1. Market Conduct Oversight
A General Overview
November 7, 2018

2. Market Conduct Oversight
Chief Market Analyst
John Haworth, CIE, FLMI, CPCU, MCM
Chief Market Conduct Examiner
Jeanette Plitt, AIE, CLU, MCM
A General Overview
November 7, 2018

3. What is Market Conduct Oversight?
Market Oversight is a standardized process of collecting, organizing and analyzing data and other information to enable regulators to identify general market disruptions and specific market conduct problems as soon as possible, while maintaining an efficient and effective regulatory framework.
Market Oversight is designed to work like a smoke detector providing early detection of potential market problems.
A General Overview
November 7, 2018

4. Market Analysis/Market Conduct
We will review the following topics:
Legislative Changes
Market Analysis-Tumwater
Market Conduct-Seattle
The Continuum of Market Actions
A General Overview
November 7, 2018

5. Market Oversight Law-Chapter 48.37 RCW
The Market Conduct Oversight law is contained in Chapter 48.37, RCW and was effective July 22, 2007.
Rules to administer the new law became effective September 1, 2007 and are contained in Chapter , WAC.
New law repealed references to market conduct in RCW 48.03, Exam Statute as well as applicable sections of RCW and RCW
The 5-year exam requirement is gone.
We now have one of the most stringent confidentiality laws in the country.
We have a unique complaint verification process.
A General Overview
November 7, 2018

6. Legislative Changes
Replaced domestic exam cycle with required market analysis on all companies (alien, foreign and domestic) every year. Abbreviated Level 1 and Level 2 analyses are performed on every domestic carrier annually.
Expands the scope of responses available to Market Conduct Oversight staff.
Provides the potential for a greater level of cooperation between insurers and OIC staff in sharing of information and requesting and making corrective regulatory responses.
A General Overview
November 7, 2018

7. Market Conduct Oversight Today
Market Conduct Oversight consists of two distinct Units.
Market Analysis (based in Tumwater)
Designed to identify potential market or company issues through broad industry, market and company analysis
Market Conduct (based in Seattle)
Designed to determine the extent of market or company issues and work directly with companies to resolve those issues
A General Overview
November 7, 2018

8. Market Analysis Based in Tumwater
Market analysis looks at all carriers conducting business in WA.
Unlike examinations with a set timeframe, the most current data is reviewed.
Data from other states is reviewed an incorporated into analysis.
Social Media is reviewed.
Complaint data is analyzed.
Market Conduct Annual Statement is now centralized.
Follow procedures from the NAIC Market Regulation Handbook.
A General Overview
November 7, 2018

9. Baseline Analysis Baseline analysis is first step.
Data is analyzed using the Market Analysis Prioritization Tool (MAP-T)
Data may also be analyzed using the Market Conduct Annual Statement (MCAS)
Complaint ratios are calculated and trends identified.
Carrier may be moving into state or leaving.
Carrier may have redomesticated.
Regulatory Information Retrieval System (RIRS) enforcement activity analyzed too.
Carriers that appear to be outliers are then forwarded for Level 1
A General Overview
November 7, 2018

10. Level 1 Analysis Level 1 consists of 15 major questions
Review appointed producers
Are forms filed?
Look at carrier websites
Look at what is marketed
Quickly review financials at a high level.
Review Market Conduct Annual Statements
Review complaints at a high level for any areas of concern
Look at issues identified in other states
Make recommendations for next step
A General Overview
November 7, 2018

11. Level 2 Analysis Level 2 is more focused – May take 20 – 40 hours
Reviews complaints in depth
Identify trends
Review how long producers are appointed
Social Media/Websites
AM Best reports
Review exams/enforcement orders from other states
Contact other departments in agency looking for concerns
Identify if carrier has filed appropriate rates and forms.
Look at loss ratios/financial issues
Try to anticipate if premium or complaints will change
Make recommendation to proceed to Continuum or not.
A General Overview
November 7, 2018

12. Market Oversight Workflow
A General Overview
November 7, 2018

13. Market Conduct Based in Seattle
All lines of insurance are subject to review
Market Conduct Continuum “action” means utilizing any of the full range of activities to assess and address the market conduct practices of insurers in this state:
Identify and substantiate insurers or practices that adversely impact the consumers, policyholders, and claimants.
Market Conduct actions focus on the general business practices and compliance activities of insurers, not infrequent or unintentional random errors that do not cause consumer harm.
Market Conduct shall select the least intrusive and most cost-effective Market Conduct action that will provide the necessary protections for consumers.
A General Overview
November 7, 2018

14. Continuum Referrals
Market Conduct Continuum referrals are primarily received from Market Analysis. Level 2 analysis identified a trend, potential problem, or area of concern requiring additional investigation.
Continuum referrals are also received from other departments within the OIC such as:
Rates and Forms
Consumer Advocacy
Agent Investigations
SIU
Other States
Companies self-reporting violations
Washington Insurance Examining Bureau (WIEB)
A General Overview
November 7, 2018

15. The Continuum of Market Actions
The Continuum of Regulatory Responses are the Market Conduct Oversight steps or actions that may be taken to investigate a Continuum referral. Continuum actions may include, but are not limited to (See RCW (4)(a)):
(i) Correspondence with the insurer;
(ii) Insurer Interviews;
(iii) Information gathering;
(iv) Policy and procedure reviews;
(v) Interrogatories;
(vi) Insurer self-evaluation and compliance programs;
(vii) Desk examinations; and
(viii) Investigations;
When other Market Conduct actions have not sufficiently addressed issues raised concerning company activities in WA state, the Commissioner may call a Market Conduct Examination.
A General Overview
November 7, 2018

16. Continuum Workflow Continuum Actions
Workflow is based on the Continuum of Market actions found in Chapter 48.37, RCW. Typically the first action taken by the examiner is to call the company, discuss the issues found in the referral or Level 2, and confirm a Continuum has been opened.
Conference calls, information requests, policy and procedure reviews are all examples of actions designed to provide an opportunity to verify data, resolve issues, and provide confirmation of compliance with insurance laws.
Continuum actions provide the framework for examiners to work together with companies in targeting, identifying, and correcting issues quickly.
Continuum actions can be expanded based upon examiner findings
A General Overview
November 7, 2018

17. Continuum Workflow Closing a Continuum
Continuums can be closed at any time. Continuum outcomes are:
Closed without additional activity
Closed with enforcement referral based on violations
Closed because an examination is called.
Company is notified of the examiners findings prior to the files closure. The company has an opportunity to review the final findings at this point.
Closing letter is sent to the Company confirming the next step in the process.
An internal file Summary is prepared and Enforcement referral if applicable.
A General Overview
November 7, 2018

18. WA State Market Conduct Oversight
Baseline Analysis
~820
~1100
~1400
Level 1
145
311
279
206
205
208
246
174
Level 2 46
109
119
120
121
128
131
113
Continuum 12 32 41 23 37 48 52 54
Examinations 1 2 3
A General Overview
November 7, 2018