Audit Division

Audit Summary

 

Department of Business and Industry

Division of Insurance

Report LA00-04

 

 

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 companiesí 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 Divisionís ability to ensure complaints are handled timely and effectively.

 

 

Principal Findings


                 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)


 

Department of Business and Industry

Division of Insurance

 

Agency Response

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