State regulation of the insurance market is inconsistent and erratic, according to a report from the
With the exception of two states, California and Ohio, states the GAO looked at conducted examinations of fewer than 2% of licensed companies in 2001.
"Based on the number of market conduct examinations reported by the states to NAIC, it would take many years for any of the states we visited to examine all of the companies licensed in the statein some cases, more than 100 years," the report concluded. Furthermore, the states criteria for selecting companies and the number of staff used to conduct examinations varied, creating a situation where states are reluctant to rely on each others examinations.
The
"However, despite NAICs long-standing efforts and some successes, progress has been slow, and it remains unclear whether the quality and consistency of market conduct regulation will improve fundamentally, particularly in these two key areas," the report said. The financial regulation standards for solvency established in the 1990s serve as a model of effective consistent regulation, and the NAIC should turn to these in reevaluating market conduct examinations.
The
The GAO report recognizes that the NAIC has attempted to address the issue but concludes that the NAIC has much work to do in order to reach consensus. "However, at present it remains uncertain whenand even whetherNAIC and the states can agree on and implement a program that will accomplish this goal.