Bad Conduct

The U.S. insurance industry’s top compliance shortcomings relate to claims handling noncompliance, including timeliness, required disclosures, payments and grievance and appeal processes–as well as underwriting, rating and insurance producer and sales issues.

That’s according to a review by Wolters Kluwer Compliance Solutions of U.S. insurers’ market conduct actions. The annual review uses public data from 2020 and examines U.S. property and casualty, life, and health insurers’ market conduct actions, including exams and other enforcement actions.

Now in its 17th year, the Top 10 market conduct actions review offers a compliance checklist of operational areas for insurers.

“While technology has helped to streamline and automate some processes, our annual Top 10 market conduct action findings continue to show the ongoing challenges that insurers face in managing their regulatory requirements,” said Steven Meirink, executive vice president and general manager for the Compliance Solutions business. “However, a robust compliance program management approach that includes a strong risk and controls framework can be key to helping improve insurer success rates in market conduct compliance.”

The following are listings of the top compliance issues determined in market conduct actions across the U.S. by state insurance regulators. These issues are primarily found in insurers’ claims, underwriting, and sales processes.

• Failure to acknowledge, pay, investigate or deny claims within specified timeframes
• Failure to issue correct payments and/or compliant denial notices
• Using unapproved/unfiled rates and rules or misapplying rating factors
• Failure to process total loss claims properly
• Failure to cancel, non-renew, or decline policies in accordance with requirements
• Failure to adhere to producer appointment, termination, records, reporting and/or licensing requirements
• Failure to provide required compliant notices and disclosures in claims processing
• Improper/incomplete documentation of claim files
• Improper/incomplete documentation of underwriting files
• Failure to provide required compliant notices and disclosures in underwriting processes

While the Top 10 lists provide insight into insurers’ ongoing compliance risk challenges, Wolters Kluwer says other findings regularly surface as well. Routine determinations by examiners include the failure to consistently identify the legal name of the insurer, as well as failures to adhere to certain state-specific mandates that range from the annual claims training requirement in California to the approval process required to use a different fraud warning statement in New York. Wolters Kluwer helps financial institutions manage regulatory and risk obligations.