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NAMIC Public Policy Papers, Commentaries and Studies

NAMIC Public Policy Papers

The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation
The bursting of the housing bubble and resulting financial crisis have been followed by the worst economic slowdown since the early 1980s if not the Great Depression. This Issue Analysis considers the role of AIG and the insurance sector in the financial crisis, the extent to which insurance involves systemic risk, and the implications for insurance regulation. It provides an overview of the causes of the financial crisis and the events and policies that contributed to the AIG intervention. It considers sources of systemic risk, whether insurance in general poses systemic risk, whether a systemic risk regulator is desirable for insurers or other non-bank financial institutions, and the implications of the crisis for optional federal chartering of insurers and for insurance regulation in general. (Published: 9/22/2009)

First-Party Insurance Bad Faith Liability: Law, Theory, and Economic Consequences
The idea that insurers should be penalized for unfair claim settlement practices involving first-party insurance coverage is a relatively recent development in the long history of insurance law. Today, many states allow for recovery of consequential, or incidental, damages, attorney’s fees, and prejudgment interest, as well as the benefit owed under the policy, in a first-party insurance bad faith case. The paper concludes that certain features of recent legislation in several states will create incentive distortions that may lead to greater uncertainty and higher costs for insurers, higher levels of insurance fraud, and correspondingly higher insurance premiums for consumers. (Published: 9/26/2008)

The Assault on the McCarran-Ferguson Act and the Politics of Insurance in the Post-Katrina Era
Seven of the ten most costly hurricanes in the history of the United States occurred in a 14-month period spanning parts of the 2004 and 2005 hurricane seasons. In response to perceived problems related to insurance industry claims and underwriting practices following these storms, some policymakers are offering legislation that would repeal a provision of the McCarran-Ferguson Act of 1945 that gives insurers a limited exemption from federal antitrust laws. (Published: 9/21/2007)

Auto Insurance Reform Options: How to Change State Tort and No-Fault Laws to Reduce Premiums and Increase Consumer Choice
(Published: 10/4/2006)

Insuring the Uninsurable: Private Insurance Markets and Government Intervention in Cases of Extreme Risk
(Published: 6/21/2005)

It’s Time to Admit that SOX Doesn’t Fit: The Case Against Applying Sarbanes-Oxley Act Governance Standards to Non-Public Insurance Companies
(Published: 6/2/2005)

The Case for Underwriting Freedom: How Competitive Risk Analysis Promotes Fairness and Efficiency in Property/Casualty Insurance Markets
The policy debate over insurance price regulation tends to focus on state-administered "rating laws" that require insurers to seek the approval of state insurance departments whenever they wish to raise or lower premiums. A new National Association of Mutual Insurance Companies (NAMIC) Public Policy Paper explains that price regulation also takes a less direct form: state-imposed underwriting restrictions that curtail the ability of insurers to accurately assess and classify risk. (Published: 9/22/2004)

The Legal Theory of Disparate Impact Does Not Apply to the Regulation of Credit-Based Insurance Scoring
Attempts to apply a “disparate impact” legal standard to the use of credit-based insurance scores by insurers ignore case law, federal authorization of the practice, state laws that protect consumers from unfair discrimination and the benefits consumers derive from its use. The Legal Theory of Disparate Impact Does Not Apply to the Regulation of Credit-Based Insurance Scoring offers a critical analysis of current efforts to extend the disparate impact legal theory to the use of credit-based insurance scoring, exposing the theory’s inherent flaws and highlights the special difficulties that arise when the theory is applied to situations other than employment discrimination litigation. (Published: 7/7/2004)

The Damaging Effect of Regulation of Insurance by the Courts
The notion that people should be able to rely on the law is so fundamental that it should not have to be defended. Yet, tort litigation over the last decade has begun to erode this obvious truth. When a court steps outside its traditional role of resolving individual disputes, and places itself in the shoes of legislators or regulators, our ability to rely on the letter of the law is shaken. This is particularly true of the insurance industry because it is so heavily regulated. If we cannot presume that a practice authorized by a legislature or approved by a regulator is legal, then there are grave implications for the rule of law. However, the problem is not only legal. The ill effects of “regulation through litigation” can damage entire markets, affecting everyone - including consumers. (Published: 8/12/2003)

Regulation of Property/Casualty Insurance: The Road to Reform (Updated: October 2006)
NAMIC supports a reformed system of state property/casualty insurance regulation as the optimum regulatory structure. “A reformed system of state insurance regulation is superior to an unproven new system of federal regulation crafted in a difficult political environment,” stated David Anderson, NAMIC chairman and secretary/treasurer of Farm Mutual Insurance Co. of Lincoln County, Canton, S.D. “The road to reform runs through state capitals, not Washington, D.C.” (Published: 4/12/2002)

Market Conduct Regulation for a Competitive Environment
In the spring of 2000, the National Association of Mutual Insurance Companies (NAMIC) released a report which noted that a critical mass of activity is pushing policymakers in the direction of creating more uniform insurance regulatory procedures and greater consistency of state standards. (Published: 3/14/2001)

Accepting The Challenge: Redefining State Regulation Now
The National Association of Mutual Insurance Companies (NAMIC) favors the enactment of  more uniform insurance regulatory standards by every state as the last, best hope for maintaining and improving the existing system of sovereign state insurance regulation. The threat to state regulation is so significant today that an unprecedented partnership of industry leaders, regulators and state policymakers is needed to put the necessary reforms in place. (Published: 4/18/2000)

Should the Community Reinvestment Act Apply to Insurance Companies?
The Community Reinvestment Act (CRA) should not be applied to insurance companies. This paper, which looks at CRA’s application to financial services sectors beyond banking, examines the question of whether new social investment obligations on the property/casualty insurance industry represent good public policy. Developed by a special task force of member companies and approved by NAMIC’s board of directors, the paper includes a bold evaluation of the social, political and economic environment in which the insurance industry operates. (Published: 8/31/1999)

Focus On The Future Options For The Mutual Insurance Company
The environment in which mutual insurance companies must compete for policyholders, for revenue, and for capital is rapidly changing. To meet the challenges of the changing economic climate, mutual insurance companies in the United States, Canada and abroad have moved to restructure, recapitalize and adapt to their changed competitive circumstances. (Published: 1/6/1999)