The action came at the summer meeting here of the National Conference of Insurance Legislators.

NCOIL will examine the NAIC's recommended changes during its summer meeting next month and decide if those alterations should be incorporated into the model it adopted in February.

A finalized NCOIL model will then be returned to the NAIC for an up or down vote, although NAIC Secretary Treasurer and Oregon Administrator Joel Ario noted that it is conceivable that when it is returned to state regulators someone could offer an amendment.

Industry representatives have complained that the regulators' changes would allow them to alter surveillance procedures without due process, but consumers have said the revisions would eliminate roadblocks to regulatory activity.

The NAIC action to refer back to NCOIL was not embraced by all the regulators. Wisconsin Insurance Commissioner Jorge Gomez expressed disappointment that a document reached by consensus from state insurance regulators was not going to be adopted.

But Mr. Ario explained that if the NAIC adopted its version of the model rather than send it back to NCOIL, there would be two versions of the model before state legislators. "The industry has played the two organizations off of each other," Mr. Ario said. By working to create a single model that everyone signed onto, it would be more likely that the model could be enacted, he explained.

Mr. Ario's remarks echoed earlier comments by Florida State Sen. Steven Geller, D-Hallandale, NCOIL's president. During a consumer liaison meeting, Mr. Geller said that "candidly, a lot of folks would prefer to put NCOIL and NAIC at each other's throats." The reason he said, was that they could argue that regulators and legislators could not get along and, consequently, some federal oversight was needed.

Later, Mr. Geller told National Underwriter, "NAIC and NCOIL decided we are not going to play that game. We're invoking the no gaming rule."

A trade group representative later denied that the industry would like to stymie a surveillance model's adoption.

When NCOIL addresses the market conduct model next month, according to Tim Tucker, an NCOIL spokesperson, it might revisit a requirement that companies have internal systems in place to verify compliance with market conduct requirements. The possible rub, he said, would be if regulators wanted broader authority.

The point will not slow down advancement of the model, he added. It is the third leg of a three-leg approach that includes market analysis, a targeted exam and a self-compliance mechanism, he said.

Birny Birnbaum, executive director of the Center for Economic Research, Austin, Texas, and an NAIC-funded consumer representative, said it is important that the model advances, noting that neither consumers nor insurers are happy with existing market conduct regulation. "It is ready for reinvention," he added.

Mr. Birnbaum continued, "This could be the issue that demonstrates to Congress that there is a reason for state regulation."

If regulators can show that they have "the skill and will to do it, it should put to rest questions about state regulation that come up before Congress," he added.

The Property Casualty Insurers Association of America, Des Plaines, Ill., supports an NCOIL model as a basis to work toward market conduct reform, according to PCI representative Lenore Marema.

Inclusion of a due process such as an arbitration provision is something PCI would like to see she added.

What is needed is maximum effectiveness, and either version of the model will have to be amended to achieve that, she said.

Laura Kersey, a representative of the American Insurance Association, Washington, said that AIA is supportive of the NCOIL model. Having the surveillance process give deference, priority jurisdiction, to the regulator where a company is domiciled is an important point, she said.

The American Council of Life Insurers, Washington, believes that the NCOIL model is a good base to work from, according to Linda Lanam, vice president-annuities with ACLI.

ACLI, she continued, is "very concerned about some of the comments made that the industry wants nothing to happen." She said that ACLI is "very supportive" of the efforts.

She added that ACLI would like to see market analysis be the focus of market conduct examinations.

In the long term, ACLI would like to see market conduct include deference to market conduct initiatives taken by a company's state of domicile, according to Ms. Lanam.