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Kansas Self-Audit Law Boon to Consumers and Industry; NAMIC Comments

INDIANAPOLIS (April 21, 2005)—Kansas’ new self-audit privilege law will provide greater protections to insurance consumers while improving the state regulatory climate, according to a spokesman from the National Association of Mutual Insurance Companies (NAMIC).

“Enactment of House Bill 2357 creating the self-audit privilege will create an environment in Kansas conducive to the conduct of internal audits by insurance companies,” said NAMIC State Affairs Manager Joe Thesing. “NAMIC congratulates Governor Kathleen Sebelius and the legislature for this important step forward.”

HB 2357, based on the NCOIL self-evaluative privilege model and originally introduced by House Insurance Committee Vice Chair Eric Carter, establishes that an insurance compliance self-evaluative audit document is privileged information and will not be discoverable or admissible as evidence in legal proceedings. Such documents could be voluntarily submitted to the Insurance Commissioner as confidential documents in the course of an examination without waiving the privilege.

“The self-audit privilege is a consumer protection tool that encourages good market practices. Without the privilege, insurance companies interested in using proactive self-evaluative audits are limited by the reality that these audits may be used against them even if problems identified in the audit have been corrected,” Thesing added.

The Kansas House approved HB 2357 by a vote of 81-40 on Feb. 25. The bill was amended by the Senate Finance Committee and unanimously adopted by the Senate on March 25, 38-0. Following a conference committee to reconcile House and Senate versions, the final bill was adopted by the House and Senate on April 1 and signed by Gov. Sebelius, who formerly served as Insurance Commissioner, on April 15.

With enactment of HB 2357, Kansas becomes the seventh jurisdiction to provide the self-audit privilege. The other six are: the District of Columbia, Illinois, Michigan, New Jersey, North Dakota and Oregon.

Posted: Thursday, April 21, 2005 12:00:00 AM. Modified: Thursday, April 21, 2005 2:58:44 PM.

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