Complaint Analysis and Multi State Collaboration

Anne Marie Narcini

Manager of Consumer Protection Services

NJ Department of Banking & Insurance

Early Multi State Collaboration

In early to mid 1990’s complaints regarding “churning” and misrepresentation in life insurance sales escalated against Prudential

In 1995 NJ DOI invited other states to join in a multi-state task force to investigate

New Jersey as domestic launched own exam

Multi-State Task Force Process for Prudential

Task Force pursued multi-state exam process– Analyzed databases of complaint data; agent discipline

data; policy transaction data and commission recapture data

– Reviewed individual state exams covering timeframe– Review national and state complaints– Interviewed agents and Executive officers of regional

marketing

Early Multi State Collaboration

Why multi-state? “Illinois originally initiated its own market conduct examination of Prudential's sales practices, but preliminary findings so closely mirrored those of the Task Force that we opted to join the Multi-state group rather than duplicate its efforts and issue a separate report. We concluded that policyholder interests would be better served utilizing the combined resources of the 30 participating states”

Mark Boozell, Director of Insurance in IL in 1996

Prudential Multi State Settlement in 1996

$35 million fine largest ever assessed nationally at that time. Restitution up to $1 billion

Prudential notified customers who purchased permanent life insurance policies between 1982 and 1995 of sales-related claims for remediation

Range of compensation included full or partial premium refund; continued coverage with no additional premiums due; opportunity to obtain enhanced value additional life insurance or annuities with no agent commissions on those transactions.

Prudential Multi State Settlement in 1996

Established a Regulatory Settlement Oversight group to monitor remediation

Regulatory multi state settlement leveraged settlement of a national class action

Class action settlement included all, and built upon some, of the features of the Task Force agreement

What Did Complaints Tell Us in the Early Multi-State approach?

Complaints with Potential to Extend Beyond Single Policyholder

0

20

40

60

80

100

120

Type of Complaint

Nu

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of

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1991

1992

1993

1994

What Did Complaints Tell Us in the Early Multi-State approach?

New Jersey exam indicated 4 year period 1991-1994 almost 4,500 complaints against Prudential companies with our state

During a 5 year time period now, less than 400

Market has changed, however obvious difference in level of compliance.

Complaint Coding and Market Analysis

For Market Analysis total complaints and confirmed complaint indices provided via CDS

Consumer Info (CIS) included “total complaints” (only confirmed complaints)

Current “confirmed complaint” per NAIC “does not include those complaints in which the

complaint resolution indicates the consumer's complaint position wasn't upheld or the insurance department was unable to assist” Disposition code driven

Proposed Definition of Confirmed Complaint

Proposed definition: “The insurer, licensee, producer, or other regulated entity committed a violation of an applicable state insurance law or regulation, federal requirement that the state has the authority to enforce, or term/conditions of an insurance policy or certificate; OR the complaint and entity's response, considered together, indicate that the entity was in error”

Current NAIC Complaint Coding Activities

Complaint Handling and Reporting Standards Subgroup of the Market Analysis Priorities Working Group

Clarify and modify the existing reason codes and disposition codes within NAIC’s existing CDS (Complaint Database System) coding scheme.

Establish guidelines for consistent complaint handling starting with the definition of a complaint and examining state processes for receipt and recording complaints.

Current NAIC Complaint Coding Activities

Develop/enhance training materials, including NAIC’s CDS manual

Establish guidelines for the consistent reporting of complaint-related statistics.

Examine best practices and technology applications and models that would assist the states in promoting uniformity and enhance services to the insurance consumer.

Complaint Reconciliation

Validating proper recording of complaints and dispositions

Challenge of limited resources and technology

Suggestions?

NJ Market Analysis Success Stories

Analysis of an auto writer showed continued problems cited in a prior exam. Following a trend analysis of complaints, the analyst conducted a targeted detail review of PIP complaints which revealed a pattern of problems in medical claim processing as well as several recent adverse court rulings related to PIP denials. Compliance documents requested with potential rexam

Level 2 and detailed complaint analysis of a homeowner carrier identified an issue with values. Data was requested from the company, a series of interrogatories were sent and ultimately the company was asked to a meeting at the Department to discuss our concerns.

NJ Market Analysis Success Stories

Analysis of a specialty line insurer revealed rising complaints, significant regulatory actions nationally, class action litigation with potential significant monetary settlement and declining financial indicators. Given the findings and the significant market share for the product, a targeted market conduct exam was recommended and information shared with financial analysts.

Market analysis resulted in a targeted exam for a limited line product. Issues found in the exam affected multiple states. A referral was made to MAWG and NJ lead in a multi state settlement resulting in corrective action, penalties and remediation in multiple jurisdictions.

What You Can Do

Identify areas of interest and NAIC Working Groups

Sign up as an interested party Review draft proposals and provide

comments Be a part of the process