NAMIC Warns Lawmakers to Focus on Growing Risk to Ease Rising Insurance Costs

As Congress examines increasing challenges in the property insurance marketplace, the National Association of Mutual Insurance Companies warned lawmakers to look beyond obvious weather events and focus on the root problems driving cost increases in certain areas.

“Insurance is a mechanism for spreading risk, and it is not insurance that’s changed,” said Jimi Grande, senior vice president of federal and political affairs for NAMIC. “Instead, what we’re seeing is the risk and cost of what’s being insured going up dramatically. Between a changing climate, shifting population, reinsurance rate hikes, and historic inflation, we’re entering a new era of risk, and Congress shouldn’t ignore any of these variables.”

Ahead of a Nov. 2 House Financial Services subcommittee hearing titled “The Factors Influencing the High Cost of Insurance for Consumers,” Grande noted that more Americans have been moving into areas with high risk for hurricanes, wildfires, and other natural disasters in recent years, which, combined with the changing climate, has dramatically increased the risk in these areas. In testimony submitted for the hearing, NAMIC pointed out that the U.S. has experienced a record 24 confirmed weather/climate disaster events with losses exceeding $1 billion each as of Oct. 10, according to the National Centers for Environmental Information. Economic conditions, including lingering high inflation, supply chain issues, legal system abuse, and regulatory challenges have further compounded the problem.

“People are moving en masse to riskier regions of the country, driving up the costs of those properties, as severe weather continues to wreak havoc,” Grande said. “After major storms, we see higher costs for the materials needed to repair and rebuild those properties and the workers who rebuild them. When you add in an aggressive trial bar and elected officials who don’t want to approve rates reflecting increased risk, that’s how we end up with an affordability and availability problem.”

Some are seeking help from Congress in the form of a new federal program to solve this issue, either as a “backstop” to federally insure against extreme disasters or a federally backed reinsurance mechanism, but Grande emphasized that such measures mask the real problem and would likely cause more harm than good.

“People are looking for an insurance solution to something that isn’t actually an insurance problem,” Grande said. “Taxpayers across the country should not be on the hook for disaster claims for Americans living in high-risk areas. Worse yet, by using the federal government to suppress rates and disguise risk, it will make it easier for even more people to move into high-risk areas and add to the problem.”

Insurance lags economic conditions. Companies renew policies annually and the costs of repairs and rebuilding materials and labor change far more swiftly, meaning the costs of a claim can be far higher than would have been expected when the policy was sold and price for coverage set. Grande urged lawmakers to focus on the economic challenges that created the affordability and availability problem.

“Mutual insurers, those owned by the very policyholders they protect, have been around since before the American Revolution,” he said. “Through wars, pandemics, recessions, and depressions, they’ve continued to protect their policyholders and help them recover, and they will continue to do so in this new era of risk. But insurers can’t fix high inflation and can’t stop abuses of our legal system. Congress needs to look past the surface issues of higher costs and focus on what’s driving those increases.”

In its testimony, NAMIC also outlines several factors leading to the increasing costliness of auto ownership and solutions that could be advanced on Capitol Hill, in addition to the association’s opposition to the Federal Insurance Office duplicating the work of functional state insurance regulators.

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The National Association of Mutual Insurance Companies consists of more than 1,500 member companies, including seven of the top 10 property/casualty insurers in the United States. The association supports local and regional mutual insurance companies on main streets across America as well as many of the country’s largest national insurers. NAMIC member companies write $391 billion in annual premiums and represent 68 percent of homeowners, 56 percent of automobile, and 31 percent of the business insurance markets.