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 designed in part for market conduct exams. It gives examiners a structured way to ask for an AI inventory, testing records, vendor diligence, and adverse-outcome monitoring. A carrier that can produce these documents on demand is in a strong position. One that cannot may face a corrective action plan, fines, or product restrictions.
Market conduct authority is the enforcement mechanism behind the NAIC Model Bulletin and state AI rules. See our guides to the NAIC AI Evaluation Tool and AI governance in insurance.