# Market Conduct & Unfair Practices > Market conduct exams and MCAS, the Unfair Trade Practices Act, complaint registers and DOI clocks, record retention, advertising, and what examiners ask for. Financial regulation asks whether an insurer will be able to pay; market regulation asks whether it treats people the way the law says it must while it does. Did it charge the filed rate, use the approved form, send the required notice on time, pay the claim within the deadline, answer the complaint, keep the record, say only true things in its advertising, and not discriminate unfairly? Every state polices this for the business written in it, through complaint handling, market analysis of data the insurer reports, targeted inquiries, and market conduct examinations that end in public reports, fines and orders to change. The statutes behind it are the state versions of the NAIC's Unfair Trade Practices Act (Model #880) and Unfair Claims Settlement Practices Act (Model #900), plus the state's own rate, form, notice and claims laws. What makes market conduct a systems topic is that an examination is a data request. Under the NAIC's framework examiners start from the insurer's own data: they ask for every policy, claim, complaint and cancellation in a period in a standard layout, compute the ratios, pull samples, and then ask the system to show that each sampled item followed the rules in force at the time. A system that can't produce that data, or produces it but can't explain a premium or a missed clock, is the finding. This chapter covers the unfair trade practices law, how market regulation works from complaint to examination, the market conduct annual statement, complaint handling and its clocks, record retention and advertising rules, and what examiners ask a system to produce. Claim deadlines in depth are [Claim Handling Law & Clocks](https://www.syntaqx.com/books/insurance/claim-handling-law); fraud reporting is [Fraud & SIU](https://www.syntaqx.com/books/insurance/insurance-fraud). ## How the Platforms Do It Market conduct obligations appear in carriers' filings as a cost of doing business in every state, and the regulators publish the machinery: - **Progressive's 10-K for 2025** lists among regulated areas licensing, rates, forms, claims practices and "examinations of regulated insurers' financial condition and operations." - **The NAIC's Market Conduct Annual Statement** collects claims and underwriting data in 13 lines from insurers in 51 participating jurisdictions as of data year 2024 (page updated September 25, 2025). - **The NAIC's Market Conduct Surveillance Model Law (#693, 2004)** sets the continuum of actions short of an exam, the 60-day exam announcement, the Standard Data Request and the report timeline that most states follow. - **State complaint laws** set response clocks: Florida gives a licensee 14 days to answer the Division of Consumer Services, California 21 calendar days to answer a Department of Insurance inquiry on a claim. - **Core claims and policy platforms** keep diaries, complaint logs and document histories because those are what get sampled ([Core Platforms](https://www.syntaqx.com/books/insurance/core-platforms) covers the vendors). ## The Unfair Trade Practices Act Model #880, first adopted by the NAIC in 1947 and amended as recently as 2024, is the base statute in nearly every state under its own name and numbering. Its structure matters to a system as much as its content. **The general business practice standard.** A practice listed in the Act is an unfair trade practice if "committed flagrantly and in conscious disregard" of the Act, or "with such frequency to indicate a general business practice" (section 3). A single late notice is a compliance error; the same error in 8% of a sample is a general business practice. That is why examiners sample and why systems need error rates, not just error handling. **The defined practices** (section 4), those with direct system consequences: | Practice | What it means for the system | | --- | --- | | **Misrepresentation and false advertising of policies** (A, B) | Marketing content, quote screens, illustrations and comparisons are regulated statements; versioned and retained | | **Unfair discrimination** (H) | Between individuals of the same class and essentially the same hazard in rates or terms; refusing, canceling or limiting property or casualty coverage "solely because of the geographic location of the risk" unless based on sound underwriting and actuarial principles | | **Rebates** (I) | Any inducement "not specified in the policy" is prohibited unless state law allows it; gift cards, giveaways and referral rewards need a rule check per state | | **Failure to maintain marketing and performance records** (K) | Records must be kept so that "data regarding complaints, claims, rating, underwriting and marketing are accessible and retrievable for examination," for at least "the current calendar year and the two (2) preceding years" (or the state's period) | | **Failure to maintain complaint handling procedures** (L) | A complete record of complaints since the last examination, showing "the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of each complaint, and the time it took to process each complaint" | | **Misrepresentation in applications** (M) | Producer or applicant statements on applications | | **Failure to provide claims history** (P) | P&C insurers must give the first named insured loss information for the three previous policy years within 30 days of a written request | **Penalties** (section 8): after a hearing, a cease and desist order and up to $1,000 per violation, capped at $100,000 in the aggregate, or, if the violation was flagrant, up to $25,000 per violation capped at $250,000; violating a cease and desist order adds up to $25,000 per violation and $250,000 in aggregate, or license suspension or revocation (section 11). States set their own amounts in their enactments, so the numbers are rule rows. **Claims practices are a separate act.** In June 1990 the NAIC moved claims practices out of #880 into the Unfair Claims Settlement Practices Act (#900), with its own model regulation (#902), which sets the claim file documentation and time standards ([Claim Handling Law & Clocks](https://www.syntaqx.com/books/insurance/claim-handling-law), in the Claims part, works the clocks through). ### Worked Numbers: How a Finding Becomes a Fine An illustration, my numbers, under #880's section 8 amounts as written (a state's enactment may differ). An exam samples 100 personal auto cancellations and finds 12 where the notice was mailed fewer days before the cancellation date than the state requires; extrapolated across the 4,200 cancellations in the exam period, that's about 504 violations. | Scenario | Computation | Penalty | | --- | --- | --- | | Not flagrant, counted on the sample | 12 × $1,000 | $12,000 | | Not flagrant, counted on the population | 504 × $1,000 = $504,000, capped | $100,000 | | Flagrant, counted on the population | 504 × $25,000 = $12.6 million, capped | $250,000 | The penalty is usually not the expensive part. The order that follows typically requires the insurer to find every affected policyholder in the population, reinstate or refund, and certify the fix, which is a query the system either can or can't run: every cancellation in the period with its mailing date, the required notice days from the rule in force, and whether a claim occurred in the gap. ## How Market Regulation Works Most states follow the framework in Model #693, which describes a continuum from data analysis to examination: 1. **Market analysis.** The department and the NAIC's Market Analysis Working Group review complaint data, MCAS ratios, regulatory actions in other states, news and financial data to identify insurers and practices worth a closer look, using the NAIC Market Analysis Handbook as one resource. 2. **The continuum of actions short of an exam.** Correspondence, interviews, information gathering, policy and procedure reviews, interrogatories, review of the insurer's self-evaluation and compliance programs, and desk examinations, chosen to be "cost effective for the Insurance Department and the insurer." 3. **Targeted examinations.** Focused on the problems analysis found, using desk examinations "to the extent feasible," and the NAIC's Standard Data Request for the data. 4. **The exam timeline,** unless the insurer and commissioner agree otherwise: the exam is announced to the insurer and posted on the NAIC's Examination Tracking System no later than 60 days before it starts, with the work plan; a pre-examination conference 30 days before; an exit conference; the draft report within 60 days of completion; the insurer's written comments within 30 days of receiving it; the final report within 30 days of the comments; and the insurer's acceptance or hearing request within 30 days (plus 30 by agreement). The insurer's response is included in the final report. 5. **Coordination.** States share results and coordinate multistate exams through the NAIC, so one exam can stand for many states, and the results appear in other states' market analysis. Each of those dates is a task the insurer's compliance system should hold, and the exam itself is a project with requests, responses, criticisms (the examiner's written findings on specific files) and agreed corrective actions. ## The Market Conduct Annual Statement The MCAS is the routine data stream behind market analysis. Developed in 2002 and started that year with eight states and two lines of business, it now covers 13 lines (private passenger auto, homeowners, life, annuities, long-term care, health, lender-placed home and auto, disability income, private flood, other health, short-term limited duration health, travel, and pet, the newest, from data year 2024) and 51 participating jurisdictions as of data year 2024, collecting claims and underwriting data so regulators can compare companies on ratios developed for that purpose. What the MCAS asks of a system is not a report written once a year but counts that are definable over the policy and claim records: policies in force, new business, cancellations and nonrenewals by initiator and timing, claims opened, closed with and without payment, and closed within time bands, suits opened, complaints. Each count has a definition in the MCAS data call instructions for its line, and the definitions change; the system that answers it reliably computes it from the core tables (`policy_transactions`, `claims`, `exposures`, `claim_payments`, `complaints`) with the definition versioned, rather than from a separate reporting extract that drifts. [Regulatory & Statistical Reporting](https://www.syntaqx.com/books/insurance/regulatory-and-statistical-reporting) covers the production side. ## Complaints and Their Clocks A complaint, in #880's definition, is "any written communication primarily expressing a grievance," which reaches far beyond the department's complaint forms: an email to customer service, a letter to the claims adjuster, a social media message that gets escalated, an agent's written note relaying a customer's grievance. Two kinds arrive with different clocks: - **Department complaints.** A consumer files with the state; the department sends the insurer an inquiry and a deadline. Florida requires a written or electronic response "within 14 days after receipt of a written request" from the Division of Consumer Services, with administrative penalties up to $5,000 per violation for insurers ($1,000 for individual licensees) (Fla. Stat. 624.307(10)(b)). California requires a response to a Department of Insurance inquiry on a claim "immediately, but in no event more than twenty-one (21) calendar days of receipt," addressing every issue raised (10 CCR 2695.5(a)). - **Direct complaints.** A grievance sent to the insurer itself, which still belongs in the complaint register #880 requires: classified by line, nature, disposition and time to process. The register is the record regulators sample, and the fields #880 lists are its minimum schema. Claim-related complaints also run the claim clocks (California's 15-day response to claimant communications under 2695.5(b), for example), so a complaint about a claim is linked to the claim and its diary. ## Records and Retention Market regulation runs on records kept long enough and in a shape that can be retrieved: - **The NAIC baseline.** #880 requires records accessible for "the current calendar year and the two (2) preceding years," and #902 requires claim data "accessible and retrievable for examination" (claim number, line of coverage, date of loss, date of payment, date of denial or closing) for open and closed files for the same three years, with "detailed documentation ... to permit reconstruction of the insurer's activities relative to each claim" and each document "noted as to date received, date processed or date mailed." - **Longer state periods.** New York's Regulation 152 (11 NYCRR 243.2) is a common benchmark: policy records for "six calendar years after the date the policy is no longer in force" or until the exam report reviewing them is filed, whichever is longer; claim files for six years after the claim closes (or the report); complaint records six years after the complaint is resolved; licensing records six years after the relationship ends; other records six years from creation. - **The exam extends retention.** New York's periods run until the exam report reviewing the records is filed, if that is later, so records under an open exam must not be purged on schedule. The practical rule is to take the longest applicable period per record type across the states where the business is written, and to hold anything under exam or litigation regardless ([Retention Schedules by Record Type](https://www.syntaqx.com/docs/building-blocks/data-retention#retention-schedules-by-record-type) has the general mechanics). ## Advertising Advertising rules attach to the insurer even when a producer, lead generator or partner places the ad. #880's misrepresentation and false advertising provisions cover any "estimate, illustration, circular or statement, sales presentation, omission or comparison" that misrepresents a policy. The life and annuity rules are stricter and more specific: the NAIC's Advertisements of Life Insurance and Annuities Model Regulation (#570) requires each insurer to keep "a complete file containing a specimen copy of every printed, published or prepared advertisement" of its individual policies, with a notation of how and how widely it was distributed and the form number advertised, for "five (5) years after discontinuance of its use." For a system, every marketing asset and quote-flow screen is a versioned document with the period it ran and the channels it ran in. Lead generation and consent belong to [Leads, Aggregators & Consent](https://www.syntaqx.com/books/insurance/leads-and-consent). ## What Examiners Ask a System to Produce A market conduct exam's data requests follow a predictable shape across lines, starting from the NAIC Standard Data Request: - **Populations.** Every policy in force, issued, endorsed, cancelled, nonrenewed and declined in the exam period; every claim opened, closed, paid, denied and reopened; every complaint; every producer who wrote business and their appointments. Each in a fixed layout, with keys that let the examiner join them. - **Samples with full files.** For each sampled item, the documents as issued, the notices with proof of mailing, the diary, the payments, and for underwriting and rating samples the rating worksheet. - **Rerating.** The examiner reprices sampled policies from the filed rate pages. The system must show the product version, rate tables, factors and rounding it applied, and that those were the filed ones for that effective date ([Filing Rates & Forms](https://www.syntaqx.com/books/insurance/rate-and-form-filing#from-filing-to-product-configuration)). - **Timeliness tests.** For each clock (cancellation notice days, claim acknowledgment, decision and payment, complaint response), the start date, the deadline from the rule in force and the completion date. - **Licensing tests.** For each sampled policy, the producer of record's license and appointment valid on the transaction date. - **Written procedures** and evidence they were followed. Responses go back as files with a data dictionary, and the exam's criticisms cite specific records, so the response pipeline needs stable record identifiers and reproducible extracts (the same query on the same as-of date gives the same rows). ## How to Build It The core model's `complaints` is named in the spine; this chapter defines it and adds the exam itself, its requests and the examiner's criticisms: ```sql CREATE TABLE complaints ( -- every written grievance, from any channel id UUID PRIMARY KEY DEFAULT uuidv7(), insurer_id UUID NOT NULL REFERENCES insurers (id), source TEXT NOT NULL CHECK (source IN ('department', 'direct', 'producer', 'other_regulator')), jurisdiction TEXT REFERENCES jurisdictions (code), -- the department, if any department_ref TEXT, -- the DOI's file number received_at TIMESTAMPTZ NOT NULL, response_due_at TIMESTAMPTZ, -- computed from a jurisdiction rule row rule_ref UUID REFERENCES jurisdiction_rules (id), line TEXT NOT NULL, -- #880 classification by line nature TEXT NOT NULL, -- 'claim_delay', 'denial', 'premium', -- 'cancellation', 'marketing', 'service' policy_id UUID REFERENCES policies (id), claim_id UUID REFERENCES claims (id), producer_id UUID REFERENCES producers (id), responded_at TIMESTAMPTZ, disposition TEXT CHECK (disposition IN ('upheld', 'compromised', 'not_upheld', 'information_provided', 'referred', 'withdrawn')), closed_at TIMESTAMPTZ ); CREATE TABLE market_exams ( -- a market conduct exam or other action id UUID PRIMARY KEY DEFAULT uuidv7(), insurer_id UUID NOT NULL REFERENCES insurers (id), lead_jurisdiction TEXT NOT NULL REFERENCES jurisdictions (code), participating TEXT[] NOT NULL DEFAULT '{}', kind TEXT NOT NULL CHECK (kind IN ('targeted_onsite', 'desk', 'interrogatory', 'data_call', 'comprehensive')), scope JSONB NOT NULL, -- lines, areas, exam period announced_on DATE, completed_on DATE, -- confirmed in writing by the department draft_report_on DATE, comments_due_on DATE, -- 30 days from draft receipt under #693 final_report_on DATE, accept_due_on DATE ); CREATE TABLE exam_requests ( -- each data or file request id UUID PRIMARY KEY DEFAULT uuidv7(), exam_id UUID NOT NULL REFERENCES market_exams (id), sequence INT NOT NULL, kind TEXT NOT NULL CHECK (kind IN ('population', 'sample_file', 'procedure', 'interrogatory', 'criticism')), received_at TIMESTAMPTZ NOT NULL, due_at TIMESTAMPTZ NOT NULL, as_of TIMESTAMPTZ, -- the recorded-time cut for reproducibility query_version TEXT, -- the extract definition used responded_at TIMESTAMPTZ, response_document_id UUID, agrees BOOLEAN, -- for criticisms: agree or disagree record_refs JSONB NOT NULL DEFAULT '[]', -- the policies, claims, notices cited UNIQUE (exam_id, sequence) ); ``` Two queries carry most of the weight. The **complaint register** is a projection of `complaints` over a period with exactly the #880 fields (line, nature, disposition, days to process); keep it a query, not a report someone types. The **timeliness population** joins each clocked event to its rule row and computes days late against the rule in force on the event's keyed date, which is what both an exam and a remediation order need: ```sql SELECT c.jurisdiction, COUNT(*) AS department_complaints, COUNT(*) FILTER (WHERE c.responded_at > c.response_due_at) AS late_responses, PERCENTILE_CONT(0.5) WITHIN GROUP ( ORDER BY EXTRACT(EPOCH FROM (c.closed_at - c.received_at)) / 86400) AS median_days FROM complaints c WHERE c.source = 'department' AND c.received_at >= :period_start AND c.received_at < :period_end GROUP BY c.jurisdiction; ``` ## Auditing - **The complaint register,** every complaint since the last exam with #880's fields, and its link to the policy, claim and producer. - **Every clock with its rule and outcome:** start, deadline from the rule row, completion, for notices, claims and complaints. - **Exam history:** every request with its due date, the extract definition and as-of time used, the response sent, and every criticism with the insurer's agreement or disagreement and the corrective action. - **Advertising and quote-flow versions** with the dates and channels each ran, for five years after use for life and annuity advertising. - **Retention holds:** records under an open exam or report period excluded from purge until the hold lifts. ## What This Means for the System You Build - **Treat every written grievance as a complaint** in one register, whatever channel it came through, with line, nature, disposition and time to process. - **Compute department response deadlines from jurisdiction rules** and alert well before them; Florida's 14 days and California's 21 are short. - **Measure error rates, not just errors,** because the legal test is a general business practice, and run the population query a remediation order would require before an examiner asks. - **Make exam extracts reproducible:** a versioned query and a recorded-time cut, so a resubmission returns the same rows. - **Retain by the longest applicable rule** across the states written, and hold anything under exam or litigation. - **Version marketing and quote screens like forms,** with the dates and channels they ran. ## References **Law and regulation** - [Fla. Stat. 624.307](http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0624/Sections/0624.307.html), the 14-day response to Division of Consumer Services complaint requests and penalties up to $5,000 per violation - [10 CCR 2695.5](https://www.law.cornell.edu/regulations/california/10-CCR-2695.5), the 21-calendar-day response to Department of Insurance inquiries, 15-day responses and claim acknowledgment - [11 NYCRR 243.2](https://www.law.cornell.edu/regulations/new-york/11-NYCRR-243.2), New York's six-year retention periods for policy, claim, complaint, licensing and financial records, extended until the exam report is filed **NAIC** - [NAIC: Unfair Trade Practices Act (#880, PDF)](https://content.naic.org/sites/default/files/model-law-880.pdf), the general business practice standard, the defined practices, record and complaint register requirements, claims history within 30 days, penalties, and the adoption history from 1947 to 2024 - [NAIC: Market Conduct Surveillance Model Law (#693, PDF)](https://content.naic.org/sites/default/files/model-law-693.pdf), the continuum of market conduct actions, the Standard Data Request, the 60-day exam announcement and the report timeline - [NAIC: Unfair Property/Casualty Claims Settlement Practices Model Regulation (#902, PDF)](https://content.naic.org/sites/default/files/model-law-902.pdf), claim file documentation and retrievable claim data for the current and two preceding years - [NAIC: Advertisements of Life Insurance and Annuities Model Regulation (#570, PDF)](https://content.naic.org/sites/default/files/model-law-570.pdf), the advertising file kept for five years after an advertisement's use ends - [NAIC: Market Conduct Annual Statement](https://content.naic.org/insurance-topics/market-conduct-annual-statement), the 2002 start, the 13 lines with pet added for data year 2024, and 51 participating jurisdictions **Filings** - [Progressive: Form 10-K for 2025](https://www.sec.gov/Archives/edgar/data/80661/000008066126000086/pgr-20251231.htm), regulated areas including claims practices and examinations of insurers' condition and operations --- Canonical URL: https://www.syntaqx.com/books/insurance/market-conduct