The model that will be moved to the NAIC executive committee, and then potentially on to its plenary for final adoption, is based substantially on a model adopted Feb. 27 by the National Conference of Insurance Legislators, Albany, N.Y.

Changes in the NAIC's version of the NCOIL Market Conduct Surveillance model law include language that clarifies that a state insurance commissioner would provide a written explanation when a market conduct exam was called. Based on that written explanation, an insurer could request an informal hearing but would not have a right to an administrative hearing.

Another change addresses the use of best practices organizations when considering market conduct practices of insurers. The new language would require that companies that belonged to a best practices organization would not only maintain membership but also adhere to its standards.

The language in the adopted model would allow a commissioner to consider such membership if market conduct fines were being levied. However, it would "not be a mandatory notion," said Joel Ario, NAIC secretary-treasurer and Oregon insurance administrator, who is heading up the market conduct effort.

Mr. Ario said that NCOIL had expressed some concerns that changes the NAIC had made to its model were more than just technical in nature. There could be more discussion on the issue and input from NCOIL at the executive committee level, he added.

Regulators also raised several points. Delaware said that it preferred a zone exam approach to market conduct issues.

North Carolina asked what would happen in a state which had laws on the book that required a company to have a market conduct examination every 3 or 5 years. In response, Mr. Ario said that the goal would be for market analysis and targeted exams would ultimately replace laws that required examinations.