A self-evaluative privilege allows insurers to conduct internal audits to ensure compliance with consumer protection laws and regulations without fear of having the results of the audits made public or used against the insurers in litigation.
Insurance is one of the most highly regulated industries, and insurers are subject to many laws and regulations enacted to protect consumers, not only to those applicable to all businesses, but also to many specialized rules tailored to insurance practices and typically state-specific. Marketing, underwriting, and claims payment processes are all governed by countless requirements and limitations.
This means that for every insurer—and particularly those operating in multiple states—compliance is an extraordinary challenge. Conducting a self-audit to determine where a company is noncompliant, so it can then correct the issue, is simply a logical method of addressing the challenge. However, if the results of the audit can be used against the company in either a regulatory action or, more perniciously, litigation, then there is a tremendous disincentive for the insurer to engage in such activity.
Starting with Illinois in 1997, several states have enacted legislation to establish a self-evaluative privilege for insurers. In 1998, the National Conference of Insurance Legislators adopted a model law on the subject.
NAMIC strongly supports the enactment of self-evaluative privilege laws for the mutual benefit of insurers and consumers.