Insurance industry and consumer groups remain bitterly at odds over a controversial proposal to collect market conduct data as part of the annual statement process, and house it in a centralized data bank.
The issue pits those in the industry raising concern over the confidentiality of the data, as well as how it would be treated if released, against consumer advocates who say such data should be public because it will benefit consumers and even keep the insurance market healthy.
The proposal was the subject of a conference call yesterday that drew over 100 participants, including both industry and consumer group representatives. The May 28 call was arranged by the Executive Committee of the National Association of Insurance Commissioners.
The proposal must be approved by the executive committee and then the NAIC’s plenary before it becomes NAIC policy.
NAIC President Sandy Praeger, who is the Kansas insurance commissioner, started the call by saying regulators would not take action during the call itself, and possibly do nothing definitive during the NAIC’s summer meeting this week in San Francisco, which starts on May 30.
She noted that because of work with vendors on annual statement filings, if action is not taken by July 1, the recommendations would not be implemented in 2009, but would then be considered for 2010.
The proposal was adopted by the NAIC’s Market Conduct “D” Committee on April 17, noted the committee’s chair, Montana Insurance Commissioner John Morrison. Among the elements of the proposal that Mr. Morrison detailed are:
- A centrally-stored facility.
- A collection of data through a supplemental filing.
- A May 1 deadline rather than a March filing required for financial information.
- A recommendation not to proactively sell data unless the NAIC membership directed the group to do so.
Mr. Morrison also noted that the data elements in the proposal are currently public, but any additional data elements would require a review before they could be added.
The proposal was suggested, he said, because it would streamline a system of market data analysis that started on a trial basis in 2002 and became permanent in 2004. Twenty-four states collected market-conduct data for 2007, and 29 will collect 2008 data, he said. Rather than providing data to individual states, a company could make one filing, he explained.
State Rep. Robert Damron, D-Nicholasville, Ky., who is president-elect of the National Conference of Insurance Legislators, said states need more time to look at the issue before they could decide if it is a policy they would support.
In an unusual move, Frank Keating, president and CEO of the American Council of Life Insurers, participated on the call. He commended regulators for their efforts to modernize the way data is collected, but also noted privacy laws and the possibility that companies could be made vulnerable to lawsuits if the information is made public.
The exposure to additional litigation, the way data could be used by class-action attorneys and perhaps other companies, and even the reason the data needed to be collected were raised by industry trade groups, including the American Insurance Association, the National Association of Mutual Insurance Companies, and the Property Casualty Insurers Association of America.
Companies testifying included Farmers Insurance, Liberty Mutual, Mass Mutual, Principal Financial Group and Travelers Group.
The AIA issued a statement noting it will continue voicing strong opposition to the data collection proposal during the NAIC’s national meeting.
"The NAIC is a non-profit, non-governmental entity. As such, it should not collect proprietary market data for which no guarantee of confidentiality can be provided,” according to AIA President Marc Racicot.
“This information is extremely sensitive, and if it were to be compromised, there would be needlessly harmful ramifications for both consumers and insurance companies,” he added. “In the states where insurers file market conduct annual statements, there are clear statutory requirements governing their confidentiality, and regulators must take appropriate steps to ensure this information remains confidential."
Mr. Racicot added that "insurers already operate in a highly-regulated environment. The annual financial statement filed every year by insurers--which contains financial, and not proprietary market information--is a key tool for regulators, consumers and investors to monitor the financial health and solvency of an insurance company."
Deirdre Manna, a PCI representative, noted that in an NAIC meeting in Washington on May 20-21, PCI President David Sampson urged regulators not to proceed with the proposal because the NAIC authority over preserving and protecting such information was still unclear.
Additionally, she raised the question of why the data was being collected in the first place. Originally, she said, the goal was to collect data so there would be fewer market conduct examinations. However, five years later, Ms. Manna added, insurers had not been shown specific tangible benefits.
The use of publicly available data by competitors and class-action lawyers was mentioned by several who spoke. However, these speakers also said that efforts to streamline the process are a good thing.
Meanwhile, a trio of NAIC-funded consumer representatives asserted the importance of having such data available to the public, and urged that the project be fully adopted.
The three were Birny Birnbaum, executive director for the Center for Economic Justice; Brendan Bridgeland, executive director of the Center For Insurance Research; and Gregory Squires, a professor of sociology, public policy and public administration at George Washington University in Washington.
Mr. Birnbaum said the only way there could be true regulatory modernization is if there is data that could be analyzed so improvements can be made. Consequently, he argued, market conduct analysis and data is needed and should be culled by regulators.
He called the argument that data would be misused “incredibly disheartening,” and added, “I don’t need insurers to tell me and other consumers what information I need to know.”
In addition, Mr. Birnbaum called the idea of insurers waiting over a year to access competitive information in other companies’ data “absurd,” because at that point competitive advantages would already be incorporated into company strategy.
Mr. Bridgeland argued that available data was actually good for the whole market, because if there is a general impression of denial of claims, it could drive down the perceived value of insurance policies.
In addition, Mr. Squires suggested that rather than just the choice of no data or abused data, there is in fact a third choice--“conclusive and accurate and informative data.”