NAMIC to House Committee: Overregulation Adds to Risks, Not Protection

WASHINGTON (Feb. 6, 2025) – Excessive and flawed regulation can make marketplaces unsustainable and undermine the fundamental principle of consumer protection, the National Association of Mutual Insurance Companies told lawmakers today.

In testimony submitted to the House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust, NAMIC explained how decades of unsound regulation in California kept the marketplace from adapting to extreme weather and evolving technology, increased costs, and left consumers with fewer options and greater risks.

NAMIC pointed out for the hearing titled, “California Fires and the Consequences of Overregulation,” that California voters approved Proposition 103 more than 30 years ago to keep insurance premiums low in the wake of a litigation-fueled coverage crisis. The law made the state’s insurance commissioner an elected position, and barred companies from using climate modelling or other actuarially-proven rating factors in underwriting and from factoring in the costs of reinsurance into their rates. Additionally, the law created an intervenor system in which self-appointed activists could object to proposed rate increases and turn a profit if the regulator agrees.

“NAMIC and its members continue to act as economic first responders in the wake of devastating recent disasters in California. However, the inflexibility of Proposition 103 as climate science and actuarial underwriting have developed has contributed to a deterioration of the market rather than improved it,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC. “While carriers continue to post huge underwriting losses, rate approvals continued to slow down. Insurance companies need to make enough money to pay claims and protect their existing customers. When rates can’t keep up with losses, it becomes difficult or even impossible to offer coverage, leaving consumers with fewer options .”

The testimony also noted the progress California has made in the past year in modernizing its insurance regulations, and encouraged both state and federal regulators to continue working to reduce risk and better protect communities across the Golden State and elsewhere.

“Consumers, policymakers, and insurers share the common goal of a healthy, competitive property insurance market in California,” Grande said. “This depends on protecting people and property by making homes and communities better able to withstand the rising risks they face in a market where insurers can offer products without overwhelming regulatory burdens. To its credit, the California Department of Insurance, working with the governor’s office, has started taking steps to address some of its outdated rules. NAMIC encourages federal policymakers and state officials to work together on commonsense and bipartisan solutions and sound forest management to help protect more Californians from the next wildfire.”

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NAMIC membership reflects many of the country’s largest national insurers as well as regional and local mutual insurance companies on main streets across America. NAMIC members write $383 billion in annual premiums and account for 61 percent of homeowners, 48 percent of the automobile, and 25 percent of the business insurance markets.