His reaction followed the National Conference of Insurance Legislators' unanimous adoption of the Market Conduct Surveillance Model Act at their meeting last week in San Antonio.

The model provides a regulatory framework for market conduct and anwers criticism over state regulation, said Tim Tucker, NCOIL's director of state-federal affairs.

He added that the model offers a step-by-step approach, providing a continuum that uses market analysis and progesses to a market conduct examination when needed.

The model follows most of the concepts being discussed at the NAIC, is driven by a market analysis approach that targets problems, and uses NAIC databases to achieve analysis, he added. It will receive expedited consideration at the NAIC starting at its spring meeting in New York, March 13-16, Mr. Ario said.

State legislators looked at four issues before the unanimous vote was taken. They removed a provision that would have required CEOs of insurance companies to certify that there are appropriate market conduct procedures in place and language that would have included an arbitration process if an insurer was dissatisfied with the outcome of a market conduct examination.

The issue of restitution was not included in the model and language that referenced work products, including model laws and regulations developed by the National Association of Insurance Commissioners, Kansas City, Mo., were left in the model.

Mr. Tucker said the next step for NCOIL will be to educate legislators about why the model should be adopted. He said that Nebraska has introduced the model and held a hearing, and will advance the completed model before its legislature. Other states could conceivably introduce the model in this legislative session, he continued.

Prior to the model's adoption, legislators indicated that the issue of a CEO certification could be raised in other NCOIL working committees if needed and was not necessarily central to the issue of market conduct, according to Mr. Tucker.

The issue of arbitration., which has been used in Florida in the context of rate setting, was something that could be examined in a broader regulatory context if needed, he added.

A provision that would reference NAIC work products will now include a process by which notice would be given if there is a material change in NAIC standards and a hearing could be held, he said.

Insurance groups including the American Council of Life Insurers, Washington, and the National Association of Mutual Insurance Companies, Indianapolis, expressed preliminary support for the adopted model.

As it was adopted by the state-federal relations committee, the model would bring consistency, efficiency and cost-effectiveness to market conduct oversight, but offers no teeth, according to Lenore Marema, a PCI representative with the Property Casualty Insurers Association of America, Des Plaines, Ill.

PCI is glad that NCOIL will continue to consider due process, but said that if the model is adopted in states as it is currently written, "it will be half a loaf. What happens when an examiner acts outside parameters. There is no remedy."

Kevin Hennosy, a consumer advocate and publisher of SpreadtheRisk.org, Kansas City, Mo., also is expressing support for the newly adopted model because it creates a system for market conduct regulation. The model benefits consumers and strengthens state regulation, and should be looked at by Congress when it takes the issue up, he continues. It uses a targeted, step-by-step approach, Mr. Hennosy added.

In other action, NCOIL approved a Property/Casualty Flex-rating Regulatory Improvement Act model as an interim step while states adopt the 2001 NCOIL Insurance Modernization Act, which would provide a use and file law for insurance rates in personal lines.

The flex model requires that insurer rate filings cannot exceed an overall statewide rate increase or decrease of 12 percent in the aggregate for all coverages.

Robert Zeman, a PCI senior vice president, said the flex model may serve as a "transitional mechanism" as states move toward open competition.