The pilot would be explored as an alternative to a national data-collection program that has been discussed.

States that are expressing interest in participating in the pilot include: Arizona, California, Illinois, Maryland, Missouri, Ohio, Oregon and Wisconsin.

Ms. Stead, who is heading up the regulatory team examining the issue of market conduct annual statements, said that the goal is to avoid duplicative market conduct examinations.

But one issue that is receiving a lot of discussion, she continued, is confidentiality concerns over collecting and housing data in a central location such as an NAIC depository.

Although there may not be seamless confidentiality standards if information is shared among states, industry trade group representatives said insurers feel more comfortable with states sharing information than with housing data in one place.

Speaking to the possibility of class-action litigation, an industry representative commented, "we're afraid of giving away the keys to the candy store."

Many states have confidentiality laws, but they are not always consistent among states, Ms. Stead said.

Another issue that received a lot of discussion, according to Ms. Stead, is just how much data needs to be collected.

Insurers are arguing that regulators have enough data to detect problem companies.

Ms. Stead said that during a recent meeting, claims aging was one data source cited as a way of measuring market conduct. The measure looks at how long claims remain unpaid.

On the life side, the number of cancellations and nonrenewals and the number of replacements in relation to volume of new business was discussed, she added.

Another means of determining market conduct is to measure the number of complaints that a company receives directly, Ms. Stead explained.

A "How-to" guide is also being looked at. The guide would detail how existing data could be more efficiently deployed.

The Missouri insurance department has released information on how it treats data.

Property-casualty trade groups are in the process of working to develop a "how-to" approach, said Dave Reddick, market regulation manager with the National Association of Mutual Insurance Companies in Indianapolis.

In addition to the issue of confidentiality, according to Don Cleasby, assistant general counsel with the National Association of Independent Insurers in Des Plaines, Ill., there is the issue of sheer volume of information that companies would have to gather and regulators would have to receive.

Efforts should first be made to analyze the information that is currently available, he said. "The How-to guide needs to catch up."

The American Council of Life Insurers in Washington favors "an improved market conduct examination system, one that is much more streamlined," said Jack Dolan, an ACLI spokesman.

Lenore Marema, vice president, legal and regulatory affairs with the Alliance of American Insurers in Downers Grove, Ill., said that discussions have focused on better use of existing information such as complaint data and Insurance Regulatory Information Systems ratios.

Ms. Marema said states get a "wealth of information" that could be used to create a consistent approach for analyzing companies. But if, for example, a market conduct annual statement for personal lines is implemented, Ms. Marema expressed concern that "another layer of data collection and regulation would be created on top of what they already do."

Kevin Hennosy, chairman of SpreadtheRisk.org, Kansas City, Mo., says that a national overview works for financial analysis and could work for market conduct analysis.

On the issue of trial attorneys using data from a centralized data bank to sue insurers, Hennosy notes, "if there wasn't a problem out there, these folks wouldn't have to worry about frivolous lawsuits."

In fact, he continues, "if a regulator catches it first, you might be kept out of court."

In order for trial lawyers to use the data in a central spot effectively, they would have to parse it very specifically, he says. It would be far easier to get a market conduct report, Hennosy continues.

Insurers, according to Hennosy, are not the only ones who do not want to see the system change. Chief market conduct examiners are used to the current system, he adds.

The framework of the financial statement system could be used for the market conduct system that is being built, Hennosy says.