5 - Market Conduct

5.1 Mission

The primary mission of the Market Conduct Section is to conduct examinations and reviews of insurance company business practices to ensure that policyholders are treated fairly in the Massachusetts insurance marketplace.

The Market Conduct Section reviews the manner in which insurance companies treat policyholders in order to ensure that such treatment complies with the terms and conditions of insurance contracts, as well as state laws, regulations and bulletins. Examinations involve interviews with key company personnel, and review of company records and practices - including those relating to sales, advertising, rating, underwriting, claims and complaint handling.

The Section also conducts Market Analysis Reviews of various regulatory data covering select companies doing business in Massachusetts. Review of this regulatory data enables the Section to better understand the current state of the marketplace, and identify possible areas of regulatory intervention.

5.2 2009 Goals



Monitor insurers and industry trends, and analyze their impact on consumers and the insurance marketplace to determine whether regulatory intervention or oversight is appropriate.



Monitor the progress of multi-state regulatory settlement agreements in which the Massachusetts Division of Insurance is a lead state negotiator.




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 Division of Insurance and the NAIC guidelines.



Conduct substantive market conduct examinations that are thoughtfully planned and timely executed by qualified and trained professionals.


5.3 Primary Activities

Examinations and Reviews

The market conduct examination process enables the Division to ensure that insurance companies treat policyholders and consumers fairly and in accordance with both the terms of the insurance contract and state laws or regulations. Completed examinations can result in insurance companies taking corrective action to address identified violations and prevent their recurrence.



The Market Conduct Section evaluated the business practices of 11 domestic companies in the following areas during comprehensive examinations completed in 2009:

  • 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

In addition to comprehensive examinations, the Section completed 35 limited scope examinations of domestic and foreign insurers in 2009. A limited scope examination is one that covers only specifically stated areas of activity rather than the comprehensive set of areas listed above. One limited scope re-examination looked at whether Mid-West National Life Insurance Company of Tennessee, The Chesapeake Life Insurance Company, and the MEGA Life and Health Insurance Company, which are companies in the Health Markets Inc. company group, complied with the terms of a Regulatory Settlement Agreement (RSA) reached with the Division several years ago. As a result of this re-examination and a new RSA reached with the Division in August 2009, Health Markets agreed to pay a $2 million monetary penalty, to stop writing any new health coverage after September 30, 2009, and to reconsider claims that were previously denied. The claims reassessment process is ongoing, with the first payments being made in 2010.

Market Analysis

In 2009, the Market Conduct Section completed 67 market analysis reviews on 48 companies for 9 lines of business. During market analysis reviews, the Division assesses data from a variety of sources including the NAIC Complaint Database (CDS), the NAIC regulatory information retrieval system (RIRS), the NAIC Market Initiative Tracking System (MITS), and insurance company-submitted financial statements. These market analysis reviews provide an early warning mechanism used to identify company non-compliance with insurance laws and regulations, and negative financial trends which may impact future claim payments.

Company Reports



In 2009, the Division reviewed potential violations self-reported by one company involving claims handling for qualified student health insurance plans. The total restitution to Massachusetts' insureds from this self-report was $881,306. The Division also reviewed a life insurance company's payments to Massachusetts consumers under a national remediation plan established after the company self-reported problems with its annuity contracts. The Massachusetts remediation credits or payments thus far total $765,026.

Settlement Monitoring



As a result of examinations that were previously conducted by the Division, the Market Conduct Section monitored two regulatory settlement agreements throughout 2009.

  • UNUM Group

The UNUM settlement concerned improper claim handling including denials and termination of payments, on group and individual disability income policies. As of December 31, 2009, on a national basis, UNUM Group has paid approximately $715 million either directly to claimants, or has placed funds in reserve for future payments. Approximately $14.2 million of that total has been paid or placed in reserve for future payments to Massachusetts' claimants.




  • UnitedHealthcare Group

The UnitedHealthcare Group settlement covered claims previously underpaid due to errors in determining benefit eligibility, claim adjudication system or claim processor errors, and provider contract issues. In 2009, restitution paid to Massachusetts' insureds and health care providers totaled $2.03 million.




Additional Reviews

The Market Conduct Section regulates 265 risk purchasing groups by registering new groups and renewing the registration of existing groups. In 2009, the Section collected approximately $34,000 in fees from these 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