Market Conduct Exam
A state insurance regulatory examination of an insurer's business practices, including sales, claims handling, underwriting, and now AI governance and fairness.
A market conduct exam is a state insurance department’s review of whether an insurer is complying with insurance laws and treating consumers fairly. Examiners may review policy forms, sales practices, claims handling, complaint handling, and increasingly, AI governance and model risk management.
The NAIC AI Systems Evaluation Tool is built to supplement market conduct exams, financial analysis and financial examination review. Its exhibits give a regulator a structured way to ask for an AI inventory, testing records, vendor diligence and adverse-outcome monitoring. Because the tool is optional and stops at the questions, the remedy for a carrier that cannot answer them runs on the state’s own market conduct and unfair trade practices law.
Market conduct authority is one of the routes by which the NAIC Model Bulletin and state AI rules get enforced. See our guides to the NAIC AI Evaluation Tool and AI governance in insurance.