§ 132 — Market conduct actions and market analysis

Illinois § 132

• Jurisdiction: Illinois
• Topic: REGULATION
• Ch. 215: INSURANCE
• Act 215 ILCS 5/: Illinois Insurance Code.
• Art.: Article IX - Provisions Applicable To All Companies

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(a) Definitions. As used in this Section: "Data call" means a written solicitation by the Director to 2 or more regulated companies or persons seeking existing data or other existing information to be provided within a reasonable time period for a narrow and targeted regulatory oversight purpose for market analysis. "Data call" does not include an information request in a market conduct action or any data or information that the Director shall or may specifically require under any other law, except as provided by the other law. "Desk examination" means an examination that is conducted by market conduct surveillance personnel at a location other than the regulated company's or person's premises. "Desk examination" includes an examination performed at the Department's offices with the company or person providing requested documents by hard copy, microfiche, or discs or other electronic media for review without an on-site examination. "Market analysis" means a process whereby market conduct surveillance personnel collect and analyze information from filed schedules, surveys, required reports, data calls, and other sources to develop a baseline understanding of the marketplace and to identify patterns or practices of regulated persons that deviate significantly from the norm or that may pose a potential risk to insurance consumers. "Market conduct action" means any activity, other than market analysis, that the Director may initiate to assess and address the market and nonfinancial practices of regulated persons, including market conduct examinations. The Department's consumer complaint process outlined in 50 Ill. Adm. Code 926 is not a market conduct action for purposes of this Section; however, the Department may initiate market conduct actions based on information gathered during that process. "Market conduct action" includes: (1) correspondence with the company or person; (2) interviews with the company or person; (3) information gathering; (4) policy and procedure reviews; (5) interrogatories; (6) review of company or person self-evaluations and voluntary compliance programs; (7) self-audits; and (8) market conduct examinations. "Market conduct examination" or "examination" means any type of examination, other than a financial examination, that assesses a regulated person's compliance with the laws, rules, and regulations applicable to the examinee. "Market conduct examination" includes comprehensive examinations, targeted examinations, and follow-up examinations, which may be conducted as desk examinations, on-site examinations, or a combination of those 2 methods. "Market conduct surveillance" means market analysis or a market conduct action. "Market conduct surveillance personnel" means those individuals employed or retained by the Department and designated by the Director to collect, analyze, review, or act on information in the insurance marketplace that identifies patterns or practices of persons subject to the Director's jurisdiction. "Market conduct surveillance personnel" includes all persons identified as an examiner in the insurance laws or rules of this State if the Director has designated them to assist her or him in ascertaining the nonfinancial business practices, performance, and operations of a company or person subject to the Director's jurisdiction. "On-site examination" means an examination conducted at the company's or person's home office or the location where the records under review are stored. "SOFR rate" means the Secured Overnight Financing Rate published by the Federal Reserve Bank of New York every business day. (b) Companies and persons subject to surveillance. The Director, for the purposes of ascertaining the nonfinancial business practices, performance, and operations of any person subject to the Director's jurisdiction or within the marketplace, may engage in market conduct actions or market analysis relating to: (1) any company transacting or being organized to transact business in this State; (2) any person engaged in or proposing to be engaged in the organization, promotion, or solicitation of shares or capital contributions to or aiding in the formation of a company; (3) any person having a written or oral contract pertaining to the management or control of a company as general agent, managing agent, or attorney-in-fact; (4) any licensed or registered producer, firm, pharmacy benefit manager, administrator, or any person making application for any license, certificate, or registration; (5) any person engaged in the business of adjusting losses or financing premiums; or (6) any person, organization, trust, or corporation having custody or control of information reasonably related to the operation, performance, or conduct of a company or person subject to the Director's jurisdiction, but only as to the operation, performance, or conduct of a company or person subject to the Director's jurisdiction. (c) Market analysis and market conduct actions. (1) The Director may perform market analysis by gathering and analyzing information from data currently available to the Director, information from surveys, data call responses, or reports that are submitted to the Director, information collected by the NAIC, and information from a variety of other sources to develop a baseline understanding of the marketplace and to identify for further review companies or practices that deviate from the norm or that may pose a potential risk to insurance consumers. The Director shall use the most recent NAIC Market Regulation Handbook as a guide in performing market analysis. The Director may also employ other guidelines or procedures as the Director may deem appropriate. (2) The Director may initiate a market conduct action subject to the following: (A) If the Director determines that further inquiry into a particular person or practice is needed, then the Director may consider undertaking a market conduct action. The Director shall inform the examinee of the initiation of the market conduct action and shall use the most recent NAIC Market Regulation Handbook as a guide in performing the market conduct action. The Director may also employ other guidelines or procedures as the Director may deem appropriate. (B) For an examination, the Director shall conduct a pre-examination conference with the examinee to clarify expectations before commencement of the examination. At the pre-examination conference, the Director or the market conduct surveillance personnel shall disclose the basis of the examination, including the statutes, regulations, or business practices at issue. The Director shall provide at least 30 days' advance notice of the date of the pre-examination conference unless circumstances warrant that the examination proceed more quickly. (C) The Director may coordinate a market conduct action and findings of this State with market conduct actions and findings of other states. (3) Nothing in this Section requires the Director to undertake market analysis before initiating any market conduct action. (4) Nothing in this Section restricts the Director to the type of market conduct action he or she initially selected. (5) A regulated person is required to respond to a market analysis data call or to an information request in a market conduct action on the terms and conditions established by the Director. The Department shall establish reasonable timelines that are commensurate with the volume and nature of the data required to be collected in the information request. (6) Without limiting the contents of any examination report, market conduct actions taken as a result of a market analysis shall focus primarily on the general business practices and compliance activities of companies or persons rather than identifying infrequent or unintentional random errors that do not cause significant consumer harm. The Director may give a company or person an opportunity to resolve matters that are identified as a result of a market analysis to the Director's satisfaction before undertaking a market conduct action against the company or person. (d) Access to books and records. Every examinee and its officers, directors, and agents must provide to the Director convenient and free access at all reasonable hours at its office or location to all books, records, and documents and any or all papers relating to the business, performance, operations, and affairs of the examinee. The officers, directors, and agents of the examinee must facilitate the market conduct action and aid in the action so far as it is in their power to do so. The Director and any authorized market conduct surveillance personnel have the power to administer oaths and examine under oath any person relevant to the business of the examinee. A failure to produce requested books, records, or documents by the deadline shall not be a violation until after the later of: (1) 5 business days after the initial response deadline set by the Director or authorized personnel; or (2) an extended deadline granted by the Director or authorized personnel. (e) Examination report. The market conduct surveillance personnel designated by the Director under Section 402 must make a full and true report of every examination made by them that contains only facts ascertained from the books, papers, records, documents, and other evidence obtained by investigation and examined by them or ascertained from the testimony of officers, agents, or other persons examined under oath concerning the business, affairs, conduct, and performance of the examinee. The report of examination must be verified by the oath of the examiner in charge thereof, and when so verified is prima facie evidence in any action or proceeding in the name of the State against the examinee, its officers, directors, or agents upon the facts stated therein. (f) Examinee response to examination report. The Department and the examinee shall comply with the following timeline, unless a mutual agreement is reached to modify the timeline: (1) The Department shall deliver a draft report to the examinee as soon as reasonably practicable. Nothing in this Section prevents the Department from sharing an earlier draft of the report with the examinee before confirming that the examination is completed. (2) If the examinee chooses to respond with written submissions or rebuttals, then the examinee must do so within 30 days after receipt of any draft report delivered after the completion of the examination. (3) As soon as reasonably practicable after receipt of any written submissions or rebuttals, the Department shall issue a final report. Whenever the Department has made substantive changes to a previously shared draft report, unless those changes remove part or all of an alleged violation or were proposed by the examinee, the Department shall deliver the revised version to the examinee as a new draft and shall allow the examinee 30 days to respond before the Department issues a final report. (4) The examinee shall, within 10 days after the issuance of the final report, accept the final report or request a hearing in writing, unless granted an extension by mutual agreement. Failure to take either action within 10 days or the mutually agreed extension shall be deemed an acceptance of the final report. If the examinee accepts the examination report, the Director shall continue to hold the content of the examination report as private and confidential for a period of 30 days. Thereafter, the Director shall open the final report for public inspection. (g) Hearing; final examination report. Notwithstanding anything to the contrary in this Code or Department rules, if the examinee requests a hearing, then the following procedures apply: (1) The examinee must request the hearing in writing and must specify the issues in the final report that the examinee is challenging. The examinee is limited to challenging the issues that were previously challenged in the examinee's written submission and rebuttal or supplemental submission and rebuttal pursuant to paragraphs (2) and (3) of subsection (f). (2) Except as permitted in paragraphs (3) and (8) of this subsection, the hearing shall be limited to the written arguments submitted by the parties to the designated hearing officer. The designated hearing officer may, however, grant a live hearing upon the request of either party. (3) Discovery is limited to the market conduct surveillance personnel's work papers that are relevant to the issues the examinee is challenging. The relevant market conduct surveillance personnel's work papers shall be admitted into the record. No other forms of discovery, including depositions and interrogatories, are allowed, except upon written agreement of the examinee and the Department when necessary to conduct a fair hearing or as otherwise provided in this subsection. (4) Only the examinee and the Department may submit written arguments. (5) The examinee must submit its written argument and any supporting evidence within 30 days after the Department serves a formal notice of hearing. (6) The Department must submit its written response and any supporting evidence within 30 days after the examinee submits its written argument. (7) The designated hearing officer may allow additional written submissions if necessary or useful to the fair resolution of the hearing. (8) If either the examinee or the Department submit written testimony or affidavits, then the opposing party shall be given the opportunity to cross-examine the witness and to submit the cross-examination to the hearing officer before a decision. (9) The Director shall issue a decision accompanied by findings and conclusions. The Director's order is a final administrative decision and shall be served upon the examinee together with a copy of the final report within 90 days after the conclusion of the hearing. The hearing is deemed concluded on the later of the last date of any live hearing or the final deadline date for written submissions to the hearing officer, including any continuances or supplemental briefings permitted by the hearing officer. (10) Any portion of the final examination report that was not challenged by the examinee is incorporated into the decision of the Director. (11) Findings of fact and conclusions of law in the Director's final administrative decision are prima facie evidence in any legal or regulatory action. (12) If an examinee has requested a hearing, then the Director shall continue to hold the final report and any related decision as private and confidential for a period of 49 days after the final administrative decision. After the 49-day period expires, the Director shall open the final report and any related decision for public inspection if a court of competent jurisdiction has not stayed its publication. (h) Disclosure. So long as the recipient agrees to and verifies in writing its legal authority to hold the information confidential in a manner consistent with this Section, nothing in this Section prevents the Director from disclosing at any time the content of an examination report, preliminary examination report, or results, or any matter relating to a report or results, to: (1) the insurance regulatory authorities of any other state; or (2) any agency or office of the federal government. (i) Confidentiality. (1) The Director and any other person in the course of market conduct surveillance shall keep confidential all documents, including working papers, third-party models, or products; complaint logs; copies of any documents created, produced, obtained by, or disclosed to the Director, market conduct surveillance personnel, or any other person in the course of market conduct surveillance conducted pursuant to this Section; and all documents obtained by the NAIC pursuant to this Section. The documents shall remain confidential after the termination of the market conduct surveillance, are not subject to subpoena, are not subject to discovery or admissible as evidence in private civil litigation, are not subject to disclosure under the Freedom of Information Act, and must not be made public at any time or used by the Director or any other person, except as provided in paragraphs (3), (4), and (6) of this subsection (i) and in subsection (k). (2) The Director and any other person in the course of market conduct surveillance shall keep confidential any self-evaluation or voluntary compliance program documents disclosed to the Director or other person by an examinee and the data collected via the NAIC market conduct annual statement. The documents are not subject to subpoena, are not subject to discovery or admissible as evidence in private civil litigation, are not subject to disclosure under the Freedom of Information Act, and they shall not be made public or used by the Director or any other person, except as provided in paragraphs (3) and (4) of this subsection (i), in subsection (k), or in Section 155.35. Nothing in this Section shall supersede the restrictions on disclosure under Section 155.35. (3) Notwithstanding paragraphs (1) and (2) of this subsection (i), and consistent with paragraph (5) of this subsection (i), in order to assist in the performance of the Director's duties, the Director may: (A) share documents, materials, communications, or other information, including the confidential and privileged documents, materials, or information described in this subsection (i), with other State, federal, alien, and international regulatory agencies and law enforcement authorities and the NAIC, its affiliates, and subsidiaries, if the recipient agrees to and verifies in writing its legal authority to maintain the confidentiality and privileged status of the document, material, communication, or other information; (B) receive documents, materials, communications, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates or subsidiaries, and from regulatory and law enforcement officials of other State, federal, alien, or international jurisdictions, authorities, and agencies, and shall maintain as confidential or privileged any document, material, communication, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, communication, or information; and (C) enter into agreements governing the sharing and use of information consistent with this Section. (4) Nothing in this Section limits: (A) the Director's authority to use, if consistent with subsection (5) of Section 188.1, as applicable, any final or preliminary examination report, any market conduct surveillance or examinee work papers or other documents, or any other information discovered or developed during the course of any market conduct surveillance in the furtherance of any legal or regulatory action initiated by the Director that the Director may, in the Director's sole discretion, deem appropriate; however, confidential or privileged information about a company or person that is used in the legal or regulatory action shall not be made public except by order of a court of competent jurisdiction or with the written consent of the company or person; or (B) the ability of an examinee to conduct discovery in accordance with paragraph (3) of subsection (g). (5) Disclosure to or by the Director of documents, materials, communications, or information required as part of any type of market conduct surveillance does not waive any applicable privilege or claim of confidentiality in the documents, materials, communications, or information. (6) Notwithstanding the confidentiality requirements of this Section or otherwise imposed by State law, if the Director performs a data call, other than the collection of data for the NAIC market conduct annual statement, the Director may make the results of the data call available for public inspection in an aggregated format that does not disclose information or data attributed to any specific company or person, including the name of any company or person who responded to the data call, so long as the Director provides all companies or persons that responded to the data call 15 days' notice identifying the information to be publicly released. Nothing in this Section requires the Director to publish results from any data call. (j) Corrective actions. (1) As a result of any market conduct action, the Director may take any action the Director considers necessary or appropriate in accordance with the report of examination or any hearing thereon for acts in violation of any law, rule, or prior lawful order of the Director. No corrective action, including a penalty, shall be ordered with respect to violations in transactions with consumers or other entities that are isolated occurrences or that occur with such low frequency as to fall below a reasonable margin of error. Such actions include, but are not limited to: (A) requiring the regulated person to undertake corrective actions to cease and desist an identified violation or institute processes and practices to comply with applicable standards; (B) requiring reimbursement or restitution of any actual losses or damages to persons harmed by the regulated person's violation with interest from the date that the actual loss or damage was incurred, which shall be calculated at the SOFR rate applicable on the date that the actual loss or damage was incurred plus 2%; and (C) imposing civil penalties as provided in this subsection (j). (2) The Director may order a penalty of up to $2,000 for each violation of any law, rule, or prior lawful order of the Director. Any failure to respond to an information request in a market conduct action or violation of subsection (d) may carry a fine of up to $1,000 per day up to a maximum of $50,000. Fines and penalties shall be consistent, reasonable, and justifiable, and the Director may consider reasonable criteria in ordering the fines and penalties, including, but not limited to, consumer harm, the intentionality of any violations, or remedial actions already undertaken by the examinee. The Director shall communicate to the examinee the basis for any assessed fine or penalty. (3) If any other provision of this Code or any other law or rule under the Director's jurisdiction prescribes an amount or range of monetary penalty for a violation of a particular statute or rule or a maximum penalty in the aggregate for repeated violations, the Director shall assess penalties pursuant to the terms of the statute or rule allowing the largest penalty. (4) If any other provision of this Code or any other law or rule under the Director's jurisdiction prescribes or specifies a method by which the Director is to determine a violation, then compliance with the process set forth herein shall be deemed to comply with the method prescribed or specified in the other provision. (5) If the Director imposes any sanctions or corrective actions described in subparagraphs (A) through (C) of paragraph (1) of this subsection (j) based on the final report, the Director shall include those actions in a proposed stipulation and consent order enclosed with the final report issued to the examinee under subsection (f). The examinee shall have 10 days to sign the order or request a hearing in writing on the actions proposed in the order regardless of whether the examinee requests a hearing on the contents of the report under subsection (f). If the examinee does not sign the order or request a hearing on the proposed actions or the final report within 10 days, the Director may issue a final order imposing the sanctions or corrective actions. Nothing in this Section prevents the Department from sharing an earlier draft of the proposed order with the examinee before issuing the final report. (6) If the examinee accepts the order and the final report, the Director shall hold the content of the order and report as private and confidential for a period of 30 days. Thereafter, the Director shall open the order and report for public inspection. (7) If the examinee makes a timely request for a hearing on the order, the request must specify the sanctions or corrective actions in the order that the examinee is challenging. Any hearing shall follow the procedures set forth in paragraphs (2) through (7) of subsection (g). (8) If the examinee has also requested a hearing on the contents of the report, then that hearing shall be consolidated with the hearing on the order. The Director shall not impose sanctions or corrective actions under this Section until the conclusion of the hearing. (9) The Director shall issue a decision accompanied by findings and conclusions along with any corrective actions or sanctions. Any sanctions or corrective actions shall be based on the final report accepted by the examinee or adopted by the Director under paragraph (9) of subsection (g). The Director's order is a final administrative decision and shall be served upon the examinee together with a copy of the final report within 90 days after the conclusion of the hearing or within 10 days after the examinee's acceptance of the proposed order and final report, as applicable. The hearing is deemed concluded on the later of the last date of any live hearing or the final deadline date for written submissions to the hearing officer, including any continuances or supplemental briefings permitted by the hearing officer. (10) If an examinee has requested a hearing under this subsection (i), the Director shall continue to hold the final order and examination report as private and confidential for a period of 49 days after the final administrative decision. After the 49-day period expires, the Director shall open the final order and examination report if a court of competent jurisdiction has not stayed their publication. (k) National market conduct databases. The Director shall collect and report market data to the NAIC's market information systems, including, but not limited to, the Complaint Database System, the Examination Tracking System, and the Regulatory Information Retrieval System, or other successor NAIC products as determined by the Director. Information collected and maintained by the Department for inclusion in these NAIC market information systems shall be compiled in a manner that meets the requirements of the NAIC. Confidential or privileged information collected, reported, or maintained under this subsection (k) shall be subject to the protections and restrictions on disclosure in subsection (i). (l) Immunity of market conduct surveillance personnel. (1) No cause of action shall arise nor shall any liability be imposed against the Director, the Director's authorized representatives, market conduct surveillance personnel, or an examiner appointed by the Director for any statements made or conduct performed in good faith while carrying out the provisions of this Section. (2) No cause of action shall arise nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the Director, the Director's authorized representative, market conduct surveillance personnel, or examiner pursuant to an examination made under this Section, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive. (3) A person identified in paragraph (1) of this subsection (l) shall be entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this Section and the party bringing the action was not substantially justified in doing so. As used in this paragraph, a proceeding is substantially justified if it had a reasonable basis in law or fact at the time it was initiated. (4) This subsection (l) does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in paragraph (1) of this subsection (l).

Legislative History

(Source: P.A. 103-897, eff. 1-1-25 .)