The Role of Market Analysis 2004
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Transcript of The Role of Market Analysis 2004
The Role of Market Analysis
Oregon Insurance DivisionMarch 8, 2004
Introductions
• Joel Ario, Insurance administrator• Jann Goodpaster, Market Regulation
Manager• Gayle Woods, Rates and Forms
Manager• Pat Neesham, Market Analysis
Manager• Cindy Jones, Investigations Manager
Overview
Joel Ario
DCBS Goals
• Protect consumers • Support a positive business climate • Be accountable to the public• Provide excellent customer service
Insurance Division Goals
• Ensure financial solvency• Ensure fair treatment of
consumers• Be accountable to the public• Provide excellent customer service
Organizational structure
• Financial Regulation--analysis, exams
• Market Regulation-- analysis, exams, investigations, rates and forms
• Consumer Services--consumer complaints, producer licensing
Guiding Principles for Market Regulation• Identify real problems• Proportional response• Interstate Collaboration
Identifying Real Problems
• Market analysis as foundation of regulatory program
• Responds to industry and consumer critiques
• Primary tools: complaints, annual statement data
• New tools: handbook is a work in progress• Creative approaches on case by case basis
Proportional response
• Continuum of regulatory actions • Less intervention is better than
more • More efficient use of limited
regulatory resources• More effective way to solve
problems • Ready to escalate where necessary
Regulatory Actions to Access Problem• Insurer interviews• Targeted surveys and data calls• Policy and procedure reviews• Interrogatories• Desk audits and review of self
audits• Targeted exams
Regulatory Actions to Correct Problems• Goal is compliance• Education and proactive outreach• Corrective plans• Remediation and restitution• Enforcement actions
Role of exams
• Past: comprehensive, domestic focus
• Current: targeted, uniform procedures, market impact focus
• Future: analysis-driven, collaborative, other options
• Exams will always be necessary• Domestic deference???
Interstate collaboration: short-term • Consider other states’ work • Bring interstate issues to MAWG• Support collaboration wherever
possible
Interstate collaboration: long term • Oregon can’t monitor 1500 companies• Need systematic allocation of
responsibilities • Domestic deference may be answer • Requires agreement on baseline
responsibilities of each state • Targeted exams for cause by non
domestic states
NCOIL Model
• Analysis driven• Continuum of regulatory responses• Targeted exams• Uniform procedures• Participation in NAIC databases• Collaboration through NAIC
Market Analysis & Market Conduct• Jann Goodpaster• Pat Neesham
The Goal
• Follow up with company as early as possible to ensure that concerns are adequately addressed before small problems become large problems
• Responses are proportional
Role of Market Analysis
• The Umbrella for Market Regulation functions
• Coordination of Market Regulation Functions
• Intra-departmental communication
History of Market Analysis
• Case by Case problem solving• Company Profiles• Broader market surveillance
Complaint data
• Rich data mine• Complaint information is more
indicative of problems in the P&C and health lines of business than in life.
• Coding becoming clearer and more meaningful
Case by Case Analysis
• Problem solving• From consumer advocates,
managers, agents, consumers, other agencies
• Initial investigation• Recommend further action• Communicate your results to the
entire division
Company profiles
• NAIC Market Analyst Handbook– Complaint data– Financial
information– Market share– Jumpstart report
• Oregon information– Rates & Forms– Other company
filings– Legal actions– Policy team info– Best guide– Internet information– Correspondence
The checklist
• Designate a Market Analysis Coordinator:– Pat Neesham– Principle liaison with MAWG– Responsible for communication with
other work units in the Division– Responsible for baseline analysis of
key lines of business
Checklist continued
• Establish a systematic interdivisional communication program, surveying other work units on a least a quarterly basis– Quarterly meetings– Policy teams– Roundtable
Checklist continued
• Identity key lines of business• P&C: Personal auto and
homeowners, hard markets• Life and Health: Group life and
health, individual life, health and annuities
Checklist continued
• Identify companies with a significant market activity in each identified line with:– 1% or more of the market share (from
annual statement)– $100,000 or more in premium (from annual
statement)– 5 or more complaints (from annual complaint
reports)– or domestics
Checklist continued
• Review identified companies by:– Calculating and compiling complaint
indices for each company– Review the state page from annual
statement with attention to volume, loss ratio, and where applicable reserves and defense cost
Checklist continued
• Identify priority companies for further analysis based on:– complaint activity, – referrals from
MAWG or other states
– significant changes or anomalies in reserves
– significant changes or anomalies in defense costs
– unusual loss ratios– major
participation in non or over competitive market sectors
Checklist continued
• Report all significant findings to MAWG
• Consult with MAWG & other States to determine their experience with specific companies
• Must notify MAWG if it is a national significant company
Market Analysis Handbook
• Market Analysis Handbook was developed for states to:
• Implement a market analysis programs
• Assist states to optimize Department resources
• Eliminate duplicative inquiries• Enhance interstate collaboration
Market Analysis Handbook Cont• Handbook includes:• Outline of elements and
objectives• Guidance for staff as they
implement programs
Market Analysis Handbook Cont• Handbook applies a uniform
method of analysis• Develop understanding of its
marketplace• Target companies with market
conduct problems
Market Analysis Handbook Cont• Resulting analysis provides
indicators of insurers with unusual results
• Screen and follow-up with insurers• Focus resources on insurers with
potential problems
Market Analysis Handbook Cont• Handbook is an evolving document• Ongoing discussions• Additional sources of data added
Market Analysis Handbook Cont• Initial version of handbook• Information companies
already report• Information regulators can
readily access
Market Conduct Exams
• One of many tools• Emphasis on targeted
examinations as indicated by market analysis
• Use of uniform outline
Uniform Examination Outline• Scheduling
– Prioritize exams through analysis– Call all examinations using the ETS– We will enter examines into the ETS
60 days prior to the examination
Outline continued
• Pre examination planning– Internal planning consisting of
information from market analysis as well as NAIC examination jumpstart report
– Plan becomes part of workpapers– Announced to company 60 days in
advance– Resource list 30 days in advance– Standardize data calls
Outline continued
• Examination procedures– pre examination conference– Communication with company– Document handling procedures– NAIC sampling guides– Exit conference– Use of standards for testing
Outline continued
• Exam reports– Standard format used in the NAIC
handbook– Timely reports– Inclusion of company’s response– Reports become public– Follow up procedures
Collaborative exam efforts
• MAWG• Privacy• Credit Scoring• ICE exams
Investigations
• Cindy Jones, Manager
Role of Investigation in Market Regulation• Participate in examinations with
examiners• Part of the continuum of responses• Rapid response• Efforts at NAIC to identify best
practices
Investigations
• Source of Referrals:
•Consumer Advocates•Private Citizens•Insurance Agents•Insurers•Other State Agencies
Factors Considered in Opening Case Files
• Violation of Insurance Code• Violation of Administrative Rule• Harm to Consumer• Seriousness of Violation• Age of Violation
Types of Agent Investigations
• Misappropriation of Premium• Misrepresentation• Trust Account Violations• Fraud• Forgery• Life Insurance Replacement• Failure to Respond
Possible Actions
• Letter of Warning
• Referral to Enforcement Unit for Administrative Action
• Referral for Criminal Prosecution
Rates and Forms
Gayle Woods, manager
The Role of Rates and Forms in Market Regulation• Staff review policy
forms and premium rates to ensure that:– Policy provisions are
fair to consumers and in compliance with Oregon’s laws and regulations
– Premium rates and reasonable in relation to the coverage provided
– Policy language and sales materials are clear and understandable
– Competition among insurers is fair and on a sound financial basis
Speed to Market
• SERFF• Rate and form filing checklists and
review standards• CARFRA• Interstate compact• Filing Submission Uniformity/Metrics• Self Certification Pilot Program• Product Locator
Rates and Forms
• In 2003 Rates and Forms finalized 10,998 filings, of which approximately 10% were received through the SERFF system
Rates and Forms
• Website• Filing Seminar• E-Notify• Changes in Rates and Forms
Summary
• What do we hope to accomplish?
Goals of Reorganization
• Integrates Market Regulation functions
• Increases communication between front end and back end regulation
• Provide better customer service
Addressing issues on a broader basis• Through rule making, legislative
changes, and NAIC model laws.• Examples-
– Law has not kept pace with changing conditions.
– The practice is technically legal but harmful to consumers.
– Marketplace disruptions
Coordination of market regulation information• Monitor insurance companies
compliance with laws• Identify practices that negatively
impact consumers• Focus resources on insurers with
potential market conduct problems
Intra departmental communication• Routinely gather and distribute
information between all units• Become the storehouse for
information using Teammate and other vehicles
Changes to the Market Regulation in Oregon• March 1, 2004 all examiners and
analysts report to Market Analyst manager
• Except for examinations already called, no more routine examinations
• All examinations must be called as a result of analysis
Impact on Insurers
• More communication• Many companies will be assigned
to a specific analyst• Less intrusive examination• Rapid response