PURPOSE: This rule implements the purposes of section 374.185, RSMo, and establishes uniform standards for the director in applying the discretion authorized in issuing warrants for market conduct examinations pursuant to sections 374.202 to 374.207, RSMo.

1. (1) The director is responsible for market regulation of insurers for Missouri policyholder protection and shall utilize market conduct actions, including market analysis, investigation, desk examinations, targeted examinations, and comprehensive examinations of insurers or other companies. Such actions shall be pursued by the division in a manner consistent with the purposes of section 374.185, RSMo.
2. (2) A market conduct examination shall be conducted only upon the issuance of a warrant by the director or with the written consent of the insurer or company. In furtherance of the purposes of section 374.185, RSMo, and to provide uniform standards designed to avoid arbitrary or capricious use of discretion in issuing warrants for market conduct examinations, the director shall apply the following standards in evaluating FINANCIAL INSTITUTIONS AND PROFESSIONAL REGISTRATION

factual support for a market conduct examination warrant:

1. (A) A request for a warrant need not be verified by oath, but must contain the signature of the chief market conduct examiner, and shall state facts sufficient to support the director’s reasonable belief of cause as set forth below;

2. (B) The director may issue a warrant for—

   1. 1. A desk examination, if the director

has reason to believe—

1. A. An insurer or other company may

have engaged in, or taken a substantial step toward engaging in, or may have materially aided any other person in engaging in, any practice or course of business in violation of Chapter 287, Chapter 354, or Chapters 374 to 385, RSMo, or any rule adopted pursuant thereto, and the examination is reasonably calculated to provide data or other information relevant to this inquiry;

1. B. Significant changes have occurred

in an insurer’s or other company’s market share during the last year for which an insurer cannot provide a satisfactory explanation;

1. C. Significant market changes threat-

en the availability or affordability of insurance coverage; or

1. D. An examination is required to be

performed by law;

1. 2. An on-site examination, if the direc-

tor has reason to believe—

1. A. An insurer or other company has

engaged in, is engaging in, has taken a substantial step toward engaging in, or has materially aided any other person in engaging in any practice or course of business in violation of Chapter 287, Chapter 354, or Chapters 374 to 385, RSMo, or any rule adopted pursuant thereto;

1. B. Significant market changes threat-

en the availability or affordability of insurance coverage; or

1. C. An examination is required to be

performed by law;

1. (C) The evidence indicating that an insurer or other company has engaged in, is engaging in, has taken a substantial step toward engaging in, or has materially aided any other person in engaging in any practice or course of business in violation of Chapter 287, Chapter 354, or Chapters 374 to 385, RSMo, or any rule adopted pursuant thereto, shall be derived from the following sources:

   1. 1. Information obtained from a market

conduct annual statement, market survey, or report of financial examination;

1. 2. A number of complaints against the

company indicating a particular practice or a complaint ratio that deviates significantly from the norm (a complaint ratio shall be established for each line of business);

1. 3. Information obtained from other

objective sources; or

1. 4. Information obtained from any credi-

ble source with direct access to relevant information;

1. (D) The scope of a warrant shall be reasonably limited by the cause supporting the issuance of the warrant. If additional cause is discovered, and the examiner seeks to expand the scope of the warrant, a request must be made to modify or expand the previously issued warrant or a new warrant must be issued by the director; and

2. (E) A warrant shall—

   1. 1. Be in writing and in the name of the

department;

1. 2. Be directed to the division;
2. 3. Identify the scope of the examination

by describing the specific line of business or specific business practices to be examined and a reasonable estimate of the duration of the examination;

1. 4. Identify whether the examination will

be conducted as a desk examination, an onsite examination, or both; and

1. 5. Be signed by the director.

1. (3) A warrant shall be served on the insurer or other company prior to commencing the market conduct examination.
2. (4) The warrant authorizes one (1) or more examiners designated by the director to perform the examination and shall instruct them as to the scope of the examination. In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the Market Regulation Handbook adopted by the National Association of Insurance Commissioners (NAIC). The division may also employ such other guidelines or procedures as the director may deem appropriate not inconsistent with the provisions of this chapter.

AUTHORITY: sections 374.045 and 374.205, RSMo 2000 and section 374.185, RSMo Supp. 2007.* Original rule filed April 1, 2008, effective Nov. 30, 2008.

*Original authority: 374.045, RSMo 1967, amended 1993, 1995; 374.185, RSMo 2007; and 374.205, RSMo 1992, amended 1997, 1999.