An insurance market conduct study, also known as a market conduct examination, is a formal evaluation of an insurer’s business practices by a state insurance regulatory agency to confirm compliance with state laws, rules, regulations, or orders by the insurance commissioner. These should be viewed as regulatory investigations and are crucial for states to maintain the integrity of the insurance market, ensuring that consumers are treated fairly and that insurance companies operate in a manner that is both ethical and compliant with regulatory standards.

In theory, the purpose of market conduct studies is to uphold consumer rights and maintain industry integrity. These examinations play a pivotal role in safeguarding the interests of policyholders by ensuring that insurance companies operate in a fair, transparent, and compliant manner.

Market conduct studies should be thorough investigations into the practices of insurers, scrutinizing various operational aspects such as underwriting and rating, policyholder service, claims handling, and marketing and sales practices. These studies also delve into producer licensing, insurer operations and management, and the handling of complaints. These investigations can range from comprehensive reviews, which cover a spectrum of practices, to targeted audits that focus on specific areas of concern based upon such factors as increased repetitive consumer complaints about an isolated topic.

The primary objective of these regulatory examinations is to guarantee that consumers are offered insurance products that are not only beneficial but priced fairly by financially stable companies. By closely monitoring and evaluating the conduct of insurers, regulatory bodies and market conduct examiners try to ensure that the insurance marketplace remains competitive and that the insurance products available meet the stringent standards set by state law.

Market conduct studies serve as a critical tool in identifying and addressing any practices that may be deemed unfair or detrimental to consumers. In theory, they should reinforce the integrity of the insurance industry. For policyholders, these studies provide a layer of protection, ensuring that their rights are upheld and that they receive the quality of service and products they rightfully deserve.

Insurance market conduct studies and examinations have been criticized. I intentionally emphasized the words “in theory” because my opinion is that these studies do not adequately investigate wrongful insurance company claims practices and objectives. Over the next several days, I will explore this topic in much greater detail about why market conduct studies fail policyholders and what can be done to make them better.

I would suggest that readers take just a few minutes to read All Insurance Companies Have Written Claims Processes, which explains how market conduct studies can make insurance company claims practices much more transparent.

Thought For The Day 

Honesty and transparency make you vulnerable. Be honest and transparent anyway.

—Mother Teresa