Market conduct encompasses company business behavior and customer treatment issues such as fairness of company practices, claim payment times, policy renewals and policy generation.

There is a "strong desire" on the part of trade groups to see NCOIL work in collaboration with the NAIC on conduct oversight, said Tim Tucker, NCOIL director of state-federal affairs.

Whether or not a model market conduct law is developed by NCOIL is something legislators will need to discuss further and learn more about, he added.

However, he noted that dialogue in Congress has suggested a need for action.

Among the speakers at the NCOIL hearing was Nebraska Insurance Director Tim Wagner.

Mr. Wagner heads up an effort at the NAIC for states to collaborate and accept company examinations conducted by a state of domicile. To date, five states are participating in these collaborative arrangements.

Speaking of the possibility of a market conduct model law, Mr. Wagner said at this point, it is "premature" to start drafting a model. He added that more dialogue is needed at the June 21 NAIC meeting and the NCOIL summer meeting in July.

Mr. Wagner added that a periodic examination of a company is "a better tool" than targeted examinations resulting from consumer complaints.

Mr. Wagner said the domestic regulator should be responsible for the market conduct oversight of insurers.

While there is a goal of getting 15 states to participate in reciprocity, he said that there are currently only five states participating.

"There are entrenched interests at the NAIC," but a reciprocity agreement among interested states makes it possible to "go outside of the NAIC committee structure." While calling some regulators "entrenched," Mr. Wagner noted that they are, "in fact, a minority" who are protecting their own interests.

The collaborative agreement is entered into every year so that it is, in fact, "a living, breathing document," he added. That allows for flexibility where needed, he continued.

Periodic examinations conducted by a state of domicile are one way to approach regulation, according to Mr. Wagner. However, other states prefer a targeted approach and "a lot of states are asking why they need to conduct market conduct examinations at all."

Insurers are also weighing in on a market conduct data analysis project that the NAIC is working on with a market conduct annual statement.

Regulators want to repeat a data call, but insurers are saying that data should be analyzed before new data is collected.

The issue is scheduled to be discussed more fully during the NAIC June 21-24 summer meeting.

Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, said that extending the data call project another year is valuable because looking at data over time makes it easier to check for the quality of data collected.

To ensure the quality of the data, he said, it is necessary to have a two-to-three-year data collection period rather than a six-month data call.

But, Linda Lanam, ACLI vice president and deputy general counsel, asked regulators, "How is it making regulation better. That is what we haven't seen yet." Later, she added, "We don't know what you are trying to get to" and whether it will create a clear improvement to regulators or the regulated.

Property-casualty insurers offered input on efforts at both NCOIL and at NAIC.

"We have no objections to NCOIL drafting a model if it is drafted in an appropriate way that has benefits identified in the report," said Don Cleasby, assistant vice president and assistant general counsel with the National Association of Independent Insurers, Des Plaines, Ill.

On the issue of the NAIC data call, Mr. Cleasby said a decision on extending the data call should not be made until the regulators have gone through the process once.

One of the items in the report that would be beneficial is the development of self-evaluative procedures for companies, according to Dave Reddick, market regulation manager with the National Association of Mutual Insurance Companies, Indianapolis.

On the issue of developing a model, Mr. Reddick said that because of the differences in state laws on personal and commercial lines of business, a model law proposal needs to be studied more.

During the hearing, the American Council of Life Insurers, Washington, submitted testimony that said it would discuss the model law proposal with members. It also encouraged more immediate action such as encouraging insurer self-audits and using tools such as the NAIC Market Conduct Examiners Handbook.

ACLI said in its testimony that deficiencies in the current system that must be addressed include efforts to better coordinate multistate examinations or reciprocal acceptance of an examination done by another state.

ACLI also expressed reservations over vesting a company's state of domicile with primary responsibility for market conduct oversight because of concerns ranging from variation in state laws and regulation on privacy of examination work papers to the limited staff available to conduct examinations.