Market conduct exam

A market conduct examination is a review by a state department of insurance of how an insurer does business with consumers: how it underwrites and rates policies, handles cancellations and nonrenewals, advertises and sells, answers complaints, and pays claims. It differs from a financial examination, which checks that an insurer can pay what it owes. Examiners sample files, compare them with state law, and often work from the NAIC's Market Regulation Handbook as a framework.

An exam can be comprehensive or targeted, such as a review of homeowners claims after a hurricane. The report lists findings, for example claims paid late or underpaid, or a rate applied incorrectly, and the insurer can be ordered to fix the process, refund consumers or pay fines under a consent order. Several states can examine a company together in a multistate exam.

For a homeowner, the value is in the reports. Many departments publish them, and they show patterns that a star rating does not, such as how quickly a company really pays. Search your department's website for an insurer's name. One complaint rarely triggers an exam, but a pattern of complaints can. See the market conduct exams guide and the department of insurance entry.