Market Conduct Surveillance Act

SECTION 27-71-7

§ 27-71-7. Protocols for targeted market conduct examinations.

(a) When the commissioner identifies through market analysis a pattern of conduct or practice by an insurer which requires further investigation, and less intrusive market conduct actions identified in subsection 27-71-5(b) are not appropriate, the commissioner has the discretion to conduct targeted, market conduct examinations in accordance with the NAIC Market Conduct Uniform Examination Procedures and the Market Regulation Handbook (or procedures, adopted by regulation, that are substantially similar to the foregoing NAIC products).

(b) If the insurer to be examined is not a domestic insurer, the commissioner may communicate with and may coordinate the examination with the insurance commissioner of the state in which the insurer is organized.

(c) Concomitant with the notification requirements established in subsection (e) of this section, the commissioner shall post notification on the NAIC Examination Tracking System, or comparable NAIC product as determined by the commissioner, that a market conduct examination has been scheduled.

(d) The commissioner may not conduct a comprehensive market conduct examination more frequently than once every three (3) years. The commissioner may decide not to conduct a comprehensive market conduct examination based on market analysis.

(e)(1) Prior to commencement of a targeted on-site market conducted examination, market conduct surveillance personnel shall prepare a work plan and proposed budget. Such proposed budget, which shall be reasonable for the scope of the examination, and work plan shall be provided to the company under examination.

(2) Market conduct examinations shall, to the extent feasible, utilize desk examinations and data requests prior to a targeted on-site examination.

(3) Market conduct examinations shall be conducted in accordance with the provisions set forth the in the NAIC Market Regulation Handbook and the NAIC Market Conduct Uniform Examinations Procedures (or procedures, adopted by regulation, that are substantially similar to the foregoing NAIC products).

(4) Prior to the conclusion of a market conduct examination, the individual among the market conduct surveillance personnel who is designated as the examiner-in-charge shall schedule an exit conference with the insurer.

(f) Announcement of the examination shall be sent to the insurer and posted on the NAIC's Examination Tracking System (or comparable NAIC product, as determined by the commissioner) as soon as possible but in no case later than sixty (60) days before the estimated commencement of the examination, unless extraordinary circumstances indicating a risk to consumers requires immediate action. Such announcement to the insurer shall contain:

(1) The name and address of the insurer(s) being examined;

(2) The name and contact information of the examiner-in-charge;

(3) The reason(s) for and the scope of the targeted examination;

(4) The date the examination is scheduled to begin;

(5) Identification of any non-insurance department personnel who will assist in the examination, if known at the time the notice is prepared;

(6) A time estimate for the examination;

(7) A budget and work plan for the examination and identification of reasonable and necessary costs and fees that will be included in the bill, if the cost of the examination is billed to the company; and

(8) A request for the insurer to name its examination coordinator.

(g) If a targeted examination is expanded beyond the reasons provided to the insurer in the notice of the examination required under this section, the commissioner shall provide written notice to the insurer, explaining the extent of the expansion and the reasons for the expansion. The department shall provide a revised work plan to the insurer before the beginning of any significantly expanded examination, unless extraordinary circumstances indicating a risk to consumers require immediate action.

(h) The commissioner shall conduct a pre-examination conference with the insurer examination coordinator and key personnel to clarify expectations thirty (30) days prior to commencement of the examination.

(i) The department shall use the NAIC Standard Data Request (or comparable product, adopted by regulation, that is substantially similar to the foregoing NAIC product).

(1) A company responding to a commissioner's request to produce information shall produce it as it is kept in the usual course of business or shall organize and label it to correspond with the categories in the demand.

(2) If a commissioner's request does not specify the form or forms for producing electronically stored information, a company responding to the request must produce the information in a form or forms in which the company ordinarily maintains it or in a form or forms that are reasonably usable.

(3) A company responding to an information request need not produce the same electronically stored information in more than one form.

(j)(1) The commissioner shall adhere to the following timeline, unless a mutual agreement is reached with the insurer to modify the timeline:

(a) The commissioner shall deliver the draft report to the insurer within sixty (60) days of the completion of the examination. Completion of the examination shall be defined as the date the commissioner confirms in writing that the examination is completed.

(b) The insurer must respond with written comments within thirty (30) days of receipt of the draft report.

(c) The department shall make a good faith effort to resolve issues and prepare a final report within thirty (30) days of receipt of the insurer's written comments, unless a mutual agreement is reached to extend the deadline. The commissioner may make corrections and other changes, as appropriate.

(d) The insurer shall, within thirty (30) days, of receipt of the final report, file a written response to all comments and recommendations contained in the report. The response shall include a written plan of how and when the comments and recommendations contained in the examination report will be corrected and/or implemented. For each comment and recommendation, the response must include an implementation date and a completion date for each corrective action. In lieu of these requirements, the company may submit a rebuttal to any comment or recommendation contained in the examination report. An additional thirty (30) days shall be allowed if agreed to by the commissioner and the insurer.

(2) The final written and electronic publicly available market conduct report shall include the insurer's written response and any agreed-to corrections or changes. The response may be included either as an appendix or in text of the examination reports. References to specific individuals by name shall be limited to an acknowledgement of their involvement in the conduct of the examination.

(k)(1) Upon adoption of the examination report pursuant to subsections 27-13.1-5(c) – (f), the commissioner shall continue to hold the content of the examination report as private and confidential for a period of thirty (30) days, except to the extent provided in the paragraph (k)(2) of this subsection herein. During this time, the report shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private action. Thereafter, the commissioner shall open the report for public inspection, provided no court of competent jurisdiction has stayed its publication. This section may not be construed to limit the commissioner's authority to use any final or preliminary market conduct examination report, and examiner or company work papers or other documents, or any other information discovered or developed during the course of an examination in the furtherance of any legal or regulatory action that the commissioner, in the commissioner's sole discretion may deem appropriate.

(2) Nothing contained in this chapter shall prevent or be construed as preventing the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the insurance department of this or any other state or agency of the federal government at any time, provided the agency or office receiving the report or matters relating thereto agrees to hold it confidential and in a manner consistent with this chapter.

(l) The insurer may appeal the order adopting the examination report in accordance with the procedures set forth in subsection 27-13.1-5(d) and the administrative procedures act, title 42, chapter 35.

History of Section.
(P.L. 2008, ch. 72, § 1; P.L. 2008, ch. 233, § 1.)