Bulletin: NL000079

Date:
August 04, 1999
To:
All Independent Agents
RE:
Market Conduct Examinations

Dear Associates:

The number of state examinations of title insurance underwriters and agents (collectively "insurance companies") has been increasing. These examinations may involve a review of one or more of the following business areas designated in the Market Conduct Examiners' Handbook issued by the National Association of Insurance Commissioners ("NAIC"): operations, complaint handling, marketing and sales, agent relations, policyholder service, underwriting, and claims. For your reference, these seven areas are broken down in more detail on the attached outline.

According to the NAIC Market Conduct Examination Handbook, an examiner should conduct tests to "determine if the insurance company is meeting standards." The standards used in a market conduct examination are set by applicable state statutes, rules, and regulations. Failure to meet these standards may result in fines and penalties being assessed against the agent.

You are encouraged to review the statutes, rules and regulations that set forth the standards for your state, and to assure your company's compliance with those standards.

In the event you are notified that your agency has been scheduled for a market conduct investigation, please notify Patrick Thesing, Chief Claims Counsel, in the National Legal Department of Stewart Title Guaranty Company at 1980 Post Oak Boulevard, Houston, Texas, 77056, (800) 729-1902. Your cooperation is appreciated.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

Exhibit

Market Conduct Examinations

Patrick R. Thesing
Senior Vice President
Stewart Title Guaranty Company

I.Company and Agent Operations/Management

A. Up-to-date, valid internal, or external audit program
B. Appropriate controls, safeguards and procedures for protecting the integrity of computer information
C. Antifraud Plan in place
D. Valid disaster recovery plan
E. Records are adequate, accessible, consistent and orderly and comply with state record retention requirements
G. Organization is licensed for title insurance business
H. Acts within the scope of its license
I. No member of the Board of Directors may be a title insurance agent who wrote more than 1% or more of the direct premiums for the previous calendar year.
J. Agencies and applicable employees must have errors and omission policies and fidelity coverage if required by statutes, rules, and regulations.
K. Business is diversified as required by statutes, rules, and regulations
L. Cooperates on a timely basis with examiners performing the examinations
M. Periodic review and testing of title plant built, owned, controlled, or maintained by a title agent.

II.Complaint Handling

A. All complaints are recorded in the required format on the complaint register
B. Adequate complaint handling procedures in place
C. Adequate steps are taken to address/resolve the complaint in accordance with applicable statutes, rules and regulations, and contract language
D. Time frame for response is in accordance with applicable statutes, rules and regulations

III.Escrow, Settlement, Closing, or Security Deposit Refund

A. All escrow funds are submitted for collection to or deposited in a separate fiduciary trust account in a qualified financial institution promptly and in accordance with statutes, rules and regulations
B. Interest received on funds shall be paid in accordance with applicable statutes, rules and regulations
C. Disbursements are done in accordance with applicable statutes, rules and regulations

IV.Marketing and Sales

A. All advertising and sales materials are in compliance with applicable statutes, rules and regulations
B. Internal training materials are in compliance with applicable statutes, rules and regulations
C. Communications to agents are in compliance with applicable statutes, rules and regulations
D. Controlled business is handled in accordance with statutes, rules and regulations
E. Inducements are not provided, directly or indirectly, in consideration of referral of business or escrow or other services provided by a title insurance agent, if prohibited by statutes, rules and regulations

V.Title Insurance Agent Relations

A. Properly licensed and appointed in the jurisdiction where the application was taken
B. Termination of agent complies with statutes regarding notification to the agent and notification to the state if applicable
C. Written underwriting contracts, which include required provisions, are in place between title insurance agencies and all applicable title companies, and business is not placed without a contract
D. Records of terminated agents adequately document reasons for terminations
E. Policies and premiums are reported and remitted on a timely basis
F. Maintain a record of financial stability for each agent under contract
G. Conduct a review of underwriting, claims and escrow practices of the agent in accordance with statutes, rules and regulations
H. Maintain an inventory of all policy forms or policy numbers allocated to each agent

VI.Policyholder Service

A. All correspondence is answered in a timely and responsive manner
B. Disclosures are made as required
C. Underwriting and Rating
D. Rates charged are in accordance with rates, rules and manuals on file with the department of insurance
E. Disclosures to insureds concerning rates and coverage are accurate and timely

V.Underwriting and Rating

A. Do not permit rebating, commission, cutting or inducements
B. Practices are not unfairly discriminatory; adheres to applicable statutes, rules and regulations, and company guidelines in the selection of risks
C. Re-issue and refinance credits are applied consistently in compliance with statutes, rules and regulations
D. All forms and endorsements forming a part o the contract are identified and filed with the department of insurance (if applicable)
E. Agents are properly licensed and appointed in the jurisdiction where the application was taken
F. Policies and endorsements are issued accurately, timely and completely
G. Do not engage in collusive or anti-competitive underwriting practices
H. Charges other than premium for providing coverage are in compliance with statutes, rules and regulations
I. Other than closing or settlement protection, do not provide any other coverage which purports to indemnify against improper acts or omissions of a person with regard to escrow, settlement, or closing services
J. The closing or settlement protection conforms to the terms of coverage and form of instrument as required by statutes, rules and regulations
K. Reports and disclosures are made in accordance with statutes, rules and regulations
L. Comply with statutes, rules, and regulations regarding the recording, reporting, and validation of revenue, loss and expense experience
M. All policies are correctly coded

VI.Claims

A. Initial contact by company with claimant is within the required time frame
B. Timely investigations are conducted
C. Resolve in a timely manner
D. Responses to correspondence are provided in a timely manner
E. Claim files are adequately documented
F. Claims are properly handled in accordance with policy provisions and applicable statutes, rules and regulations
G. Claim files are reserved in accordance with company's established procedures
H. Denied and closed-without-payment claims are handled in accordance with policy provisions and state law
I. Canceled benefit checks and drafts reflect appropriate claim handling practices
J. Claim handling practices do not compel claimants to institute litigation to recover amounts due under policies by offering substantially less than is due under the policy
K. Indemnification of a proposed insured solely against the loss of settlement funds may only be made for events as authorized by statutes, rules and regulations
L. Loss statistical coding is complete and accurate

References

Bulletins Replaced:
None
Related Bulletins:
NL000072 This Bulletin has been rescinded and reissued under MGT-16
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None