NAIC Deliberating Insurer Complaint Coding Process

Jun 21, 2010


Because insurance complaint coding has a significant impact on regulatory focus, as well as the way in which insurance departments and the National Association of Insurance Commissioners (“NAIC”) portray an insurance company’s complaint data to the public, the NAIC’s Market Regulation and Consumer Affairs Committee (“Committee”) has proposed a complaint reconciliation process for all states to implement within the next two years.

The complaint reconciliation process is considered to be critical for proper market analysis and regulatory oversight of the marketplace. Complaints continue to be a primary indicator of company practices and the need for further regulatory scrutiny.  In addition, more and more states are publishing aggregate complaint data and company-specific complaint data.  The NAIC also publishes state complaint data through its Consumer Information Source (“CIS”).

In 2006 the NAIC adopted a charge to: “…monitor and evaluate the states’ accurate submission of data and full participation in the Complaint Database system. As part of this effort, consider issues related to accuracy of the complaint data which will include the development of uniform standards for the reconciliation of complaint data between companies and state departments…”

Since that time, the Committee and its working groups have discussed the complaint reconciliation process, received testimony on it and viewed demonstrations on reconciliation tools.

Currently, at least eight states that verify consumer complaints in some manner and degree. To do so, they employ processes that range from merely verifying the number of complaints filed against a carrier, to verifying each consumer complaint individually, including its validity and its coding in both state and NAIC complaint databases.

Seven states verify that each complaint names the correct company. Six states verify the type of coverage cited in the complaint by comparing and confirming that the information contained in the complaint matches the information in the company’s records. Several states inform the company of the insurance department’s final determination regarding whether the complaint is confirmed or unconfirmed under the NAIC complaints protocol, and how the insurance department will code the complaint in its submission to the NAIC for publication on the CIS. Companies may request changes in the findings or coding by the insurance department.

Common to all state complaint verification approaches is a foundational requirement to verify a minimum set of complaint data points for each complaint registered against an insurance company. Another common component is the verification of the type of coverage afforded by the insurance policy coverage (such as individual versus group, private passenger versus commercial auto).

Various state approaches require an insurance department to notify the appropriate insurance company of each registered individual complaint against it, while providing the insurance company with the opportunity to dispute the identification of the insurer named in the complaint. Through this process, the insurance department ensures that the complaint is recorded against the proper insurance company.


Minimum Complaint Reconciliation Data Points

Based upon current data points used for existing state complaint reconciliation processes and the recommendation of the Insurance Consumer Affairs Exchange,[1] it has been determined that the complaint reconciliation process should, at a minimum, include the following nine reconciliation data points:

  1. Date complaint was opened
  2. Date complaint was closed
  3. Company name
  4. Company code
  5. Insured name
  6. Complainant name
  7. Line of coverage, type of coverage and type of policy (Such as individual, group, association, private passenger, other)
  8. Policy number
  9. Department of Insurance file number

 The complaint reconciliation process also should include communication of the following three key data points to insurers:

  1. Reason codes
  2. Disposition codes
  3. Confirmed or unconfirmed status

Because these three additional codes require professional judgments to be made by insurance department personnel regarding the facts and resolution of a complaint, an insurance company is without recourse with regard to any of these three data points.

During the process, insurers should be notified as to how and why the complaint was coded in these three key areas.  Thus, the reconciliation ideally should be an effective method through which such communication can be facilitated and any clerical errors can be brought to the attention of the insurance department.


Recommended Reconciliation Process

According to the NAIC, the complaint reconciliation process, regardless of what functional process is used, should include the following steps:

  1. State insurance departments shall provide an insurance company with a list of complaints that have been filed against the company for the relevant verification time period. This list will include the minimum reconciliation data points for the company’s review. This notification may be accomplished through a web-based system, through an e-mail based system, by mailing a hard copy or through an automated electronic filing system.
  2. For a Web-based system, a company may complete the reconciliation process by responding as needed; but, shall be given a deadline by which the company is required to review and respond to the state regarding the prior year’s complaints. For an e-mail based system or hard copy mailing system, the state department of insurance shall give the insurance company a reasonable and definitive time frame (e.g. 30-45 days) by which it must review and verify the data points for reconciliation.
  3. The insurance company should respond to each complaint reconciliation data point as either “agree” or “disagree.”
  4. If the insurance company disagrees with any of the complaint reconciliation data points, it must provide the state insurance department with a concise description of the nature of the objection along with appropriate supporting information or documentation. 
  5. The state insurance department will investigate all complaint data point responses that are marked with a “disagree” within 30-45days.
  6. The state insurance department will then advise the insurance company whether the original coding for the complaint data point marked “disagree” has been affirmed or modified by the state insurance department.

The NAIC proposes that a state insurance department may want to conduct the complaint reconciliation process on an annual basis as of a certain date, or it may want to conduct the complaint reconciliation process on a quarterly basis.  As an alternative, it may chose to conduct complaint reconciliation as each complaint is closed.

A state insurance department may determine that the timing of the complaint reconciliation may depend upon the type of reconciliation system used.  A state may employ a web-based system for each individual complaint registered against an insurance company. Through this system, an insurance company may compare its current complaint records to the complaint records of the insurance department as needed. A simpler approach is the use of an e-mail based system that can be used to verify each individual complaint registered against an insurance company. Finally, a state insurance department might employ the use of hard copy reports that are mailed to an insurance company for reconciliation.

To view the NAIC’s complete Reconciliation Proposal, click here.

To view the related Complaint Coding Project outline, click here.


Complaint Issues Working Group

For 2010, the Complaint Issues Working Group (“Working Group”) of the Market Regulation and Consumer Affairs Committee is charged with:

  • Developing and implement a complaint coding reconciliation process; and
  • Providing direction regarding state implementation of the revised coding scheme for the NAIC’s Complaints Database System.

(To view materials from the meetings listed below, click on the corresponding hyperlinks) 

June 2 Working Group Meeting Materials


April 16 Meeting Materials


[1] The Insurance Consumer Affairs Exchange (“ICAE”) is a not-for-profit organization made up of members of the insurance industry dedicated to consumer services.  The ICAE has a Regulatory Advisory Council consisting of regulators who provide input on various issues from a regulatory perspective. The ICAE completed a Position Paper on Complaint Data Analysis in 2008. The Position Paper included recommendations for complaint reconciliation.



Should you have any questions or comments, please contact Colodny Fass.


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