NAMIC: Treasury Homeowners Insurance Report Offers Incomplete Analyses

Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies, offered the following comments in response to the Federal Insurance Office’s analysis of the U.S. homeowners insurance market between 2018-2022.

“The latest FIO analysis is a flawed and failed attempt at adding something to the conversation. This report is a frustration to anyone who understands the basic insurance principle of matching rate to risk. The analysis notes the multiple factors contributing to the increased cost of providing coverage – including inflation, population shifts, and litigation – but focuses almost exclusively on climate issues, to the detriment of understanding what is really impacting consumers and insurance markets that serve them.

“FIO’s continued insistence in ‘complementing’ the efforts that states are already undertaking only perpetuates a completely inaccurate notion that climate issues are not being considered by the thousands of state insurance regulators across the country with decades of experience in market challenges. This report continues to conflate weather events during this four-year period predominately with climate, ignoring the fact that some areas of the country are more susceptible to hurricanes and storms.

“Those largely ignored other factors are enormously impactful on insurance costs. As the report notes, we’re moving into harm’s way – nearly a million new homes were built in high-risk areas between 2018-2022. That not only increases the likelihood of losses, but also the related costs of losses – including building materials and labor – and the surge in demand in the aftermath of large-scale natural disasters. Over that same time, legal system abuse soared 40% higher, injecting unnecessary costs onto those same consumers.”

“Rather than pursue ‘whole of government’ climate policy plans, the federal government can and should instead work to reduce risk, bending the loss curve down for consumers. By helping to fund and promote mitigation efforts at the individual, community, and state level, we can better prevent losses, keep more Americans safe, and reduce the costs of insurance. Already in the wake of the Los Angeles wildfires, we’ve seen legislation proposed that would help prevent future fire losses through improved forest management and support for mitigation projects and modern building codes.”