The Courant on Market Conduct Exams

It really must be a slow day when the Courant prints an ode to the market conduct exam:

It’s not the sexy sleuthing of film and fable, but Connecticut regulators are hot on the trail of misbehaving insurance companies.

The detectives are from a little-known section of the state Insurance Department that uncovers problems and makes the industry pay hundreds of thousands of dollars each year in fines and refunds to consumers, businesses and other institutions.

They work for the department’s “market conduct” division, which culls through insurers’ records to see how they’ve treated customers or if they’ve violated state laws.

Of course, any consumer-oriented insurance article wouldn’t be complete without a quote from one of our favorite consumer advocates….

“My perception is market conduct exams don’t ask the right questions,” said J. Robert Hunter, director of insurance for the Consumer Federation of America. Exams around the country “find all kinds of trivial crap,” he said. “That isn’t where the real action is. It’s the big scams that are really hurting [consumers].”

The article has a bit of a critical tone when it comes to the time delay involved between when missteps occur and when a market conduct exam will pick them up….which is a fair criticism, but is unfortunately the nature of the beast when dealing with a bureaucracy with limited resource (c.f. the “not sexy” comment by the Courant). This is the reason why a consumer who is having a legitimate problem with an insurer should proactively register a complaint with their state’s insurance department (or the Department of Labor, if the insurance is provided as a benefit from an employer).

One item that the article doesn’t touch upon (presumably because the folks authorized to talk to the press are out on vacation the last 1-2 weeks of the year) is how effective a market conduct exam is as an encouragement for responsible insurers to keep their own noses clean. In addition to the threat of fines, market conduct exams can be grueling, resource intensive events potentially coming from any of the 50 states, the District of Columbia, or any territories the insurer might be doing business in. There’s an inherent wisdom in making sure those ordeals proceed as easily as possible. And the best way to avoid a painful exam experience is to have as squeaky-clean a track record as possible.