the role of market analysis 2004
TRANSCRIPT
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The Role of Market Analysis
Oregon Insurance DivisionMarch 8, 2004
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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
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Overview
Joel Ario
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DCBS Goals
• Protect consumers • Support a positive business climate • Be accountable to the public• Provide excellent customer service
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Insurance Division Goals
• Ensure financial solvency• Ensure fair treatment of
consumers• Be accountable to the public• Provide excellent customer service
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Organizational structure
• Financial Regulation--analysis, exams
• Market Regulation-- analysis, exams, investigations, rates and forms
• Consumer Services--consumer complaints, producer licensing
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Guiding Principles for Market Regulation• Identify real problems• Proportional response• Interstate Collaboration
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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
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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
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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
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Regulatory Actions to Correct Problems• Goal is compliance• Education and proactive outreach• Corrective plans• Remediation and restitution• Enforcement actions
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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???
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Interstate collaboration: short-term • Consider other states’ work • Bring interstate issues to MAWG• Support collaboration wherever
possible
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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
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NCOIL Model
• Analysis driven• Continuum of regulatory responses• Targeted exams• Uniform procedures• Participation in NAIC databases• Collaboration through NAIC
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Market Analysis & Market Conduct• Jann Goodpaster• Pat Neesham
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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
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Role of Market Analysis
• The Umbrella for Market Regulation functions
• Coordination of Market Regulation Functions
• Intra-departmental communication
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History of Market Analysis
• Case by Case problem solving• Company Profiles• Broader market surveillance
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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
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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
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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
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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
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Checklist continued
• Establish a systematic interdivisional communication program, surveying other work units on a least a quarterly basis– Quarterly meetings– Policy teams– Roundtable
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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
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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
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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
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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
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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
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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
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Market Analysis Handbook Cont• Handbook includes:• Outline of elements and
objectives• Guidance for staff as they
implement programs
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Market Analysis Handbook Cont• Handbook applies a uniform
method of analysis• Develop understanding of its
marketplace• Target companies with market
conduct problems
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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
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Market Analysis Handbook Cont• Handbook is an evolving document• Ongoing discussions• Additional sources of data added
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Market Analysis Handbook Cont• Initial version of handbook• Information companies
already report• Information regulators can
readily access
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Market Conduct Exams
• One of many tools• Emphasis on targeted
examinations as indicated by market analysis
• Use of uniform outline
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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
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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
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Outline continued
• Examination procedures– pre examination conference– Communication with company– Document handling procedures– NAIC sampling guides– Exit conference– Use of standards for testing
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Outline continued
• Exam reports– Standard format used in the NAIC
handbook– Timely reports– Inclusion of company’s response– Reports become public– Follow up procedures
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Collaborative exam efforts
• MAWG• Privacy• Credit Scoring• ICE exams
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Investigations
• Cindy Jones, Manager
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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
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Investigations
• Source of Referrals:
•Consumer Advocates•Private Citizens•Insurance Agents•Insurers•Other State Agencies
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Factors Considered in Opening Case Files
• Violation of Insurance Code• Violation of Administrative Rule• Harm to Consumer• Seriousness of Violation• Age of Violation
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Types of Agent Investigations
• Misappropriation of Premium• Misrepresentation• Trust Account Violations• Fraud• Forgery• Life Insurance Replacement• Failure to Respond
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Possible Actions
• Letter of Warning
• Referral to Enforcement Unit for Administrative Action
• Referral for Criminal Prosecution
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Rates and Forms
Gayle Woods, manager
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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
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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
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Rates and Forms
• In 2003 Rates and Forms finalized 10,998 filings, of which approximately 10% were received through the SERFF system
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Rates and Forms
• Website• Filing Seminar• E-Notify• Changes in Rates and Forms
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Summary
• What do we hope to accomplish?
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Goals of Reorganization
• Integrates Market Regulation functions
• Increases communication between front end and back end regulation
• Provide better customer service
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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
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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
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Intra departmental communication• Routinely gather and distribute
information between all units• Become the storehouse for
information using Teammate and other vehicles
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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
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Impact on Insurers
• More communication• Many companies will be assigned
to a specific analyst• Less intrusive examination• Rapid response