Audit Division
Audit Summary
Department of Business and
Industry
Division of Insurance
Results in
Brief
Weaknesses continue to exist in the market conduct exam process. Market conduct exams are designed to help the Division determine if insurance companies’ business practices comply with laws and regulations related to protecting consumers. While some improvements have been made since our last audit, market conduct exams are still not always completed in accordance with standard procedures. Further, the Division does not consistently use a risk-based approach in selecting insurance companies for examination. Finally, the Division does not always follow-up on recommendations noted in exams to ensure problems are corrected. These weaknesses continue to exist partly because the Division does not have an effective monitoring and reporting system over market conduct exams.
Improvements have also been made in the investigation of consumer complaints, but more needs to be done. The Division does not always meet standards for the timely resolution of complaints. This may be caused, in part, from a lack of complete and accurate complaint information. This hinders the Division’s ability to ensure complaints are handled timely and effectively.
·
Market conduct exams performed by the Division of Insurance
do not always comply with established standards. Our review of six market conduct exams completed during 1997 and
1998 found several weaknesses. These
weaknesses include missing components of the exam planning process, no summary
of conclusions, workpapers missing factual support, and a lack of
recommendations. In addition, the exams
contained no summary of prior exams or description of disciplinary action
taken. These weaknesses have been
caused, in part, from a lack of supervision provided by Division personnel over
exams. (page 8)
·
Although the Division
has established a process for selecting which insurance companies are to be
examined from a ranked, risk-based list, it is not always used. The list of companies has not been updated
since 1996. In addition, half of the
companies selected for examination in 1998 did not come from this list. The Division could provide no documentation
on how these companies were selected for examination. (page 10)
·
The Division does not
always conduct follow-ups on market conduct exams to ensure the insurance
companies resolve problems noted during exams.
Although procedures exist for verifying that corrective action has taken
place, the procedures are not always followed.
As such, the Division has no assurance corrective action has or will be
taken by insurers. For the six market
conduct exams reviewed, Division personnel had not performed sufficient
follow-up activities to ensure all problems were rectified. (page 11)
·
The Division lacks
accountability over the market conduct exam process. Our review found that management does not monitor the exam selection
or follow-up processes through an established reporting procedure. Therefore, management has no assurance these
activities are properly done. (page 12)
·
Division personnel are not meeting standards for the timely
resolution of consumer complaints. The
Division does not always resolve 80% of complaints within 60 days. In addition, the Division does not always
notify the complainant within 3 working days and the insurer within 5 working
days. (page 14)
·
To adequately monitor
consumer complaint activities, Division management needs better
information. Currently, no mechanism
exists to inform management or complaint investigators when individual cases
have exceeded standards. Further,
Division personnel do not adequately maintain the information in the consumer
complaint database. The database is
missing critical information and contains errors. (page 16)
to Audit
Recommendations
|
Recommendation Number |
|
Accepted |
Rejected |
|
1 |
Provide
supervision of exams to ensure they are done in accordance with NAIC
standards and the Nevada Market Conduct Examinations Procedures Manual |
x |
|
|
2 |
Continue to use
the risk-based selection process that has been developed, including
documenting support for the companies selected |
x |
|
|
3 |
Use the
follow-up procedure as outlined in the Nevada Market Conduct Examinations
Procedures Manual |
x |
|
|
4 |
Develop a
management reporting system to provide accountability over the market conduct
exam process |
x |
|
|
5 |
Periodically
monitor the consumer complaint database to ensure it is complete and accurate |
x |
|
|
6 |
Develop a reporting
system to track the progress of individual consumer complaint cases for use
by management and complaint investigators |
x |
|
|
TOTALS |
|
6 |
0 |