ICAE – Savannah, GA – Spring 2000 Exchange – Life & Health Breakout Session

Life & Health Session

Insurance Dept. Audits

Many DOIs are using third party administrators to do market conduct exams. This is causing many problems for insurance companies – companies have had to “educate” the examiners, it is also very costly for insurance companies – some fees are as much as $250/hr.

CA DOI & VA DOI – have been using outside auditing companies for market conduct exams.

Electronic audit of claims – DOI gave a list of audit companies that could be used – the insurance company worked with the audit company that they chose via a questionnaire process. The insurance company got to choose the audit company & gave them information on the work process, etc.

Does DOI ask companies certain questions (or request certain information) on business practice/certain cases in an effort to try & determine if they (DOI) should begin a market conduct exam? The regulators in the session assured us that this is not the case – if it appears that the insurance company intentionally is not cooperating, then an exam may be requested.

What sort of things seem to warrant a market conduct exam? DOI regulators really didn’t know, another area within the DOI (Consumer Services) handles exams. Some companies become very defensive when the DOI does start a market conduct exam.

The market conduct exam area in Ohio DOI is putting together an aggressive exam process to look at HMOs to protect the consumers/doctors/hospitals.

Some DOIs are asking to review IMSA materials during the market conduct exam process. The insurance companies are concerned that the review of these materials may cause a large increase in the cost to the insurance companies (IMSA documents are generally very lengthy & at $250/hr!)

How do DOIs plan the timing of their audits? Some insurance companies have 2 or 3 DOIs in at one time. Space becomes a big problem – long lists of supplies, etc. NAIC should be more involved in the process/timing of the DOI market conduct exams.

War Story: A DOI would not look at microfilm – the insurance company had to hard copy over 500 files for market conduct exam!

Ins. Companies & DOIs: If a clear path or communication is established, the problems during a market conduct exam are minimal, assuming that there are not other problems with the insurance company.

Most insurance companies find the market conduct exam a very painful process. Although it appears that the examiners will be much easier to work with if the DOI/Ins. Company develops a rapport and a certain level of trust.

IMSA certification is done every 3 yrs (one insurance company representative asked about IMSA certification).

An insurance company in Louisiana – there is a committee that reviews complaints, agent activity, etc…..what was the problem, how serious, what action (disciplinary action) needs to be taken against agent. This company shares that data with the DOI during a market conduct exam.

New York Life – Any agent related complaint – the person who resolves the issue passes the results w/disciplinary action recommendation to a special committee who takes disciplinary action. This info’ is shared with the DOIs during market conduct reviews.

Agent Ethics

“Compliance Corner” – monthly tape of procedures, etc., to be viewed by producers to educate them. Several companies use this type of communications – another company uses this “Compliance Corner” as a monthly newspaper that highlights any agent disciplinary action/terminations that happened in the company.

Insurance companies are also taking harsher action against agents who do not respond to complaints via an agent statement, etc. – certainly against agents who are guilty of fraudulent activity.

Most companies require that an agent respond to the allegations via agent statement. Some concern over complaints written by “another” agent and signed by the customer/policyowner. There are always two sides to every story – agent should have a chance to state their piece. Also, they may be able to add some insight into the issue that cannot be obtained from corporate file.

Video — character does matter!

Importance of good character – show video to sales force, reinforce with IMSA materials. Train them on what to do if they receive a complaint, etc.

It’s important to not make “compliance” a bad name – it’s difficult to change the thinking, the culture has changed. The agents need to understand that compliance will ultimately “protect” them. This is slowly changing—agents do not always feel that compliance is a bad thing. Agents are given compliance materials with their ethics training & they need to sign an “acknowledgement”

Compliance & Ethics training

A LIMRA video that some insurance companies show to agents as part of their training. “Play by the rules”, training consists of ethics games/ethics puzzle, compliance quiz – before the presentation on compliance (during agent training).

Privacy Issues

Some companies have special units that deal directly with the privacy issues – they do investigations, etc. Companies have certain controls in place for loans, cash payments, etc. – they look for fraud, improper use of funds, etc. Companies will send out a questionnaire to the policyowner – after 2 yr contestable period – Q: major changes in health history, etc, trying to track fraudulent activity

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