[§431:2D-106]  Protocols for market conduct
examinations.  (a)  When market analysis identifies a pattern of conduct or
practice by an insurer which requires further investigation, and less intrusive
market conduct actions identified in section 431:2D‑104(b) are not
appropriate, the commissioner has the discretion to conduct targeted market
conduct examinations in accordance with procedures that are substantially
similar to the National Association of Insurance Commissioners' guidelines on
market conduct examination procedures.



(b)  Causes or conditions, if identified
through market analysis, that may trigger a targeted examination, are:



(1)  Information obtained from a market conduct annual
statement, market survey, or report of financial examination indicating
potential fraud, that the insurer is conducting the business of insurance
without a license or is engaged in a potential pattern of unfair trade practice
in violation of article 13;



(2)  A number of complaints against the insurer or a
complaint ratio sufficient to indicate potential fraud, conducting the business
of insurance without a license, or a potential pattern of unfair trade practice
in violation of article 13.  For the purposes of this section, a complaint
ratio shall be determined for each line of business;



(3)  Information obtained from other objective
sources, such as published advertising materials indicating potential fraud,
conducting the business of insurance without a license, or evidencing a
potential pattern of unfair trade practice in violation of article 13; or



(4)  Patterns of violations of this chapter and the
rules adopted thereunder regarding rate filings, form filings, and termination
requirements.



(c)  If the insurer to be examined is not a
domestic insurer, the commissioner shall communicate with and may coordinate
the examination with the insurance commissioner of the state in which the
insurer is organized.



(d)  Concomitant with the notification
requirements established in subsection (f), the commissioner shall post notification
on the National Association of Insurance Commissioners' examination tracking
system, or comparable product as determined by the commissioner, that a market
conduct examination has been scheduled.



(e)  Prior to commencement of a targeted
on-site market conduct examination, market conduct surveillance personnel shall
prepare a work plan and proposed budget.  The proposed budget, which shall be
reasonable for the scope of the examination, and work plan, shall be provided
to the insurer under examination.  Market conduct examinations, to the extent
feasible, shall use desk examinations and data requests prior to a targeted
on-site examination.



Market conduct examinations shall be conducted
in accordance with procedures that are substantially similar to the National
Association of Insurance Commissioners' guidelines on market conduct
examination procedures.



Prior to the conclusion of a market conduct
examination, the individual among the market conduct surveillance personnel who
is designated as the examiner-in-charge shall schedule an exit conference with
the insurer.



(f)  Announcement of the examination shall be
sent to the insurer and posted on the National Association of Insurance
Commissioners' examination tracking system or comparable product, as determined
by the commissioner, as soon as possible but not later than sixty days before
the estimated commencement of the examination.  The announcement shall contain:



(1)  The name and address of the insurer being
examined;



(2)  The name and contact information of the
examiner-in-charge;



(3)  The reason for and the scope of the targeted
examination;



(4)  The date the examination is scheduled to begin;



(5)  Identification of any non-insurance department
personnel who will assist in the examination, if known at the time the notice
is prepared;



(6)  A time estimate for the examination;



(7)  A budget and work plan for the examination and
identification of reasonable and necessary costs and fees that will be included
in the bill, if the cost of the examination is billed to the insurer; and



(8)  A request for the insurer to name its examination
coordinator.



(g)  If a targeted examination is expanded
beyond the reasons provided to the insurer in the notice of the examination
required under this section, the commissioner shall provide written notice to
the insurer, explaining the extent of the expansion and the reasons for the
expansion.  The commissioner shall provide a revised work plan to the insurer
before the beginning of any significantly expanded examination, unless
extraordinary circumstances indicating a risk to consumers require immediate
action.



(h)  The commissioner shall conduct a
pre-examination conference with the insurer examination coordinator and key
personnel to clarify expectations thirty days prior to commencement of the
examination.



(i)  In requesting the information, the
commissioner shall use the National Association of Insurance Commissioners'
standard data request or comparable product.



An insurer responding to a commissioner's
request to produce information shall produce it as it is kept in the usual
course of business or shall organize and label it to correspond with the
categories in the request.



If a commissioner's request does not specify
the form or forms for producing electronically stored information, an insurer
responding to the request shall produce the information in a form or forms in
which the insurer ordinarily maintains it or in a form or forms that are
reasonably usable.



An insurer responding to an information request
need not produce the same electronically stored information in more than one
form.



An insurer responding to an information request
need not provide the electronically stored information from sources that the
company identifies as not reasonably accessible because of undue burden or
cost.



(j)  The commissioner shall adhere to the
following timeline, unless a mutual agreement is reached with the insurer to
modify the timeline:



(1)  The commissioner shall deliver the draft report
to the insurer within sixty days of the completion of the examination. 
Completion of the examination shall be defined as the date the commissioner
confirms in writing that the examination is completed;



(2)  The insurer shall respond with written comments
within thirty days of receipt of the draft report;



(3)  The commissioner shall make a good faith effort
to resolve issues and prepare a final report within thirty days of receipt of
the insurer's written comments, unless a mutual agreement is reached to extend
the deadline.  The commissioner may make corrections and other changes, as
appropriate; and



(4)  The insurer, within thirty days, shall accept the
final report, accept the findings of the report, file written comments, or
request a hearing.  An additional thirty days shall be allowed if agreed to by
the commissioner and the insurer.  Any such hearing request shall be made in
writing and shall follow chapter 91.



The final written and electronic market conduct
report shall include the insurer's written response and any agreed-to corrections
or changes.  The response may be included either as an appendix or in the text
of the examination report.  The insurer shall not be obligated to submit a
response.  References to specific individuals by name shall be limited to an
acknowledgment of their involvement in the conduct of the examination.



(k)  Upon adoption of the examination report
pursuant to subsection (j), the commissioner shall continue to hold the content
of the examination report as private and confidential for a period of thirty days,
except as provided in this subsection.  During this time, the report shall not
be subject to subpoena and shall not be subject to discovery or admissible as
evidence in any private action; provided that no court of competent
jurisdiction has ordered production.  Thereafter, the commissioner shall open
the report for public inspection; provided no court of competent jurisdiction
has stayed its publication.  This section shall not be construed to limit the
commissioner's authority to use any final or preliminary market conduct
examination report, and examiner or insurer work papers or other documents, or
any other information discovered or developed during the course of an
examination in the furtherance of any legal or regulatory action that the
commissioner, in the commissioner's sole discretion, may deem appropriate.



Nothing contained in this article shall prevent
or be construed as preventing the commissioner from disclosing the content of
an examination report, preliminary examination report or results, or any matter
relating thereto, to the insurance division of this or any other state or
agency of the federal government at any time; provided that the agency or
office receiving the report or matters relating thereto agrees to hold it
confidential and in a manner consistent with this article.



(l)  Where the reasonable and necessary cost
and fees of a market conduct examination are to be assessed against the insurer
under examination, the costs and fees shall be consistent with that otherwise
authorized by law.  Costs and fees shall be itemized and bills shall be
provided to the insurer on a monthly basis for review prior to submission for
payment.



The commissioner shall maintain active
management and oversight of examination costs and fees, including costs and
fees associated with the use of insurance division personnel and examiners and
with retaining qualified contract examiners necessary to perform an
examination.  To the extent the commissioner retains outside assistance, the
commissioner shall have written protocols that:



(1)  Clearly identify the types of functions subject
to outsourcing;



(2)  Provide specific timelines for completion of the
outsourced review;



(3)  Require disclosure of contract examiners'
recommendations;



(4)  Establish and use a dispute resolution or
arbitration mechanism to resolve conflicts with insurers regarding examination
costs and fees; and



(5)  Require disclosure of the terms of the contracts
with the outside consultants that will be used, specifically the costs and fees
or hourly rates, or both, that can be charged.



The commissioner shall review and affirmatively
endorse detailed billings from the qualified contract examiner before the
detailed billings are sent to the insurer.



The commissioner may contract in accordance
with applicable state contracting procedures, for qualified contract actuaries
and examiners as the commissioner deems necessary; provided that the
compensation and per diem allowances paid to the contract persons shall not
exceed one hundred twenty-five per cent of the compensation and per diem
allowances for examiners set forth in the guidelines adopted by the National
Association of Insurance Commissioners, unless the commissioner demonstrates
that one hundred twenty-five per cent is inadequate under the circumstances of
the examination.



(m)  The commissioner may not conduct a
comprehensive market conduct examination more frequently than once every three
years.  The commissioner may waive conducting a comprehensive market conduct
examination based on market analysis. [L 2007, c 227, pt of §1]