review and Verification process and the alert issued for states to load a resident license to SPLD when an active resident license already exists. The Working Group announced plans for an upcoming interim meeting to occur in November, 2007. A description of the Producer Licensing Coalition was requested, and Commissioner Sevigny reported that the Coalition assisted with the important initiative of ensuring producer licensing uniformity and efficiencies.
Received the Report of the Market Analysis Priorities (D) Working Group (MAP). The Working Group reported they sent a survey to the Market Analysis Chiefs (MACs) of each state, requesting information on how each state’s market analysis section is organized, what resources are available, and market analysis success stories. Survey information is being compiled and will be used to complete a report. The Working Group reviewed placement of the market analysis definition in the Market Regulation Handbook, but postponed action pending the final due date for comments of Oct. 4, 2007. The Working Group reported a quarterly MAP-MAC educational call was held in August with the goal to educate states and encourage participation in market analysis systems and efforts. The Working Group received a report from the Market Analysis Research and Development (D) Subgroup (MARD) that they had reviewed, analyzed, and made recommendations to six market tools: Market Analysis Prioritization Tool (MAPT); Market Analysis Review System (MARS) Level 1 and 2 Analysis; Market Initiative Tracking System (MITS); Market Analysis Profile Report; Market Analysis Market Share Report; and the Market Analysis Profile (MAP) Demographics. Lastly, the Working group received a report from the Market Conduct Annual Statement (D) Subgroup (MCAS) regarding an approved motion to have companies submit the Certification documents electronically. The Subgroup reported that a survey regarding data integrity was sent to states, and results will be posted in October. The Subgroup reported that they are currently receiving comments regarding changes to the data call elements and the possibility of releasing aggregate data to the public. The Subgroup also reported a passed motion requesting the MAP Chair submit a request to the Blanks (E) Working Group requesting companies provide an MCAS contact on the Financial Annual Statement. Further, the Subgroup reported that five additional states (AL, CA, MT, RI, and WA) will participate in the MCAS for the 2008 calendar year data to be submitted in 2009. The Subgroup reported a passed motion to have the MAP Chair reiterate to the D Committee the critical importance of centralizing MCAS data to ensure its success. The Subgroup further reported that there is a crucial need for the NAIC to develop a streamlined and centralized method of data collection that ensures the confidentiality of the MCAS data, and that such development would assist in adding additional lines of business to the project. The Subgroup said that with each state added to the MCAS project, there is an additional strain on resources. Commissioner Julie Benafield Bowmen (AR) reported that since the MCAS is a permanent project and will now include 30 participating states, it is time to transition the administrative work performed by Ohio for the MCAS to the NAIC; and she requested Tim Mullen (NAIC) access the work being done by Ohio and report back to the D Committee if the NAIC could take over the administrative duties performed by Ohio, while keeping the information confidential. Commissioner Kreidler requested that Mr. Mullen ensure NAIC officers are fully apprised of the request due to the paramount importance of the project. Commissioner Kreidler stressed he saw the NAIC as being a conduit for MCAS data, and not a repository of such data. He requested Mr. Mullen provide the information prior to the Winter National Meeting, so a discussion could be held at that time. Mr. Mullen stated he would request the NAIC Information Technology staff get a complete understanding of the administrative work Ohio was performing on the MCAS project and determine what NAIC could do to perform that function. He stated he would investigate if existing staff could support the project, or if additional staff would be needed. Birny Birnbaum (Center for Economic Justice—CEJ) questioned the assumption that all market analysis data collected in the MCAS need remain confidential when state aggregate averages are annually distributed to hundreds of insurance companies.
Received the report of the Market Regulation Handbook (D) Working Group, who reported meeting three times since the Summer National meeting. The Working Group reported that they had adopted revisions to the definition of “complaint” in various sections of the Market Regulation Handbook in order to align the definition with the definition adopted by the Complaint Handling and Reporting Standards (D) Working Group in 2006. The Subgroup further reported the American Counsel of Life Insurers (ACLI) had proposed standardized suitability certification language, for third party use, be placed in the Market Regulation Handbook. The Working Group will refer the certification to the Life Insurance and Annuities (A) Committee for review prior to adding it to the Market Regulation Handbook. The Working Group also adopted a new Market Conduct Sampling Utility (MCSU) program and accompanying Help Documentation that will be placed in the Referenced Documents section of the Working Group’s Web page. The Working Group reported adopting revisions to Standard 9 of Chapter 19—Conducting the Life and Annuity Examination. Further, the Working Group reported they had adopted revisions to Standard 10 of Chapter 19—Conducting the Life and Annuity Examination. Lastly, the Working Group reported that they adopted new Market Analysis Chief (MAC) and Collaborative Action Designee (CAD) Core Competencies.
Received the report of the Market Analysis (D) Working Group (MAWG) that they had discussed specific companies and entities with current or potential market regulatory issues impacting multiple jurisdictions. This discussion occurred in regulator-to-regulator session in accordance with the NAIC Policy Statement on Open Meetings (discussions involving specific companies, entities or individuals).
Received the report of the Insurance Marketplace Standards Association (IMSA) Assessment Ad Hoc Working Group that they had spent three days evaluating the Insurance Marketplace Standards Association (IMSA) process. The Working Group members issued a report that they are formally providing to the Committee. The Working Group stated their report included observations and recommendations for both the IMSA organization and regulators. The Working Group reported that they believed there were benefits to regulators in evaluating IMSA, but an IMSA evaluation should not be a proxy for proper market regulation. The Working Group stated that regulators can use the IMSA process to better focus their resources and examinations, and that there were opportunities to leverage information gathered by IMSA assessors when performing market analysis or market conduct examinations. Ms. Mihalik praised IMSA for their assistance with the NAIC/NASA program and reported that IMSA conducted an IMSA Summit that allowed for attendees who do not usually have the opportunity to attend NAIC meetings. Mr. Birnbaum questioned how the IMSA report became such a priority for the Committee and requested the Committee give similar resources to its other charges for the year. In addition, Mr. Birnbaum stated the report did not include the empirical information needed to make the recommendations in the report. A motion was made to receive the report of the Working Group, the motion was seconded and the report was unanimously received.
Discussed the Federal Trade Commission (FTC) Report, “Credit-Based Insurance Scores: Impact on Consumers of Automobile Insurance.” Dave Snyder (American Insurance Association—AIA) stated the Federal Trade Commissioner’s report examined the data of nearly two million companies, representing 27% of the U.S. private passenger automobile market. He reported the study stated that credit-based insurance scores are effective predictors of risk under automobile polices. The report stated they are “predictive of the number of claims consumers file and the total cost of those claims. The use of scores is therefore likely to make the price of insurance better match the risk of loss posed by the consumers. Thus, on average, higher-risk consumers will pay higher premiums and lower-risk consumers will pay lower premiums.” Mr. Snyder stated the report found that insurers do not collect or use racial or ethnic data, so credit-based insurance scores are a true measure of risk, not racial or other impermissible factors. Mr. Snyder stated the report stands on its own and issue of credit-based insurance scores is now closed. Mr. Birnbaum stated the FTC’s report was a major disappointment to consumers and civil rights groups. He stated the disappointment was not because of the conclusions, but because of the weakness of the study and the fact that it did not really answer any questions that Congress asked. He stated the report was flawed in several ways such as 1) no independent data source was used; 2) the data were hand picked from a handful of anonymous companies with no opportunity for verification; 3) the representation of minorities was not reflective of the population; 4) no application data was considered, which would exclude all the people denied coverage due to credit scores, and all the people who were priced out of the market because their credit scores resulted in very high premiums; and 5) it failed to include information about the prime directive, which was the impact of insurance scoring on the availability and affordability of insurance. He stated they actually found that the uninsured drivers had gone up and the residual market population had gone up, which is inconsistent with the conclusion of greater availability and affordability of insurance, but they attributed this to the residual market not working properly. Mr. Birnbaum stated that the FTC now wants to do a similar study on homeowners insurance and plans to get a data set that is hand picked for them by the insurance industry with the same limitations as the other data set. .Mr. Birnbaum emphasized that state insurance regulators, in the position to have that knowledge, should bring it with authority to the FTC. He stated he thought regulators should be involved in this important consumer issue to show Congress and consumers that regulators are on top of this issue and are carrying the shields of consumer protection.
Discussed Adoption of 2008 Charges with Commissioner Kreidler presented the proposed Working Group Charges for 2008.
Mr. Mullen presented a Market Information Systems (MIS) and State Producer Licensing Reengineering Update. Mr. Mullen reported the Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006) mandates that states collectively implement a system to receive reports from insurers, federal government entities and state government entities regarding disciplinary actions taken against persons that sell or solicit the sale of any life insurance product on any military installation of the United States. To satisfy this mandate, the NAIC added two new reasons codes to the RIRS system along with a method to report the name of the military installation involved. In addition, the NAIC created a Military Sales On-line Reporting System (MSORS) for industry and other regulatory bodies to use for the submission of disciplinary actions against individuals in relationship to military sales. Through this system, insurers have a uniform set of data fields and a centralized point to report disciplinary actions to all state insurance departments. MSORS may also be used to receive reports from federal government entities and state entities other than insurance departments. States may add a link to the MSORS on their websites. The NAIC has also added a new activity type to the Special Activities Database (SAD) to help track issues related to Military Personnel and all MSORS’ data that resides in SAD. Mr. Mullen also reported the MIS Metrics application recently became a part of I-SITE Utilities. The report provides each state with detailed statistics on the submission of closed consumer complaints and regulatory actions (such as error rates, completion rates, confirmed complaints and more), state specific submission frequency and formats, and Uniform Regulation through Technology (URTT) compliance. Finally, Mr. Mullen reported that to support regulators’ efforts to keep the Exam Tracking System (ETS) up-to-date and monitor usage, ETS will require the exam call date when entering examinations for all types of examinations beginning Dec. 31, 2007.
Action Items: