Moderator: Tanya Sherman Market Analysis Manager INS Companies. Lysa Saran Deputy Director Illinois Department of Insurance

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1 The Continuum and Beyond

2 Presenters Moderator: Tanya Sherman Market Analysis Manager INS Companies Presenters: Christine Palmieri Travelers Lysa Saran Deputy Director Illinois Department of Insurance Susanna Stevens Examiner/Analyst INS Companies

3 Overview of the Session Quick overview of Market Analysis Process How the next step is determined What companies can do to be proactive Trending patterns in Market Analysis Accreditation and how it may impact the states/what might need to change Handouts are available online

4 Market Analysis Basic Overview Baseline Analysis Level 1 Analysis Level 2 Analysis Continuum Examination

5 The Level 1 Is Now Completed How do you decide to go to the next step?

6 Available Options (Handout) No Further Analysis Necessary No Further Analysis This Year, But Review Again Next Year Continuum Of Regulatory Options Level 2 Analysis Recommended Direct Contact With The Company Is Scheduled Investigation is Scheduled Enforcement Is Scheduled Examination Is Scheduled Contact the Collaborative Action Designee (CAD) for possible collaboration

7 Level 1 Analysis Recommendation: No further analysis is necessary. Statistics From a total of 101 Level 1 Analyses completed in Delaware in the 2012 data year, ten (10) recommended no further analysis is necessary No Further Analysis Next Year Continuum Level 2 Rationale for Recommendation Company(s) appear financially stable; No significant changes in operations or management; No concerns related to examinations and/or Regulatory Actions; and No complaint trends noted in the state under review. Exam

8 Level 1 Analysis Recommendation: No further analysis this year, but review again next year. Statistics Rationale for Recommendation From a total of 101 Level 1 Analyses completed in Delaware in the 2012 data year, forty seven (47) recommended no further analysis this year, but review again next year. No Further Analysis Next Year Continuum Level 2 Increase in exams called on the Company(s); Regulatory Actions citing marketing & sales, use of unapproved forms, misrepresentations of an insurance product/policy; Complaint trends reported nationally citing their marketing & sales (misrepresentations, suitability, and replacements) Outlier in Market Conduct Annual Statement in relation to replacements issued. Exam

9 Level 1 Analysis Recommendation: Continuum of a Regulatory Response. Statistics From a total of 101 Level 1 Analyses completed in Delaware in the 2012 data year, nineteen (19) recommended the Continuum of a Regulatory Response Option. No Further Analysis Next Year Continuum Level 2 Exam Rationale for Recommendation Company(s) ratios were outliers in the Market Conduct Annual Statement related to surrenders, replacements, and claims closed without payment and further explanation is needed. Confirm that violations noted by another jurisdiction did not have an affect on the state under review s policyholders. Clarification on specific issue, topic or procedure. Responses from Company are vague or nonexistent.

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12 Level 1 Analysis Recommendation: Level 2 Analysis is Recommended. Statistics From a total of 101 Level 1 Analyses completed in Delaware in the 2012 data year, twenty three (23) recommended a Level 2 Analysis. No Further Analysis Next Year Continuum Level 2 Exam Rationale for Recommendation Changes in the Company(s) blocks of business and management; Several new products released; Significant changes in the premiums reported in the state under review; Concern in complaint trends noted in the state under review and nationally; Financial data/stability is of concern; Exams called on the Company increased and many exams resulting in orders and fines; and Increase in Substantial Regulatory Actions.

13 Level 1 Analysis Recommendation: Examination Is Scheduled. Statistics From a total of 101 Level 1 Analyses completed in Delaware in the 2012 data year, two (2) recommended that an examination be scheduled. No Further Analysis Next Year Continuum Level 2 Exam Rationale for Recommendation Concern in the rate increases recently implemented in state; Regulatory Actions reported in the last two years the majority citing their claim handling and market conduct exams; Complaints reported in the state under review, the majority citing policyholder delays/no response and coverage questions; Exams completed from other states resulting in orders and fines; and Regulatory Actions citing claim handling practices and excessive profits.

14 Other Analysis Recommendations: Targeted Examination (Reference State Statutes) Review Complaints Only (Re coding) Contact the Collaborative Action Designee (CAD) for possible collaboration

15 What Can Companies Do To Be Proactive? Market Analysis Best Practices

16 Accountability, Communication, Training & Self Audit Accountability Get buy in from the Top!! Partner with senior business leaders to create a culture of compliance Develop an escalation protocol to ensure others notify the appropriate areas when a problem has been identified As compliance leaders, get involved to understand root cause and how future occurrences can be prevented Ensure others seek compliance and legal advice during the development of new or revised products or operational procedures Employ a structured process to disseminate, track and monitor response to new or revised laws and regulations Set realistic goals and focus on high exposure areas; ensure others fully understand the importance of compliance and self audit

17 Accountability, Communication, Training & Self Audit Communication Communicate regularly! Ensure other disciplines know the key compliance personnel Tailor your communications to your audience too much information for executives will be overwhelming and your message won t be heard Too little information for those who need the detail will not be helpful! Set realistic expectations for yourself and others Types of information to communicate Your perspective on internal findings and what may need to change (processes, training) Company market conduct results; don t limit your communication to the problems highlight the strengths and reward a job well done Industry violations and penalties (catalog information where publicly available) Summarize your company s regulatory activity, including the basis for activity; also include penalties, refunds and exam expenses compare to prior years Emphasize the reputational impact of non compliance General compliance reminders in employee meetings, bulletins or on an Intranet page tailor them to be state specific in key jurisdictions Remember to listen! Understanding a business or operational dilemma may allow you to develop a compliant solution

18 Accountability, Communication, Training & Self Audit Training & Self Audit Self audit programs should not be limited to policy or claim file reviews Test workflows that have an impact on compliance, i.e. the process for updating rates and forms in systems Identify all areas within your company that perform compliance audits or incorporate compliance in underwriting or operational reviews Meet with key staff to understand their standards for review and how they communicate and address findings Compare to NAIC Market Regulation Standards Are your company auditors looking at the same items a regulator would look at in a particular state or for a particular line of business? Incorporate items identified in prior market conduct exams and internal company audits

19 Accountability, Communication, Training & Self Audit Training & Self Audit Retest prior corrective actions that deal with process or individual judgment Ensure that the right resources are performing audits Collaborate with these areas at the time of an audit to provide a market regulation perspective and/or to assist with the reviews Work with your Legal staff to develop language to include on audit reports and related communications in order to protect t confidentiality Based on audit results and/or market conduct findings, identify topics that may require additional training or awareness and determine the appropriate training tools (webinars, training modules, requiring employee certification, onsite visits to company or agent offices, lunch and learn get togethers) When reviewing corrective actions, either from an internal or external audit, identify those that require ongoing monitoring to ensure they are built into audit plans

20 Market Analysis Best Practices Regulator and Industry Pointers Double Check MCAS Data Submittals Use the MCAS Interrogatory Comments Fields Provide Details In The Management Discussion and Analysis Document (MD&A) Correct Contact Person For Market Conduct (Jurat Page) Complaint Reconciliation (Coming Soon!)

21 Market Analysis Trending Recent Past and Current Trends Life and Annuity Suitability, DMF Property and Casualty Catastrophic Losses (Hurricane, tornadoes, coastal, fires, ice dams, hail and wind) Health ACA Complaints (New codes implemented), new examination template

22 Market Analysis Trending Potential Future Trends Life and Annuity DMF, STOLI s, Insurable Interest Property and Casualty Catastrophic Losses Continue and Ride Sharing Health ACA Compliance with laws (Proof of implementation) Long Term Care MCAS 2014 Filings

23 Accreditation Domestic Deference Framework (Standards Established) Core Competencies? Stair Step? Commissioners Analysis/Examinations Impact to Small States Statutes (Authorization) Data Consistency Contractors

24 Presenter Contact Information Christine Palmieri Travelers Corporate Compliance E mail: CPALMIER@travelers.com Phone: Lysa Saran Deputy Director Illinois Department of Insurance E mail: : Lysa.Saran@Illinois.gov Phone: Susanna Stevens Examiner/Analyst INS Companies E mail: sstevens@inscompanies.org Phone: