Examination Warrants

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 examination warrants for market conduct examinations pursuant to sections 374.202 to 374.207, RSMo. (1) The director is responsible for market regulation of insurers for Missouri policyholder protection and will utilize market conduct actions, including market analysis, investigation, desk examinations, targeted examinations, and comprehensive examinations of insurers or other companies. Such actions will be pursued by the division in a manner consistent with the purposes of section 374.185, RSMo. (2) A market conduct examination will be conducted only upon the issuance of an examination 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 examination warrants for market conduct examinations, the director will apply the following standards in evaluating factual support for a market conduct examination warrant: (A) A request for an examination warrant need not be verified by oath, but will contain the signature of the chief market conduct examiner, and state facts sufficient to support the director’s reasonable belief of cause as set forth in subsection (2)(B); (B) The director may issue an examination warrant for— 1. A desk examination, if the director has reason to believe— 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; 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; C. Significant market changes threaten the availability or affordability of insurance coverage; or D. An examination is required to be performed by law; 2. An on-site examination, if the director has reason to believe— 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; B. Significant market changes threaten the availability or affordability of insurance coverage; or C. An examination is required to be performed by law; (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, will be derived from the following sources: 1. Information obtained from a market conduct annual statement, market survey, or report of financial examination; 2. Confirmed complaint(s) against the company indicating a particular practice or a complaint ratio that deviates significantly from the norm; 3. Information obtained from other objective sources; or 4. Information obtained from any credible source with direct access to relevant information; (D) An examination warrant shall be based on cause and will be reasonably limited in scope to the specific line(s) of business, the specific business practice(s), and the time period to be examined, as identified in the examination warrant. If additional cause is discovered, which leads the examiner to believe additional lines of business, additional business practices, or additional time periods need to be examined, or if the examiner believes a different method of examination needs to be employed, a request to modify or expand the previously issued examination warrant or for a new examination warrant will be made to the director who may issue a new or modified warrant. The identification of additional laws violated does not necessitate a request to modify or expand a previously issued warrant; and (E) An examination warrant will— 1. Be in writing and in the name of the department; 2. Be directed to the division; 3. Identify the scope of the examination by describing the specific line(s) of business, the specific business practice(s) to be examined, and the time period to be reviewed during the examination; 4. Identify the law(s) the director reasonably believes were violated and the cause that supports the director’s determination to issue the examination warrant. The division is not precluded from pursuing or citing to other violations of law through the course of an examination that are not specified under the originally issued warrant. In identifying the cause, the examination warrant need only indicate a general category(ies) of information relied upon, including, but not limited to, complaint(s), complaint indices, market conduct annual statement(s), market share(s), financial examination(s), information from other states, legal referral(s), premium shift in line(s) of business, statistical information, market conduct examination results, new operation(s), reexamination(s), and/ or evaluation(s) of new laws; 5. Identify whether the examination will be conducted as a desk examination, an on-site examination, or both; and 6. Be signed by the director. (3) An examination warrant will be served on the insurer or other company prior to commencing the market conduct examination. (4) In conducting the examination, the examiner will observe those guidelines and procedures set forth in the Market Regulation Handbook adopted by the National Association of Insurance Commissioners (NAIC). AUTHORITY: sections 374.045, 374.185, and 374.202–274.207, RSMo 2016.* Original rule filed April 1, 2008, effective Nov. 30, 2008. Amended: Filed Dec. 13, 2018, effective July 30, 2019. *Original authority: 374.045, RSMo 1967, amended 1993, 1995, 2008; 374.185, RSMo 2007, amended 2016; 374.202, RSMo 2002, amended 2008; 374.205, RSMo 1992, amended 1997, 1999, 2016; and 374.207, RSMo 1992.