Comparison of NAIC Model Regulations

Both the N.A.I.C Unfair Claims Settlement Practices Model Regulation (previous model) and the NAIC Unfair Property/Casualty Claims Settlement Practices Model Regulation (current model), property sections, were reprinted by permission of the National Association of Insurance Commissioners. The two are included for reference so policyholders are aware of the rules' changes.

There are conspicuous differences in the old versus the current model. The first noticeable difference is the statement under Section 1. Authority: The old model specifies that insurance companies are prohibited from engaging in unfair claims settlement practices with such frequency as to indicate a general business practice and that those acts shall constitute an unfair or deceptive act or practice in the business of insurance. The current model merely says, "This regulation is adopted under the authority of the Unfair Claims Settlement Practices Act." An average policyholder reading this current model would probably not understand what is or is not a violation of the regulation because the wording that gave that explanation has now been eliminated.

The next noticeable difference is the statement in the old model under Section 2. Scope: "This regulation defines certain minimum standards which, if violated with such frequency as to indicate a general business practice, will be deemed to constitute unfair settlement practices. . ." The current model merely says under Section 2: that the regulation sets forth minimum standards and the regulation is intended to define procedures and practices which constitute unfair claims practices. No mention is now made of what actually constitutes a violation of the regulation and even further, the new wording goes on to deny that violation of the regulation does create or imply a private cause of action (law suit). So, what we now have is new wording that drops the explanation of what constitutes a violation of the regulation, in favor of an explanation of denying that a violation of the regulation is grounds for a private lawsuit. The current wording goes on to explain, "This is merely a clarification of original intent and does not indicate any change of position."

The next noticeable difference in wording appears under Section 5. Misrepresentation of Policy Provisions; in the old model: "(e) No insurer shall request a first party claimant to sign a release that extends beyond the subject matter that gave rise to the claim payment." The current wording drops this clear concise language and says the insurance company shall not indicate in a letter that a payment is final or is a release of a claim unless the payment coincides. The current wording also says the insurance company shall not issue checks or drafts for partial settlement that include wording to release the insurance company from total liability. However, there is now no wording to stop an insurance company from requesting a policyholder sign a release that extends beyond the subject matter that gave rise to the claim payment; that wording has been eliminated.

The next noticeable differences are under Section 6. Failure to Acknowledge Pertinent Communications. The old wording gave the insurance company ten (10) working days to acknowledge notification of a claim. The current wording gives the insurance company fifteen (15) days. See full article.

National Association of Insurance Commissioners: The N.A.I.C. coordinates and standardizes the activities of the various states. Its chief purpose is "to protect interests of policyholders." It is also the N.A.I.C. 's function to ensure adequate regulation of the insurance industry. It was formed as part of the legislative changes brought about by the McCarran Act in 1945. The McCarran Act was brought about as a result of the 1942 case, United States v. South-Eastern Underwriters Association, in which the federal government contended that insurance companies were in violation of the Sherman Antitrust Act, and in 1944, the U.S. Supreme Court agreed.

The National Association of Insurance Commissioners proposed a series of rules that allowed insurance companies to remain exempt from the Sherman Antitrust Act on the condition that each state maintain regulatory standards, as it still exists today. Nevada Senator McCarran introduced this legislation which was also known as Public Law 15 and is part of Title 15, Commerce and Trade Code. This enacted law ensconced insurance companies and makes them exempt from the Sherman Antitrust Act , the Clayton Act and the Federal Trade Commission Act (federal anti-monopoly laws).

Because so many controls were swept aside in favor of state regulatory control it is paramount that each Insurance Commissioner is a true champion for policyholder interests and that laissez-faire policy is not the order of the day. Policyholders know very little about the commissioner selection process. There is now a public outcry for insurance reform, but reform must begin at this level for any chance of meaningful change.

The N.A.I.C. Unfair Claims Settlement Model Regulation was replaced by the NAIC Unfair Property/Casualty Claims Settlement Practices Model Regulation; property sections of both can be found here for reference and comparison. The National Association of Insurance Commissioners holds meetings at least twice each year, its offices are located at 2301 Mc Gee, Ste. 800, Kansas City, MO 64108, telephone (816) 842-3600.