From The Chairmen...

This National Association of Mutual Insurance Companies “Year in Review” chronicles the work of your association in advocacy, education, and more in 2012. And when we say your association, we really mean you – because these efforts could not and would not have been possible without you.

That’s because we are truly a member-driven and member-involved trade association. This means you and your fellow members determine NAMIC’s agenda and priorities, and then become active participants in NAMIC’s numerous activities, projects, and events.

It’s also why we strongly believe that the difference in being a NAMIC member is in the experience of your involvement.

By that involvement, you have helped us attain some very significant achievements in 2012. From the long-term reauthorization and reform of the National Flood Insurance Program to the enactment of legislation in eight states to protect policyholders from “storm scammers,” from growing attendance at more workshops, conferences, and webinars than ever before to record-setting support for NAMIC PAC, and so much more, your involvement truly mattered.

NAMIC exists to strengthen and support its members and the mutual property/casualty insurance industry by its leadership in advocacy, public policy, public affairs, and member services. And as we succeed in that mission, we all are given the opportunity to continue providing positive contributions to our society through a financially sound, competitive, and ethical insurance industry.

We hope that as you read this annual report you will reflect on what NAMIC means to all of us as individuals, to the businesses we lead, and to the policyholders we serve. As your chairmen, we have that opportunity every day – and we are grateful to have been entrusted with the stewardship of a uniquely special organization.

We sincerely thank you for helping to make NAMIC not only the largest property/casualty trade association in the nation, but also the most effective one. We look forward to continue working alongside you in the months ahead, building on the achievements of the past year.

From The CEO...

committee adopted a report calling for improvements in the rate-making process, with the committee’s recommendations to be taken up by the 2013 Legislature. In Tennessee, commercial lines rate modernization was enacted, and NAMIC and other industry advocates were engaged and continue to be so in dialogue on flex rating with regulators in Pennsylvania. NAMIC also continues to serve on a flex-rating study committee in Nevada. But, most importantly, there were no serious or successful attempts in 2012 in states to return to prior approval. More on this issue >>

Underwriting Freedom (Insurance Scoring, CLUE, Predictive Modeling)

Efforts to ban or severely limit the use of credit-based insurance scoring and other underwriting tools were relatively limited in 2012. While ban bills were introduced in Kentucky, Rhode Island, Tennessee, and West Virginia, none advanced; and because of NAMIC’s assistance in Maryland, legislation to restrict the use of geography-based rating also failed to move. Quite possibly the biggest win we experienced in 2012, however, was in Michigan as its significant shift in the legislative environment resulted in the governor signing insurance scoring legislation based on the NCOIL model, ending a decade-long battle on this issue in the state. More on these issues >>

Civil Justice Reform

NAMIC has been active with broad-based coalitions supporting tort reforms and opposing bad faith laws in various states. One issue in particular – third-party litigation funding – is gaining momentum and has the potential to radically alter the legal landscape for insurers. Also known as litigation financing or lawsuit lending, the issue involves the practice of providing money to a litigant to pursue a potential or filed lawsuit in return for a share of any damages award or settlement. We believe third-party litigation funding runs counter to the public interest and is potentially harmful to insurers.

NAMIC also worked with industry partners in 2012 to ban or severely restrict this practice. Although no bills passed this year, NAMIC helped shape the debate in Arizona, Connecticut, Indiana, Kentucky, Oklahoma, Rhode Island, Tennessee, Texas, and at the National Conference of Insurance Legislators.

Litigation funding wasn’t the only tort-related issue in the states as a few other important tort reform proposals were also adopted in 2012. Michigan passed legislation allowing for expert testimony to be delivered via video link while Virginia adopted legislation that more narrowly defines “defective drywall.” Also, there were very few serious efforts to move anti-civil-justice-reform legislation. Ever vigilant, NAMIC monitored threats from inception and helped ensure the quiet death of a few troublesome bills. More on these issues >>

adopted was much more reasonable than what was originally debated. And in Florida, we achieved a victory when the Legislature adopted a bill to lower assessments by Citizens Property Insurance Corporation, the state’s insurer of last resort. In the wake of recent natural disasters along the Atlantic and Gulf of Mexico coastlines, NAMIC continues to make the case for stronger statewide building codes and other disaster mitigation measures to help minimize future damage. We continued to oppose the creation of state catastrophe funds/plans in favor of proposals that are based on actuarially sound rating and loss mitigation. More on this issue >>

NAIC Solvency Modernization Initiative

In 2012, the National Association of Insurance Commissioners remained actively engaged in a substantial effort to enhance solvency regulation. The first two important pieces that will affect states will be changes to the Model Holding Company Act and the Own Risk and Solvency Assessment. Both will be stand-alone legislation.

The ORSA is a new filing for companies above $500 million in DWP and is a departure from the traditional box-checking, number-crunching approach to most regulatory requirements. It is in essence an enterprise risk management approach to regulation and, in many ways, captures information that companies are already producing for internal purposes.

NAMIC, with others in the industry, has been strongly advocating throughout the development process for some key provisions found in the model. First is the compliance threshold and second is ensuring proper confidentiality protections given the proprietary nature of most of the ORSA information. We were successful in accomplishing both goals.More on this issue >>

Targets of Opportunity (View Online)

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‘Storm Scammer’ Legislation

One of the few significant growing concerns of 2012 continued a battle from the year before: combating unscrupulous home repair contractors who try to dupe consumers following hail and wind storms. Thanks in part to NAMIC, 14 states passed legislation in 2011 and 2012 to protect consumers from fly-by-night contractors. Georgia, Illinois, Minnesota, Missouri, Nebraska, and Oklahoma adopted proposals in 2011. In 2012, Alabama, Arizona, Indiana, Iowa, Kentucky, Louisiana, South Dakota, and Tennessee adopted proposals. NAMIC is already working with our industry partners to line up additional states for 2013.More on this issue >>

Accident Response Fees

By the end of 2012, cash-strapped municipalities in at least 34 states were charging accident response fees, or considering ordinances to allow for such fees. To counter local implementation of accident response fees, NAMIC meets with state legislators to educate them on how the fees are in effect a form of double taxation applied only to law-abiding citizens who carry auto insurance. While no bills to ban the practice were introduced in 2012, NAMIC continues to discuss with industry allies and legislators the potential for introducing measures in the future. More on this issue >>

Customer Choice in Auto Repair

Sectors of the auto repair industry continue efforts to pass legislation that would restrict consumer options regarding auto repair and limit information insurers can make available to consumers, thereby impairing the ability of consumers to make informed decisions on repairing their vehicles. Some proposals include language that may impose excessive restrictions on insurers’ constitutionally protected commercial free speech. No such bills were adopted in 2012; however, a handful of states debated legislation that would prohibit an auto glass company acting as a third-party administrator to refer business to itself. Legislation was introduced in Rhode Island to create a private right of action regarding auto repair complaints, but thanks to an industry grassroots lobbying effort, the governor vetoed the bill. More on this issue >>

Market Conduct Reform

Insurers continue to pay thousands of dollars each year to state regulators for expenses incurred in performing market conduct examinations. Often, the exams amount to little more than “fishing expeditions” by the regulators and essentially duplicate examinations already completed by other state regulators.

We support reasonable market conduct reform initiatives that will reduce the number and cost of market conduct exams and focus regulators on problem insurers. But NAMIC opposes any initiative that would impose the added burdens of unneeded market conduct exam requirements on insurers.

Though there was little legislative debate on this topic in 2012, NAMIC will continue to seek a reasonable solution to this issue. More on this issue >>

Workers’ Compensation Reform

New to NAMIC’s legislative agenda is workers’ compensation reform. Areas of emphasis include reforming outdated requirements and practices that drive legal involvement by attorneys in claims that should be handled administratively; reforming provider reimbursement by enacting market-oriented measures and by modernizing fee schedules and treatment parameters; reducing over-regulation; and reducing insurance fraud.

In 2012, Maine enacted legislation to modify certain benefit levels and durations that is generally viewed as positive by the industry and business community. The Missouri Legislature debated a host of reforms and ultimately adopted a non-controversial proposal that addresses co-employee negligence. And in California, the insurance industry worked with labor, the business community, and the governor’s office on a package of significant workers’ compensation reforms recently adopted by the Legislature. More on this issue >>

Federal Agenda Priorities (View Issue Priorities)

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National Flood Insurance Program

The U.S. Senate and House of Representatives voted on June 30, 2012, to pass the Biggert-Waters Flood Insurance Reform Act of 2012, a major victory for NAMIC. Passage of this legislation with strong bipartisan support was a significant achievement given the contentious political environment.

The comprehensive reform bill extends the NFIP for five years and implements a series of reforms that will bring the program closer to fiscal soundness. In the future, flood insurance premiums will better reflect the risk of a loss, flood maps will be updated, and steps will be taken to mitigate against repetitive losses.

NAMIC President and CEO Charles M. Chamness appeared in February as the industry’s sole representative at a news conference with Sens. David Vitter, R-La., and Jon Tester, D-Mont., to call on Senate leaders to bring the reform legislation to the floor for a vote. The two senators also enlisted the support of 39 of their colleagues in a letter to Senate leadership asking to vote on the legislation.

In May, as the program’s latest expiration date grew near, NAMIC created and led an advocacy campaign, known as “Flood the Hill.” Stakeholders from the property/casualty insurance industry were joined by groups representing real estate, banking, and environmental interests to call on their senators to support NFIP reform. Traditional lobbying visits were supported by thousands of calls, emails, and letters to members of the Senate pushing for a vote, which helped convince the leadership in that chamber that the issue could no longer be ignored. NAMIC crafted op-eds that were published in the Miami Herald and the Sioux Falls Argus Leader in the home state of Senate Banking Committee Chairman Tim Johnson.

NAMIC’s efforts – and the Flood the Hill campaign in particular – were cited by Sen. Vitter as a key factor in ultimately getting the legislation to a floor vote. Upon passage, the flood measure was included in a package of legislation addressing several unrelated expiring programs, including federal highway funding and federal student loan rates. President Obama signed the NFIP reform bill into law on July 7, 2012.

NAMIC plans to remain in close contact with NFIP administrators as they implement the reforms to ensure that the reforms are enacted as intended to strengthen the program. More on this issue >>

Dodd-Frank Act Implementation

Entering its third year since becoming law, the Dodd-Frank Wall Street Reform and Consumer Protection Act gained strength through implementation of its myriad rules and regulations. As new agencies created under the act began proposing regulations and established agencies sought to flex new regulatory muscles, NAMIC kept a watchful eye for potential overreach and worked with members of Congress to ensure strong oversight of the implementation process.

The Financial Stability Oversight Council announced in April its final rule establishing a process for designating non-bank entities as “Systemically Important Financial Institutions,” subjecting such entities to heightened regulatory scrutiny under the Federal Reserve. Since the financial crisis of 2008, we have been a leading voice in arguing that traditional property/casualty insurers in fact pose no systemic threat to the economy and therefore should not be viewed as potential SIFIs. Our perspective prevailed, as the final rule announced by the FSOC focused instead on other types of companies that engaged in risky behavior.

We also prevailed a month later when, in May, the Federal Deposit Insurance Corporation announced that a mutual insurance holding company would be included under the definition of “insurance company” as defined by the Dodd-Frank Act. This rule accepted arguments made by NAMIC in comments we submitted as part of the rulemaking process. As a result, the FDIC clearly established that mutual insurance holding companies would remain under the regulatory jurisdiction of the states rather than the FDIC’s orderly liquidation authority created as part of the Dodd-Frank Act.

agencies could seek to grow and impose new costly regulations on insurance companies. NAMIC’s testimony also noted that Congress intended to exempt from the Volker Rule property/casualty insurance companies that owned thrifts. In our view, this exemption should be widely read by the implementing agencies to allow these insurers to continue utilizing investment strategies that have been approved by their functional state regulators and which have worked to protect policyholders.

Finally, our testimony addressed the provision in Dodd-Frank granting the Federal Reserve a new role in overseeing savings and loan holding companies that have insurance operations. As the Fed has never dealt with regulating the business of insurance, we urged Congress to encourage the Fed to proceed slowly and work with the industry on the best way forward. Specifically, we highlighted the need for any new capital or accounting standards to reflect the realities of the business of insurance.

With their Dodd-Frank-granted authority, the Fed, the FDIC, and the Office of the Comptroller of the Currency all announced proposed regulations in 2012 that would change the capital standards for savings and loan holding companies to bring them more in line with the Basel III international standards. NAMIC responded to the proposal, arguing that the standards were bank centric and as such are not appropriate for SLHCs that are predominately engaged in insurance. We urged the agencies to work with insurance regulators and industry stakeholders to develop standards that are appropriate for insurers. And, in order to sort out some of the more complex issues, we also urged a delay in the compliance deadline for any new capital regime that may be required.

During this period, NAMIC worked with Sens. Mike Johanns, R-Neb., and Sherrod Brown, D-Ohio, on a letter to the Fed, FDIC, and OCC making similar arguments. The letter was co-signed by 22 of their Senate colleagues, seeking the agencies’ recognition of unique differences between banks and insurance companies – and to avoid the adoption of “one-size-fits-all” regulations. The senators made clear that any final rulemaking should “reflect congressional intent, incorporate the state risk-based capital system, and appropriately accommodate the insurance business model.”

These efforts proved successful as the Federal Reserve, FDIC, and OCC released a joint statement in November that recognized the concerns expressed by property/casualty insurers and acknowledged there was not sufficient time to understand the rule or to make necessary systems changes. Therefore, the agencies stated they did not expect any of the proposed rules would become effective January 1, 2013.

As the end of 2012 approached, congressional oversight continued, as the Senate Banking Committee held a hearing in November to review the impact of the proposed standards. This was followed by a joint hearing of the House Financial Services Subcommittees on Insurance, Housing, and Community Opportunity and Financial Institutions and Consumer Credit. Sen. Susan Collins, R-Maine, also wrote the agencies to make clear that congressional intent was not to see a bank-centric regime imposed on the industry. NAMIC has written the members of both subcommittees, urging continued pressure on the implementing agencies to work with insurance regulators and industry stakeholders to develop standards that work for insurers, and we will continue working to ensure that our concerns are addressed. More on these issues >>

congressional offices and recruiting bipartisan support for this legislation in 2012.

In July, we worked with the House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings and Emergency Management on a hearing that examined how building codes can reduce the impact of natural disasters. Rod Matthews, property and casualty operations vice president for State Farm Insurance Companies, represented NAMIC and BuildStrong as he highlighted the importance of strong building codes in reducing property damage, cutting the federal debt, and saving lives. The hearing proved to be a positive step forward in advancing the Safe Building Code Incentive Act, with no dissent among the committee members or witnesses about the need for building codes or mitigation efforts.

In the wake of Super Storm Sandy, NAMIC continued to work with lawmakers in both chambers to promote the Safe Building Codes Incentive Act as a potential piece of disaster aid legislation. And, for the first time, the proposed measure was introduced in the Senate on December 19 by Sens. Kirsten Gillibrand, D-N.Y., Frank Lautenberg, D-N.J., Robert Menendez, D-N.J., and Charles Schumer, D-.N.Y., the Democratic Conference Committee vice chair and Policy Committee chair. More on this issue >>

Terrorism Risk Insurance Act

The economic realities of the market for commercial insurance makes renewing the public-private partnership created under the Terrorism Risk Insurance Act a priority. Though the law is not due to expire until the end of 2014, NAMIC began in 2012 making the case on Capitol Hill that the need for TRIA is still present and that reauthorization will be necessary.

TRIA was initially enacted in 2002 in the wake of the terrorist attacks of September 11, 2001, and the program was last re-authorized in 2007. Given the significant turnover in Congress since then, the issue is new for many members, and we worked to educate lawmakers about the factors that make underwriting terrorism risk virtually impossible.

On the 11th anniversary of the attacks, Jewelers Mutual CEO Darwin Copeman testified on behalf of NAMIC at a hearing of the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity. The testimony made clear that the program created by TRIA has been critical to the continued existence of a private market for commercial terrorism coverage. The TRIA program has helped foster economic development in high-risk areas during the past decade, ensuring that terrorism coverage is available, with smaller events being covered by the private sector while providing a federal safety net against the kind of large-scale attacks seen in 2001.

Members of the subcommittee heard there are factors that complicate the underwriting process, namely that necessary data on terrorist acts is kept classified by the government and the human element of terrorism adds an adaptability that does not exist in underwriting against natural disasters.

In the weeks following the hearings, NAMIC met with key congressional offices, including leadership in both the House and Senate, alongside fellow stakeholders including Realtors, shopping center and hotel developers, and commercial lenders among others. We will continue to work with members of Congress for reauthorization of the TRIA program. More on this issue >>

Small Mutual Inflation Update

Under Section 831(b) of the Internal Revenue Code, enacted in 1986, small property/casualty insurers with direct or net written annual premiums not exceeding $1.2 million may elect to be taxed on their net investment incomes. But this provision has not been adjusted to reflect the inflation of the last 26 years. If it were indexed in order to account for inflationary changes since 1986, the investment income election would be $2.39 million.

Since its introduction in the House in 2011, legislation to update this threshold and index it to inflation has garnered 44 co-sponsors. Across the Capitol, NAMIC secured introduction of the same legislation in the Senate in September 2012 when the Small Mutual Inflation Update was introduced by Sens. Tom Harkin, D-Iowa, Charles Grassley, R-Iowa, Amy Klobuchar, D-Minn., and Jay Rockefeller, D-W.Va.

Comprehensive tax reform has not received significant attention on Capitol Hill in more than a dozen years, since President George W. Bush’s first year in office. Both chambers pledged to address tax reform in 2012, but election-year politics narrowed their focus on tax bills to extending current rates on a short-term basis. With fiscal pressures building on the federal government, however, Democrats and Republicans have acknowledged the importance of tax reform to keep America competitive in the global economy. This could likely lead to serious negotiations in 2013, in which case NAMIC’s work to date to ensure that the Small Mutual Inflation Update is included in the debate over tax reforms yields positive results for small mutuals. More on this issue >>

HUD Ruling: Disparate Impact

In late 2011, NAMIC was the first property/casualty trade association to bring to the attention of our industry a proposed rule by the Department of Housing and Urban Development to apply the “disparate impact” standard to the pricing and availability of homeowners insurance. Should this rule be enacted, any underwriting factor shown to have a disparate impact on a group based on race, color, religion, sex, familial status, or national origin – even unintentionally – could be subject to litigation.

The history of NAMIC members is clear – we do not condone unfair discrimination in any aspect of our business, and we support all regulatory provisions that appropriately define and enforce this critically important objective. With respect to the provision and pricing of homeowners insurance, NAMIC strongly maintains that the state insurance provisions to which we are subject provide strong, clear, and fair standards preventing unfair discrimination, and we are not aware of any serious challenge to the adequacy or propriety of the state laws and regulations to safeguard against illegal discrimination.

NAMIC has played a lead role in opposing this excessive regulation. We submitted comments to HUD in January 2012 that argued the agency lacked the jurisdiction to impose the regulation on the insurance industry and failed to properly consider state preemption and federalism issues as required under executive orders. We provided members of Congress with specific questions about the propriety of HUD jurisdiction in this proposed rule for a February budget hearing.

We have also been working with key members of Congress who have made calls to HUD requesting clarification and expressing their concern with the proposed rule. In June, Rep. Blaine Luetkemeyer, R-Mo., sent HUD a letter expressing his concern that the proposed rule sought to transfer regulatory authority from the states to the federal government. We also worked with Rep. Scott Garrett, R-N.J., to include language in the FY 2013 Transportation-HUD appropriations bill, which was adopted by the House, to prohibit funding for HUD to be used to finalize the proposed rule to establish disparate impact standards.

Within the industry, NAMIC has been leading a coalition of insurance representatives and trade associations in Washington, collectively working closely on this matter to define and implement lobbying and legal strategies to counter the HUD proposal. We also have been leading a group of industry trade counsels in consulting with outside attorneys and industry groups on the most effective administrative or legal strategy should HUD include insurance in its final disparate impact rule. Our efforts to educate both administration officials and members of Congress on the issue are ongoing. More on this issue >>

Medicare Secondary Payer

NAMIC worked to have legislation introduced earlier this Congress to address the many complaints insurers had with the onerous and confusing Medicare Secondary Payer reporting requirements. Introduced by Rep. Tim Murphy, R-Pa., the Strengthening Medicare and Repaying Taxpayers Act is designed to improve the efficiency of the current MSP system and speed repayment of amounts owed to the Medicare Trust Fund. Sen. Ron Wyden, D-Ore., also introduced companion legislation in the Senate.

In 2012, NAMIC consistently worked toward passage of the SMART Act, building support among lawmakers and pressing leadership to move the legislation. On September 11, the House Energy and Commerce Subcommittee on Health passed the SMART Act. As Congress waited while House leadership negotiated the “fiscal cliff” with the Obama administration in the closing days of 2012, NAMIC called on House Speaker John Boehner, R-Ohio, and Minority Leader Nancy Pelosi, D-Calif., to use that time to pass the legislation. Senate passage occurred soon thereafter, and the measure was sent to the president to be signed into law. More on this issue >>

Public Policy

Issue Analysis Paper

Throughout 2012, NAMIC collaborated with Dr. Robert Klein of Georgia State University in the development of an issue paper focused on the U.S. response to European efforts to modernize insurer solvency regulation. The resulting 81-page “Insurance Regulation and the Challenge of Solvency II: Modernizing the System of U.S. Solvency Regulation” was released in December 2012.

The report examines the current U.S. solvency regulatory regime, highlighting the critical role of the National Association of Insurance Commissioners and evaluating recent NAIC-led innovations such as “risk-focused surveillance” of insurers’ financial conditions. It then explores the European Union’s complex and multi-faceted Solvency II directive to modernize insurer solvency regulation, comparing it to the U.S. system with respect to discrete rules and practices, as well as underlying philosophies and objectives. The report provides a comprehensive overview of the NAIC’s Solvency Modernization Initiative and its five principal components: capital requirements; governance and risk management; group supervision; statutory accounting and financial reporting; and reinsurance. Special attention is given to the SMI’s most consequential progeny to date, the Own Risk and Solvency Assessment, which many U.S. insurers will eventually be required to file.

The report is informed throughout by Dr. Klein’s observation that “tighter solvency standards will tend to reduce the supply of insurance and increase its price,” whereas “greater flexibility with respect to solvency requirements allows insurers to offer a wider range of possible product and price options, and allows consumers to incur greater risk in return for lower prices and/or greater benefits.” Solvency regulation, he notes, should aim to achieve “optimal balance between insolvency costs and regulatory costs.”

Dr. Klein’s objective and unbiased treatment of the ongoing effort to modernize insurer solvency regulation is a unique and highly useful resource for insurance professionals, policymakers, media analysts, and commentators both in the U.S. and abroad.

NAMIC PAC

The election cycle of 2012 was another record year for NAMIC PAC, in both fundraising and candidate support. And for the first time, NAMIC PAC ranked among the top 10 insurance industry political action committees.

As one of the industry’s fastest growing political action committees in 2012, we raised more than $391,000 for the year and $735,000 for the two-year election cycle (an increase of 38 percent over the two-year period of the 2010 elections). A total of 234 NAMIC member companies, including 88 new company contributors and 1,135 individual participants, were involved in supporting our political program. In addition, member companies that made up the PAC’s Top 10 included companies that increased their participation by more than 15 percent. The PAC’s largest fundraising push for the year occurred when we raised nearly $50,000 during NAMIC’s Annual Convention in September. This effort helped the PAC increase funds raised by 12 percent in 2012 over the prior year.

Raising the necessary funds to make an impact is an important objective for the PAC, but just as important is the PAC’s role in supporting worthy candidates with a financial contribution. Here, too, another record was set, with more than $755,500 in contributions to candidates at the federal and state levels during the 2012 election cycle. The PAC was able to support 279 elected officials in 45 states with 86 percent of these candidates winning their elections.

Advocacy Fund

Because federal law restricts certain activities by political action committees (prohibiting corporate contributions, for instance), NAMIC created the Advocacy Fund to engage in special projects that are supported by voluntary corporate contributions from member companies.

This additional source of funding enables us to further defend and promote an open and competitive insurance marketplace free of unnecessary regulation, wasteful and frivolous litigation, and onerous taxation. These activities may include engaging in voter awareness campaigns, participating in issue or industry coalitions, issuing legal briefs on behalf of the industry on important litigation, and funding legal challenges to state agency actions.

The Advocacy Fund is supported on a voluntary basis, allowing member dues to be used exclusively in support of core association activities. While the amount of a company’s voluntary corporate contribution to the Advocacy Fund is suggested in the member’s annual dues statement, members may choose to donate any amount.

Congressional Contact Program

Because ours is a regulated industry, NAMIC’s advocacy efforts are critical to the ability of member companies to be competitive, innovative, and affordable for policyholders. In 2012, our Congressional Contact Program continued to thrive as the property/casualty insurance industry’s premier grassroots action program, with 237 representatives from 168 member companies traveling to Washington, D.C., to meet with key congressional lawmakers and staff.

During these visits, CCP participants educated legislators about their companies, their policyholders, and their place in the insurance marketplace. Equally important, these participants were passionate in sharing their concerns on issues important to the property/casualty insurance industry and the future of mutual insurance. Because of these efforts, NAMIC was able to build significant support for a number of our legislative issues, and resulting in one of our top priorities – reform of the National Flood Insurance Program – being passed by Congress and signed into law by the president.

In 37 days of CCP activities, 237 NAMIC members visited more than 300 congressional offices.

Key Contact Program

Grassroots advocacy has always been the most effective form of advocacy. NAMIC’s Key Contact Program relies on members to carry our message to elected officials at the state and federal levels of government.

These Key Contacts serve as our experts, providing lawmakers and government officials with real-life perspectives on the benefits – or consequences – of proposed legislative or regulatory issues to their companies and their policyholders.

Action Alerts/Member Advisories

NAMIC uses digital communications to keep members informed of legislative and regulatory developments that have potential impact on the business of insurance. Action Alerts are used to mobilize members to contact target lawmakers on a key issue while Member Advisories are used to update members on new legislative and regulatory developments.

In 2012, there were 220 such communications sent to nearly 25,000 overall recipients.

	State	Federal	Total
Member Advisories	141	22	163
Action Alerts	52	5	57

Legislative and Regulatory Information Service

Use of NAMIC’s Legislative and Regulatory Information Service increased 28 percent in 2012 over the prior year. Nearly 350 member companies access LARIS during the year to obtain information on more than 175 unique property/casualty categories and subcategories. Available free of charge to all NAMIC member companies and their employees, the customized reports are organized by issue and state to make them user-friendly. A mapping feature tracks bills in a graphic format that can link users directly to the full text of legislation.

Farm Mutual Manager Certification Program Grows

The NAMIC Farm Mutual Director Certification Program formally recognizes the educational accomplishments and dedication to professionalism of farm mutual directors, with certification earned through the participation in a series of director courses specifically designed to enhance board members’ knowledge to provide effective strategic direction for farm mutual insurance organizations.

In 2012, there were 67 farm mutual directors who were certified by the NAMIC program. Courses were offered throughout the year by state associations and NAMIC. The FMDC Program is comprised of three modules covering management, operations and insurance, and finance and accounting. To attain a designation, a director must complete four courses from each of these modules within five years of enrollment. To maintain the designation, a director must then complete at least four hours of coursework every two years.

It is said that things are bigger in Texas, and the NAMIC Annual Convention in 2012 was proof. For four action-oriented days in September more than 1,600 members came together in Grapevine in the spirit of learning and friendship.

NAMIC’s 2011-2012 Chairman James Kennedy officially opened the event, reflecting on his year as chairman and speaking about the observations he had made within the industry as well as within the association.

“I saw first-hand the action-oriented leadership of our NAMIC members and the NAMIC team…. I challenged all of us to revisit our purpose for why we exist. I challenged us to not define ourselves or our companies by what we do, but rather by why we do it,” Mr. Kennedy said in his speech.

The event offered a schedule packed full of speakers, educational sessions, and plenty of opportunities to rekindle old friendships and network with peers. Keynote speakers hitting the stage were Aron Ralston, who saved his life by severing his arm to free himself from entrapment in a Utah canyon; Terry Jones, founder of Travelocity.com and chairman of Kayak.com; and former Republican Gov. Haley Barbour and former Democratic National Committee Chairman Terry McAuliffe, who argued their respective party’s views on the current state of politics.

NAMIC members also witnessed the swearing in of the association’s newest chairman of the board of directors – Jerrold G. Zenke, general manager of Mound Prairie Mutual in Houston, Minn. “I hope to continue to move the association forward and trumpet its importance to companies no matter their size,” Mr. Zenke said in his speech to the membership. “I want to keep the association strong. We have some really great people, and I want to be sure we continue the job we have been doing.”

CHAIRMAN’S AWARD

Wayne White, president of Farmers Union Mutual Insurance Company, Bryant, Ark., was named the association’s 2012 Chairman’s Award winner during NAMIC’s 117th Annual Convention.

Mr. White served NAMIC as its 2005 chairman, then from 2007-2011 he served as the association’s treasurer as well as chairman of the Audit/Finance Committee. He served as a member of the Financial Services Task Force, TRIA Task Force, and State Affairs Committee. Mr. White was also chairman of NAMIC’s Congressional Contact Program Advisory Committee, the Farm Mutual Conference, and the Legislative Steering Committee.

Mr. White’s service to the property/casualty insurance industry continued outside of NAMIC, as he is the past president of the Arkansas Association of Mutual Insurance Companies and past board member of the National Conference of Insurance Guaranty Funds.

NAMIC’s Chairman’s Award was created to recognize leadership, accomplishment, and outstanding service to NAMIC and the property/casualty insurance industry. White is the 49th recipient of the award.

Service Awards

NAMIC honored four individuals with Service Awards during the Annual Meeting of Members at the association’s 117th Annual Convention. Paul Baiocchi, Thomas Dials, Donald Rebele, and Bruce Thomas were recognized for their contributions to the property/casualty insurance industry.

Mr. Baiocchi is the CEO of the American Association of Insurance Services, Wheaton, Ill., a national insurance advisory organization that develops policy forms and rating information used by more than 700 property/casualty carriers throughout the United States. He has served on various industry committees and is a frequent speaker at industry meetings.

Col. Dials is chairman for Armed Forces Insurance Corporation in Leavenworth, Kan. AFI provides property/casualty insurance to military professionals throughout the United States and overseas. A retired army colonel, Col. Dials has served the property/casualty insurance industry in various volunteer capacities, including NAMIC board member, Kansas Association of Property & Casualty Insurance Companies board member and past president, and the 2011 recipient of the state association’s Ad Astra award recognizing his lifetime service to the insurance industry.

Mr. Rebele retired in December 2011 as president and CEO of the Griffith Insurance Education Foundation, Columbus, Ohio. He led the successful merger of the Insurance Education Foundation and the Griffith Foundation, forming the current organization.

Mr. Thomas, a former teacher, began his insurance career in 1980 when he joined Heartland Mutual Insurance Association, Algona, Iowa, as a claims adjuster. Sixteen years later, he was promoted to president and CEO. Mr. Thomas is a former board chairman for NAMIC. He has also served on the NAMIC Farm Conference Committee Board of Directors and the Insurance Association of Iowa Board of Directors. He is the recipient of NAMIC’s Merit Society Award and has received the association’s Professional Farm Mutual Manager designation.

PROFESSIONAL FARM MUTUAL MANAGER OF THE YEAR

NAMIC presented its Professional Farm Mutual Manager of the Year Award to long-time member Wilbur “Will” Maas, president of Farmers Mutual Insurance Association, Hull, Iowa, during the association’s annual convention for his dedication to the farm mutual property/casualty industry.

Mr. Maas is a past president of the Mutual Insurance Association of Iowa and currently serves on its board of directors. He has also contributed his time and expertise to NAMIC in various capacities, including serving on NAMIC’s Pension Committee and participating in NAMIC PAC.

The award recognizes the achievements of a farm mutual manager who dedicates himself/herself to excellence in mutual insurance company management. The recipient is selected based on excellence in marketing, administration, and financial ability as well as involvement in national and state associations in his/her local community.

NAMIC DEBUTS MUTUAL BRAND

Before an audience of 1,300 delegates and official guests, NAMIC President and CEO Chuck Chamness launched the new mutual brand at the 117th Annual Convention in Grapevine, Texas. In remarks delivered at the convention’s opening session, Mr. Chamness said the brand would help mutual insurers distinguish themselves as “not just another commodity, not just another transaction.” The brand’s trademarked tagline – “Shared Purpose. Mutual Values.” – captures the spirit of mutual insurance, where the absence of shareholders means the needs of policyholders can be better served.

A board-appointed task force of members provided oversight of the brand development effort, which was managed by NAMIC Public Affairs. The project began in late 2011 with extensive research of NAMIC member companies as well as national surveys of consumers and independent agents. By early 2012, the association was conducting focus groups to provide additional depth to the survey findings. Michael Walters Advertising of Chicago was chosen through a competitive process to create different messaging and design concepts based on the research. Conceptual prototypes were then tested with consumers and agents to determine their effectiveness. Those deemed to resonate the best formed the basis for the brand’s tone, look, and feel – and will be used as the model for future iterations of the resources.

Use of the brand is restricted to NAMIC mutual member companies that pay an annual licensing fee. Participating companies are able to use turnkey, customizable advertising resources for print, radio, TV, outdoor, direct mail, and Internet for use in their local markets. The first round of newspaper ads feature the headline “We chose mutual insurance because I know we’re in this together” next to images of policyholders. Companies access the resources on a special brand-on-demand website where company and agent information can be inserted before placement with local media.

By the end of 2012, nearly 65 mutuals had signed the brand licensing agreement, were in the process of securing their board’s approval for participation in the program, or were considering the use of brand resources as key components of their future marketing strategies. Find out more >>

MEETING THE BUSINESS NEEDS OF OUR MEMBERS

NAMIC continued to provide valuable products and services to member companies to improve their business operations and their bottom lines. From insurance products to employee benefits to web design to arbitration services and more, we strive to make our total value proposition to members the best among industry trade associations.

INSURANCE SOLUTIONS

NAMIC Insurance Solutions – comprised of NAMIC Insurance Company and NAMIC Insurance Agency – provides critical professional liability products for member companies and their agents.

More than 85 percent of member companies purchase some combination of D&O, ICPL, EPLI, Fiduciary, Fidelity and/or Cyber Liability coverage from NAMIC Insurance Solutions – and more than 2,000 agents of member companies are covered by the E&O program. The agency has been serving members for more than 30 years, and through steady growth and strong retention now serves a book of NAMIC member companies and agents that totals $12.7 million in written premium. In 2012, its net premium growth exceeded half a million dollars.

More than 90 percent of this business is placed with member-owned NAMIC Insurance Company. In the last 10 years, more than $10 million in profit has been returned to NAMICO pool members as surplus has grown from $14 million in 2002 to $22 million in 2012. During this same period, assets grew from $29 million to $47 million. The company is “A” rated (excellent), and in 2012, NAMIC Insurance Company observed its 25th year serving members.

NAMIC WEB SERVICES

More than 170 member companies in the United States and Canada took advantage of NAMIC Web Services’ design and hosting services in 2012. In 13 years, our web services department has grown to provide a variety of web-related offerings that help companies improve their image and incorporate such features as online payment processing and electronic marketing into their operations.

NAMIC ARBITRATION SERVICE

By providing a forum for low-cost resolution of subrogation disputes between property/casualty insurance companies in the United States, NAMIC made it possible in 2012 for 143 signatory member companies to arbitrate between them any disputes involving damage to or by motor vehicles, medical payments where permitted by state law, and third-party contribution claims. Our arbitration service has automatic nationwide jurisdiction and handled close to 1,000 cases in 2012.

SURVEY REPORTS

2012 marked the eighth year that NAMIC has conducted its Directors’ Compensation Survey of compensation practices at property/casualty companies. The survey collected data on board composition, time commitment, fees, expense reimbursement, and other forms of direct or indirect compensation from 154 companies that participated in the survey.

The NAMIC Salary Survey, reporting aggregate compensation data on more than 60 positions from more than 100 U.S. property/casualty insurance companies, was continually updated throughout 2012. Survey data is segmented by company size, type, and geographic region. This survey is available online via annual subscription, offering unlimited access to the data throughout the year.

Our Benefits Benchmarking Survey, a unique joint venture of NAMIC, Milliman Inc., and Gibson Insurance since 2009, is a comprehensive report that covers everything from plan design and contributions to wellness initiatives, cost control strategies, paid time off, and retirement benefits. In 2012, 172 participating companies received an individual custom report that showed how their employee benefit packages compared to those of other insurance companies.

NAMIC BENEFIT SOLUTIONS

NAMIC member companies may also participate in group employee benefit offerings, including dental insurance through MetLife; vision insurance through VSP; and life, disability, accident, and critical care products through Lincoln Financial. The purchasing power of many members participating together in a tax-exempt group trust makes these products more affordable and manageable.

MULTIPLE EMPLOYER PLAN/401(k)

In 2012, after extensive research and negotiation, we entered into a new partnership with Transamerica Financial and introduced a high-feature, low-cost employee 401(k) program for member companies. The start-up costs for the program are very low – making it affordable for any size company (operating the plan as a “single employer” provides cost savings to larger members that may currently be paying plan expenses for a stand-alone retirement program). The lineup of funds, educational support, and website features offered with this new benefit program will appeal to company employees. As a leader in the field of multiple employer plans, and with national representation, Transamerica is able to serve NAMIC members throughout the country.

2012 Financial Summary

 

Board of Directors Jerry G. Zenke, PFMM Chairman General Manager Mound Prairie Mutual Insurance Company Houston, Minn. John J. Bishop, CPCU, CLU Chairman-Elect CEO & Chairman Motorists Mutual Insurance Group Columbus, Ohio Stuart C. Henderson, JD, CPCU Vice Chairman President & CEO Western National Insurance Group Minneapolis, Minn. Christopher P. Taft, CPA, CIC Secretary/Treasurer President & CEO Preferred Mutual Insurance Company New Berlin, N.Y. James J. Kennedy, CPCU, LUTCF Immediate Past Chairman President & CEO Ohio Mutual Insurance Company Bucyrus, Ohio Sandra G. Parrillo, CPCU Past Chairman President & CEO Providence Mutual Fire Insurance Company Providence, R.I. Don H. Adams, CIC President & CEO Bear River Mutual Insurance Company Murray, Utah Brian V. Boyden, CPCU, CLU, ChFC, FLMI Executive Vice President State Farm Mutual Automobile Insurance Company Bloomington, Ill. Jerry J. Canada, CLU CEO United Farm Family Mutual Insurance Company Indianapolis, Ind. Darwin G. Copeman, CPCU President & CEO Jewelers Mutual Insurance Company Neenah, Wis. Paul A. Ehlert, JD President Germania Farm Mutual Insurance Association Brenham, Texas Douglas P. Fincannon, PFMM President Alamance Farmers’ Mutual Insurance Company Graham, N.C. Jonathan C. Grether, MSIM, CPCU, CIC, ARe, CRM COO Pharmacists Mutual Insurance Company Algona, Iowa Steven D. Linkous Property Casualty Conference Section Director President & CEO Harford Mutual Insurance Company Bel Air, Md. Kelly M.Reagan-Robery, PFMM, CIC CEO/Manager Bradford Victor-Adams Mutual Insurance Company Franklin Grove, Ill. Carlos A. Rodrigues, MBA, CMA,nFCIP President & CEO North Waterloo Farmers Mutual Insurance Company Waterloo, Ontario, Canada Steven C. Sliver, CPA President & CEO Mutual Benefit Group Huntingdon, Pa.

Paul G. Stueven, PFMM Manager/Treasurer Fairmont Farmers Mutual Insurance Company Fairmont, Minn. Tricia A. Mickley, CPA, PFMM Farm Conference Section Director Secretary/Treasurer Mount Carroll Mutual Fire Insurance Company Mount Carroll, Ill. James E. Wilds, CPCU, AIM, ARM, SCLA, RPA, CIC, CFE NAMIC PAC Board Representative Senior Vice President Frankenmuth Mutual Insurance Company Frankenmuth, Mich. FARM MUTUAL CONFERENCE BOARD OF DIRECTORS Richard Schumacher, PFMM Chairman President/Treasurer/CEO Century Mutual Insurance Association Hartley, Iowa Justin L. Lear, PFMM Chairman-Elect CEO Farmers Mutual Insurance Company Ellinwood, Kan. Paul G. Stueven, PFMM Vice Chairman Manager/Treasurer Fairmont Farmers Mutual Insurance Company Fairmont, Minn. Douglas P. Fincannon, PFMM Immediate Past Chair President Alamance Farmers’ Mutual Insurance Company Graham, N.C. Connie Costigan, PFMM President CFM Insurance, Inc. Concordia, Mo. Dan DeArment, PFMM President & CEO Friends Cove Mutual Insurance Company Bedford, Pa. Rusty Frisinger, PFMM General Manager Washington County Farmers Mutual Fire Insurance Company Fayetteville, Ark. Amy R. Johnson, PFMM Manager/Treasurer Steele Traill County Mutual Insurance Company Finley, N.D. Scott Krum, PFMM General Manager McMillan Warner Mutual Insurance Company Marshfield, Wis. *Arthur Meadows, PFMM President & CEO Panhandle Farmers Mutual Insurance Company Moundsville, W.Va. Eric P. Schmader, PFMM CFO Farmers Mutual Fire Insurance Company of Marble, PA Marble, Pa. Douglas E. Steele, CIC, PFMM General Manager Farmers Home Insurance Company of Knox County Vincennes, Ind. Brian Taylor, PFMM President & CEO Municipal Mutual Insurance Company Wellsburg, W.Va. Tricia A. Mickley, CPA, PFMM NAMIC Board Representative Secretary/Treasurer Mount Carroll Mutual Fire Insurance Company Mount Carroll, Ill.

PROPERTY CASUALTY CONFERENCE BOARD OF DIRECTORS Stephen H. Miller, CPCU Chairman Vice President & COO PEMCO Mutual Insurance Company Seattle, Wash. Gary Thompson Chairman-Elect President & CEO Columbia Insurance Group Columbia, Mo. Joseph Dietrich Vice Chairman President & CEO Trillium Mutual Insurance Company Listowel, Ontario, Canada Henry R. Gibbel Immediate Past Chair President & COO Lititz Mutual Insurance Company Lititz, Pa. Gordon P. Assad President & CEO Erie & Niagara Insurance Association Williamsville, N.Y. *Jerry Canada CEO United Farm Family Mutual Insurance Company Indianapolis, Ind. R. Douglas Haines President & CEO Buckeye State Mutual Insurance Company Piqua, Ohio *Stuart Henderson President & CEO Western National Mutual Insurance Company Minneapolis, Minn. Robert J. Hovland President Center Mutual Insurance Company Rugby, N.D. Marie M. Jewett President & CEO Co-operative Insurance Companies Middlebury, Vt. *Katja Kunzke President & CEO Wisconsin Lawyers Mutual Insurance Company Madison, Wis. Eric Nelson President & CEO Mutual of Enumclaw Insurance Company Enumclaw, Wash. *Chris Shipe President & CEO Loudoun Mutual Insurance Company Waterford, Va. Kenneth R. Shutts President & CEO Penn National Insurance Harrisburg, Pa. Michael Wenos, CPCU President Madison Mutual Insurance Company Edwardsville, Ill. Robert M. Zak President & CEO Merchants Mutual Insurance Company Buffalo, N.Y. Steven D. Linkous NAMIC Board Representative President & CEO Harford Mutual Insurance Company Bel Air, Md. *Term expired in 2012