Bill Summary – FastDemocracy

HOUSE BILL NO. 6265
     December 10, 2024, Introduced by Reps. McFall, Grant, McKinney and Scott and referred to the
       Committee on Insurance and Financial Services.
          A bill to amend 1956 PA 218, entitled
    "The insurance code of 1956,"
    by adding chapter 4A.
                     THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
                                         CHAPTER 4A
                             MARKET CONDUCT EXAMINATIONS
       Sec. 481. As used in this chapter:
       (a) "Complaint" means a written or oral communication that is
 documented that primarily expresses a grievance. As used in this
 subdivision, "grievance" means an expression of dissatisfaction.
       (b) "Desk examination" means a targeted examination that is
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 conducted by an examiner at a location other than the insurer's
 premises. A desk examination is usually performed at the
 department's offices with the insurer providing, for review,
 requested documents by hard copy, microfiche, discs, or other
 electronic media.
       (c) "Insurer" means that term as defined in section 106 and
 includes a nonprofit dental care corporation operating under 1963
 PA 125, MCL 550.351 to 550.373.
       (d) "Market analysis" means a process through which market
 conduct surveillance personnel collect and analyze pertinent
 information from filed schedules, surveys, required reports, and
 other sources in order to develop a baseline understanding of the
 marketplace and to identify, for further review, patterns or
 practices of insurers that deviate significantly from the norm or
 that may pose a potential risk to insurance consumers. The director
 shall ensure that the NAIC Market Regulation Handbook is used as 1
 resource in performing a market analysis. For purposes of this
 subdivision, "pertinent information" means information gathered by
 market conduct surveillance personnel from all of the following:
       (i) Data currently available to the department.
       (ii) Surveys and information from required reports.
       (iii) Information collected by the NAIC and other sources in the
 public and private sectors.
       (iv) Information from within and outside the insurance
 industry.
       (e) "Market conduct action" means any activities that the
 director may initiate to assess and address the market practices of
 insurers, including, but not limited to, a market analysis and,
 following a market analysis, the provision of a targeted
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 examination. For the purpose of this subdivision, market conduct
 action does not include the director's resolution of an individual
 consumer complaint or other report of a specific instance of
 misconduct.
       (f) "Market conduct surveillance personnel" means those
 individuals employed or contracted by the director to collect,
 analyze, review, or act on information concerning the insurance
 marketplace that identifies patterns or practices of insurers.
       (g) "NAIC" means the National Association of Insurance
 Commissioners.
       (h) "NAIC Market Conduct Examiner's Handbook" means the set of
 guidelines developed and adopted by the NAIC that documents
 established practices to be used by market conduct surveillance
 personnel in developing and executing an examination, or a
 successor document.
       (i) "NAIC Market Conduct Uniform Examination Procedures" means
 the set of guidelines developed and adopted by the NAIC designed to
 be used by market conduct surveillance personnel in conducting an
 examination, or a successor document.
       (j) "NAIC Market Regulation Handbook" means the outline of the
 elements and objectives of market analysis developed and adopted by
 the NAIC and the process by which states can establish and
 implement market analysis programs, or a successor document.
       (k) "NAIC Standard Data Request" means the set of field names
 and descriptions developed and adopted by the NAIC for use by
 market conduct surveillance personnel in an examination.
       (l) "On-site examination" means a targeted examination
 conducted at the insurer's home office or the location where the
 records under review are stored.
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       (m) "Qualified contract examiner" means a person under
 contract with the director who is qualified by education,
 experience, and, where applicable, professional designations to
 perform market conduct actions.
       (n) "Targeted examination" means a focused exam, that may be
 conducted by desk examination or by an on-site examination, based
 on the results of a market analysis, that indicates a need to
 review a specific line of business or specific business practices,
 including, but not limited to, the following lines of business or
 business practices:
       (i) Underwriting and rating.
       (ii) Marketing and sales.
       (iii) Complaint handling operations and management.
       (iv) Advertising materials.
       (v) Licensing.
       (vi) Policyholder services.
       (vii) Nonforfeitures.
       (viii) Claims handling.
       (ix) Policy forms and filings.
       (o) "Third-party model or product" means a model or product
 provided by an entity separate from, and not under direct or
 indirect corporate control of, the insurer using the model or
 product.
       Sec. 482. (1) The director shall, on an ongoing basis, ensure
 that market analysis is conducted.
       (2) Subject to subsection (4), if the director determines, as
 a result of a market analysis, that further inquiry into a
 particular insurer or practice is needed, the director may consider
 the following continuum of market conduct actions before conducting
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 a targeted examination by on-site examination:
       (a) Correspondence with the insurer.
       (b) Insurer interviews.
       (c) Information gathering.
       (d) Policy and procedure reviews.
       (e) Interrogatories.
       (f) Review of insurer self-evaluation and compliance programs.
 If the director is satisfied that the organization's qualification
 process is likely to provide reasonable assurance of compliance
 with pertinent insurance laws, the review under this subdivision
 may include consideration of the insurer's membership in a best-
 practices organization.
       (g) Desk examinations.
       (h) Examinations.
       (3) If the director considers a continuum of market conduct
 actions under subsection (2) and the consideration involves insurer
 participation or response, the director shall make the action in
 consideration known to the insurer in writing.
       (4) If the director considers a continuum of market conduct
 actions under subsection (2), the director shall select actions for
 consideration that yield a consideration that is cost effective for
 the department and the insurer and that protect insurance
 consumers.
       (5) The director shall take steps reasonably necessary to
 eliminate duplicative inquiries and shall coordinate market conduct
 actions and findings with other states.
       Sec. 483. (1) Market conduct actions taken as a result of a
 market analysis must focus on the general business practices and
 compliance activities of insurers rather than identifying
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 infrequent or unintentional random errors that do not cause
 significant consumer harm.
       (2) Except as otherwise provided in this subsection, the
 director may determine the frequency and timing of market conduct
 actions. However, unless extraordinary circumstances indicate a
 risk to consumers if immediate action is not taken, the director
 shall take into account the specific market conduct action in
 determining timing as described in this subsection.
       (3) If the director has information indicating that more than
 1 insurer is engaged in common practices that may violate statute
 or rules, the director may schedule and coordinate multiple market
 conduct actions simultaneously.
       (4) The director may give an insurer reasonable opportunity to
 resolve, to the satisfaction of the director, matters that arise as
 a result of a market analysis before additional market conduct
 actions are taken against the insurer.
       (5) The director shall give notice and provide parties with an
 opportunity for a public hearing under the administrative
 procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, for any
 changes made to an NAIC work product referenced in this chapter
 that changes the way in which market conduct actions are conducted
 in either of the following circumstances:
       (a) A change is made that necessitates a change in statute,
 regulation, or rule.
       (b) The director deviates from the most recently adopted NAIC
 work product.
       (6) Except as otherwise provided by law, every person from
 whom information is sought for purposes of this chapter and the
 person's officers, directors, and agents shall provide the director
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 convenient and free access to all books, records, accounts, papers,
 documents, and any computer or other recordings relating to the
 property, assets, business, and affairs of the person. An officer,
 director, employee, insurance producer, and agent of a person shall
 facilitate market conduct actions and aid in market conduct actions
 so far as it is in their power to do so.
       Sec. 484. (1) If the director determines that the continuum of
 market conduct actions identified in section 482(2) is not
 appropriate, the director may conduct a targeted examination by on-
 site examination in accordance with NAIC Market Conduct Uniform
 Examination Procedures and the NAIC Market Conduct Examiner's
 Handbook.
       (2) In conjunction with the notification requirements under
 subsection (8), the director shall post notification on the NAIC
 Examination Tracking System, or a successor NAIC product, as
 determined by the director, that a market conduct action has been
 scheduled.
       (3) Instead of market conduct action against an insurer
 licensed in this state, the director may accept an examination
 report from another state provided that the state has a market
 surveillance system the director deems comparable to the market
 surveillance system set forth under this chapter. The director's
 determination under this subsection is discretionary and is not
 subject to appeal.
       (4) Before a targeted examination by on-site examination,
 market conduct surveillance personnel must prepare a work plan
 consisting of all of the following:
       (a) The name and address of the insurer being examined.
       (b) The name and contact information of the examiner-in-
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 charge.
       (c) The justification for the targeted examination by on-site
 examination.
       (d) The scope of the targeted examination by on-site
 examination.
       (e) The date the on-site examination is scheduled to begin.
       (f) Notice of any non-insurance department personnel who will
 assist in the examination.
       (g) A time estimate for the targeted examination by on-site
 examination.
       (h) A budget for the targeted examination by on-site
 examination, if the cost of the examination is billed to the
 insurer.
       (i) An identification of factors that will be included in the
 billing if the cost of the examination is billed to the insurer.
       (5) Market conduct action must, to the extent feasible, be
 conducted by desk examination, and data requests must be utilized
 before a targeted examination by on-site examination is utilized.
       (6) Market conduct action must be conducted in accordance with
 the provisions set forth in the NAIC Market Conduct Examiner's
 Handbook and the NAIC Market Conduct Uniform Examinations
 Procedures.
       (7) The department shall use the NAIC Standard Data Request or
 a successor product to request data or information during an on-
 site examination.
       (8) The director shall make an announcement of market conduct
 action by sending it to the insurer and posting on the NAIC's
 Examination Tracking System, or a successor product, as determined
 by the director, as soon as possible, but, except when the action
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 is conducted in response to an extraordinary circumstance described
 in section 483(2), if a targeted examination is by on-site
 examination, by not later than 60 days before the estimated
 commencement of the targeted examination by on-site examination.
 The announcement described in this subsection must contain both of
 the following, as applicable:
       (a) An examination work plan.
       (b) A request for the insurer to name its examination
 coordinator.
       (9) Not later than 30 days before the commencement of market
 conduct action, the director shall conduct a pre-examination
 conference with the insurer examination coordinator and key
 personnel to clarify expectations.
       (10) Before the conclusion of a targeted examination by on-
 site examination, a person among the market conduct surveillance
 personnel who is designated as the examiner-in-charge shall
 schedule an exit conference with the insurer.
       (11) Unless a mutual agreement is reached with the insurer to
 modify the timeline, the director shall adhere to the following
 timeline:
       (a) The director must deliver a draft report to the insurer
 not later than 60 days after the completion of market conduct
 action. Completion of the market conduct action is the date the
 director is considered to confirm, in writing, that the market
 conduct action is completed.
       (b) The insurer must respond with written comments not later
 than 30 days after receipt of the draft report described in
 subdivision (a).
       (c) Unless a mutual agreement is reached between the director
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 and the insurer to extend the deadline, the department shall make a
 good-faith effort to resolve issues informally and prepare a final
 report not later than 30 days after receipt of the insurer's
 written comments as described in subdivision (b). The director may
 make corrections and other changes to the final report as
 appropriate.
       (d) The insurer must, not later than 30 days after issuance of
 the final report, accept the final report and accept the findings
 of the report or request a hearing. If agreed upon by the director
 and the insurer, not more than 30 days may be added to the 30-day
 deadline described in this subsection. A hearing request described
 in this subdivision must comply with the requirements of the
 administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
 24.328.
       (12) The director shall include the insurer's response
 described under subsection (11) in the final report described under
 subsection (11). The insurer's response may be included as an
 appendix or in the text of the examination report. This chapter
 does not require an insurer to submit a response. Individuals
 involved in the examination must not be named in either the report
 or the response, except to acknowledge their involvement.
       (13) Except as otherwise provided in subsection (14), upon
 acceptance of the final report under subsection (11), the director
 shall continue to hold the content of the report as private and
 confidential for a period of not less than 30 days. After the 30-
 day period described in this subsection, unless a court of
 competent jurisdiction has stayed its publication, the director
 shall open the report for public inspection.
       (14) This chapter does not prevent the director from
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 disclosing the content of any of the following to a department of
 this state, a department of any other state, or a federal agency,
 at any time, that agrees to hold the content as confidential in a
 manner that is consistent with this chapter:
       (a) A final report described under subsection (11).
       (b) A preliminary examination report or results.
       (c) Any matter relating to the items described in subdivisions
 (a) and (b).
       (15) If reasonable