Washington, D.C.--Despite efforts to streamline the market conduct exam process, the number of examinations has not changed much, according to the results of a survey conducted by property-casualty and life and health trade groups of their company members.
The findings were discussed during the market conduct uniformity working group at the summer meeting of the Kansas City, Mo.-based National Association of Insurance Commissioners in Washington, D.C., this week.
Groups that participated in the study include: the National Association of Mutual Insurance Companies, based in Indianapolis; the Property Casualty Insurers Association of America, Des Plaines, Ill.; the American Council of Life Insurers, the American Insurance Association, America's Health Insurance Plans, Blue Cross and Blue Shield Association, all based in Washington.
Aggregate results showed that on-site targeted examinations declined slightly, on-site single-state comprehensive exams increased slightly, on-site multistate exams showed a slight drop, and desk audits--regulatory exams from an office--increased.
The respective results for 2003, 2004 and 2005 were as follows:
o On-site single-state targeted examinations: 2003--127, 2004--108 and 2005--111.
o On-site single-state comprehensive exams: 116, 99 and 122.
o On-site multistate exams: 5,7 and 4.
o Desk audits: 58, 64 and 84.
The duration of regulatory activity seemed to show a decline in longer market conduct examinations. For instance, those exams that were less than a day increased from one in 2003 to seven in 2005. Examinations that were one day to one week were a respective 27, 18 and 23 in 2003 through 2005. Those exams of more than a month dropped from 199 in 2003 to 157 in 2004 and jumped slightly to 163 in 2005. Examinations with no examiners on site grew from 291 in 2003 to 317 in 2004, declining to 250 in 2005.
More expensive types of examinations appeared to drop. Exams costing between $50,000 and $100,000 declined from 41 to 27 companies between 2003 to 2005. Exams in the $200,000 plus range declined from 30 to four during the same period.
Don Cleasby, vice president-regional manager and general counsel with the PCI, said the association received responses from 15 member companies representing 10 percent of premium nationally. The property-casualty industry received 69 responses in total, he continued.
The aggregate numbers do not show a significant decline in the three-year period the survey was taken, he said. And, he added, the survey provided specific definitions of examination types, including comprehensive examinations. So, there should have been no disparity among responses, Mr. Cleasby said.
"The total numbers are down modestly, but are not as much as we would have hoped," said Linda Lanam, ACLI vice president-annuities and market regulation.
She noted modest improvement in the continuum of market conduct exam choices. There are a lot that the numbers still don't tell, but they do provide a perception and direction, she continued. "The vast majority feel that they are no better and maybe worse off. People are not feeling an improvement."
What the numbers do offer, Ms. Lanam said, is that "it gives us things to pursue."
Following the trade group presentation, regulators asked how the survey process could be improved, noting that more refined data would benefit companies by helping fine-tune examinations in the future.
Jim Connolly is Senior Editor for National Underwriter's Life & Health magazine.
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