6 - Market Conduct

6.1 Mission

The primary mission of the Market Conduct Section is to perform examinations and reviews of insurance carriers to ensure the fair treatment of policyholders in the Massachusetts insurance marketplace. Examinations involve the review of company records and practices relating to sales, advertising, rating, underwriting, claims and complaint handling. Market Analysis Reviews consist of an annual evaluation of various regulatory data covering select companies doing business in Massachusetts. Review of this regulatory data allows the Section to understand the current state of the marketplace and identify possible areas of regulatory intervention. The Market Conduct Section looks at the treatment that consumers receive from insurance companies in order to assure compliance with the terms and conditions of the insurance contract, as well state laws, regulations and bulletins.

6.2 Goals

Monitor insurers and industry trends. Analyze the impact on consumers and the insurance marketplace of those trends and determine whether regulatory intervention or oversight is appropriate.Complete

Monitor the progress of multi-state regulatory settlement agreements in which the Massachusetts Division of Insurance is a lead state negotiator.Complete
Determine whether multi-state regulatory settlement agreements negotiated by other states are fair to Massachusetts consumers.


Maintain a market conduct examination program in accordance with guidelines of the Division of Insurance and the NAIC.

Conduct sufficently planned, timely administered and substantive market conduct examinations with qualified and trained professionals.Complete

6.3 Primary Activities

Examinations and Reviews

The market conduct examination process allows the Division to ensure that policyholders and consumers are treated fairly and in accordance with both the terms of the insurance contract and state law or regulation. In some instances, a completed market conduct examination results in corrective action in order to fix past violations and to prevent future violations.

In 2008, the Market Conduct Section completed ten domestic market conduct examinations which evaluated:

  • Company operations and management
  • Timely and fair complaint handling
  • Marketing and sales practices
  • Appointment and licensing of producers
  • Underwriting and rating guidelines and practices
  • Claims handling and settlement practices

Market Conduct examinations may be either comprehensive or limited-scope. Six comprehensive and twenty-one limited-scope examinations of domestic insurers were in progress as of the end of 2008.

In addition to domestic examinations, the Market Conduct Section participates - and sometimes leads - multi-state examinations. In 2008, the Division was the lead examiner on two completed multi-state examinations. In each instance, the Company was found to be compliant with the terms of the regulatory settlement agreement it executed with the Division and participating states.

One multi-state examination, with the Division as a lead state examiner, was in progress as of the end of 2008.

Market Analysis

In 2008, the Market Conduct Section completed 61 market analysis reviews on 42 companies for eight lines of business. Market analysis reviews consist of assessing data from a variety of sources, such as the NAIC complaint database, the NAIC regulatory information retrieval system, the NAIC market initiative tracking system, and company financial statements. They provide an early warning mechanism used to identify non-compliance with insurance laws and regulations, and negative financial trends which may impact future claims payments.

Settlement Monitoring

As a result of examinations that were previously conducted by the Market Conduct Section, the Division monitored various regulatory settlement agreements throughout 2008.

· UNUM Group

The UNUM settlement concerned improper claims handling (i.e. denials or termination of payments) with respect to group and individual disability income policies. Thus far, approximately $682,000,000 has been paid to claimants, or placed in reserve for future payments on a national basis. Approximately $13,600,000 has been paid or placed in reserve for future payments to Massachusetts claimants.

· Boston Mutual Life Insurance Company

The Boston Mutual settlement covered improper life insurance sales to military personnel - primarily the failure to conduct a needs assessment before sale. Approximately $435,000 is to be refunded to military personnel on a national basis, including $1,500 to military personnel from Massachusetts.

· HealthMarkets, Inc.

The HealthMarkets settlement involved the improper claims handling practices of health insurers under plan certification and riders - primarily the failure to pay benefits fairly and equitably. Thus far, approximately $840,000 has been paid to Massachusetts claimants.

In 2008, the Market Conduct Section participated in a multi-state settlement of a foreign insurer, Conseco Group (Bankers Life and Casualty Insurance Company and Conseco Senior Health Insurance Company), in which a $15,000 fine was paid to the Commonwealth. The multi-state examination found errors in complaint handling, marketing and sales and long term care claims handling.

Company Reports

In 2008, the Market Conduct Section reviewed potential violations self-reported by two companies involving annuities. These self-reports resulted in benefits of approximately $225,000 paid to Massachusetts consumers.

Additional Reviews

The Market Conduct Section regulates 225 risk purchasing groups by registering new groups and renewing the registration of existing groups. In 2008, approximately $34,000 in fees was collected from the risk purchasing groups. In addition, the Section reviews and analyzes the financial statements of 24 workers' compensation self-insured groups in order to ensure the solvency of each group