The Factors Influencing the High Cost of Insurance for Consumers (EventID=116528)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Thursday, November 2, 2023, at 2:00 p.m. (ET) Housing and Insurance Subcommittee Chairman Congressman Davidson and Ranking Member Congressman Cleaver will host a hearing entitled, “The Factors Influencing the High Cost of Insurance for Consumers." ___________________________________ Witnesses for this one-panel hearing will be: • Mr. Robert Gordon, Senior Vice President, American Property and Casualty Insurance Association (APCIA) • Mr. Frank Nutter, President, Reinsurance Association of America (RAA) • Ms. Grace Arnold, Commissioner, Minnesota Department of Commerce, on behalf of the National Association of Insurance Commissioners (NAIC) • Mr. Joseph Petrelli, President and Co-Founder, Demotech, Inc. • Mr. Baird Webel, Specialist in Financial Economics, Congressional Research Service (CRS) • Ms. Sharon Lewis, Executive Director, Connecticut Coalition for Environmental Justice ___________________________________ This hearing will focus on the status of our domestic insurance markets, particularly recent developments that have led to higher costs and lower availability for property and casualty insurance. Topics to be covered will include the overall high cost of insurance, current challenges in individual state markets, and the impact of federal and international regulatory developments. The Committee will explore these dynamics and their impact on consumers. Summary The U.S. domestic insurance industry is a vital component of our economy that provides financial protections for millions of American consumers and businesses. According to the Insurance Information Institute, the U.S. insurance industry generated $1.4 trillion in net premiums written and employed nearly 3 million people in 2021. Property/casualty (P/C) lines of coverage such as homeowners, auto, and commercial insurance generated over half of those premiums, with auto accounting for the largest amount of direct premiums written. However, in recent years many consumers have experienced a sharp increase in the cost of insurance products. Some consumers have also experienced a decrease in the availability of certain lines of coverage. The rising costs and reduced access to insurance represents a significant challenge for consumers and insurance providers alike. This so-called “hardening” of insurance markets, while typically cyclical, has led to some concerns that current market conditions might be prolonged or even reflect a fundamental shift in the factors that affect the cost of providing insurance to consumers. In response, certain jurisdictions have sought to address higher costs through strict price controls or new government mandates, only to see availability go down - thus exacerbating the negative impact on consumers. While insurance is, and should remain, a state regulated product, it is important that regulators encourage greater private sector insurance competition, deployment, and innovation to maintain well-functioning markets. State-Based Insurance Regulation Model For nearly 150 years, the states have regulated the business of insurance. Congress has periodically reviewed the effectiveness of state-based insurance regulation, and together with the states have worked to ensure greater regulatory uniformity within this system. In 1945, Congress passed the McCarran-Ferguson Act (15 U.S.C. 1011 et seq.), which confirmed the states’ regulatory authority over insurance except where a federal law expressly provides otherwise. Since enactment of the McCarran-Ferguson Act, insurance companies 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. Insurance is, and should be, a datadriven product that reflects the real-world risks and costs of providing access to financial protection against a peril in a marketplace. While our state-based insurance model has long been successful, it is not immune from misguided policy choices. In addition to its prudential rules, in some places, regulators are attempting to add new requirements that are increasingly incompatible with how insurance companies operate in a solvent manner. For example, some jurisdictions are restricting the use of actual loss data or predictive modeling in setting premiums for certain types of perils. Instead of making insurance more consumer-accessible, concerns have been raised that these mandates will only further distort... ___________________________________ Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=410859