The Big “I" advocated for efforts to address the current property insurance crisis and its impact on consumers at a U.S. House of Representatives hearing.
This week, the U.S. House Financial Services Subcommittee on Housing and Insurance held a hearing, “The Factors Influencing the High Cost of Insurance for Consumers."
The hearing focused on insurance markets, particularly recent developments that have led to higher costs and lower availability for property and casualty insurance. Topics discussed included the overall increased cost of insurance, current challenges in individual state markets, and the impact of federal and international regulatory developments. The hearing clearly illustrated that the insurance industry is a vital component to the U.S. economy and provides financial protections for millions of American consumers and businesses.
One of the main themes during the hearing was the importance of the nearly 150-year-old state-based insurance regulatory system. Since the enactment of the McCarran-Ferguson Act, insurance carriers have been subject to comprehensive state regulation for both the products they sell and the financial solvency of their operations. In both instances, insurers are subject to intense scrutiny regarding their pricing, risk modeling, and use of historical and analytical information. Also noted, were the misguided policies by regulators attempting to add new requirements that are increasingly incompatible with how insurance carriers operate in a solvent manner.
A variety of issues were discussed that are contributing to the rising cost of insurance. Among those were difficult state regulatory environments, increased cost and amount of litigation, and significantly higher reinsurance rates contributing to the higher cost of premiums faced by customers. The impact of inflation on the insurance market was also a topic, which has resulted in insurance carriers experiencing higher claims payouts and operating costs. According to a recent McKinsey estimate, in 2021, rising prices contributed to an approximately $30 billion increase in loss costs over and above historical loss trends.
The Big “I" supports several of the legislative proposals discussed in the hearing, including a resolution introduced by Rep. Warren Davidson (R-Ohio), Chairman of the Housing and Insurance Subcommittee. The resolution affirms Congress' support for the McCarran-Ferguson Act and its state-based regulatory system for the business of insurance as the law of the United States. Additional proposals discussed include restricting the size, scope and authority of the Federal Insurance Office (FIO), housed within the Department of the Treasury.
The Big “I" submitted written testimony in support of the committee's efforts to address the current property insurance crisis, and its impact on consumers. The testimony emphasized several key areas that are important to independent insurance agents and posed some potential solutions to alleviate pressure on the market. Those included fostering productive state regulatory environments, cracking down on lawsuit abuse, increasing risk mitigation efforts, considering a narrow federal reinsurance backstop and increasing consumer transparency.
As Congress continues to discuss the insurance industry, the Big “I" will continue to advocate for independent insurance agents and provide updates through the News & Views e-newsletter.
Raaed Haddad is Big “I" director of federal government affairs.