The National Association of Insurance Commissioners (NAIC) brought regulators from across the US together in Chicago from Aug. 12–15 for its summer national meeting. The following is a roundup of the meeting highlights where a range of industry and economic challenges were discussed, including long-term care, flood insurance as well as the affordability and availability of homeowners cover.
Long-term care woes
The NAIC's long-term care actuarial working group discussed solutions for an issue that impacts a certain block of older long-term care policyholders.
A number of state insurance commissioners asked that the NAIC help provide relief for long-term care policyholders around age 85 with a policy duration of 25 years who are burdened with additional large rate increases despite having a history of high cumulative rate increases.
Fred Andersen, co-chair of the NAIC working group and chief life actuary at the Minnesota Department of Commerce, pitched a proposal to fix the problem with the NAIC's multistate actuarial review process. Andersen's proposal involves "specified adjustments to the cost-sharing formula" that would help limit increases imposed on the 85/25 group.
Industry representatives who spoke during the meeting were skeptical about parts of the proposal that would raise the cost burden on insurers in certain instances. Actuaries from other state insurance departments also expressed disagreement with certain aspects of the proposal.
West Virginia Insurance Commissioner Allan McVey urged the working group to move forward on a fix for the issue. "Let's get something done," McVey said.
The working group exposed the proposal for changes to the multistate actuarial process for a 45-day public comment period ending Sept. 27. The working group's leaders said they intend to vote on the changes in November at its fall national meeting in Denver.
Flood insurance inadequacy
During the NAIC's Climate and Resiliency Task Force meeting, Iowa Insurance Commissioner Doug Ommen had some strong words about the inadequacy of the US flood insurance system.
"The federal flood insurance system really doesn't fit the needs of a lot of Iowans," Ommen said, noting that in the Plains region where his home state is, it can easily flood anywhere it rains.
Ommen's remarks came after an insurtech company called reThought Flood gave a presentation on its technology-based flood insurance product and how consumer education, mitigation and risk modeling are all part of the solution to increase the take-up of flood insurance and narrow gaps in protection. The insurtech's stated goal on its website is to "create a sustainable private US flood insurance market and close the flood protection gap."
Ommen went on to say that the private market is "going to play such an important part" when it comes to giving consumers access to information and making sure they "act on it."
In the US, flood insurance coverage is primarily offered by the National Flood Insurance Program (NFIP) and is delivered to the public through partner insurance carriers. The NFIP constantly needs congressional reauthorization and is currently operating under an extension set to expire Sept. 30.
Homeowners insurance
The rising lack of affordability and availability of insurance coverage was a hot topic at the NAIC summer national meeting though concrete solutions to the problem were hard to come by.
Regulators did spend time listening to presentations on the topic from various research and trade groups. At a joint meeting of the NAIC catastrophe insurance working group and the NAIC/Federal Emergency Management Agency (FEMA) advisory group, the American Property Casualty Insurance Association (APCIA) gave a talk about mitigation discounts.
The group said various factors are creating the perfect storm for increased property loss, including a rise in exposure values and replacement costs as well as the effects of a changing climate on different atmospheric perils. Pressure on insurance availability is caused by a demand for property insurance and higher costs while at the same time, capital is decreasing.
The APCIA stressed that insurance companies are leaders of an effort to assist consumers in mitigating risk and focusing on resilience. Financial incentives for mitigating that risk can include grants, low-interest loans, reduction of fees, tax credits and other insurance incentives.
The NAIC's Center for Insurance Policy and Research (CIPR) also hosted an event to talk about measuring and assessing homeowner insurance affordability. NAIC CIPR Director Jeff Czajkowski noted in his opening remarks that there is nowhere in state regulations that say homeowners rates should be "affordable."
"The essence of insurance regulation is they need to be adequate to prevent insolvency, not excessive to prevent abuse of market power and they should not be unfairly discriminatory," Czajkowski said. "So affordability is not actually in the insurance rate regulation mandate."
Lars Powell, who serves as director of the Center for Risk and Insurance Research at the University of Alabama, spoke on the CIPR panel and said the role of the insurance regulator should include transparency, meeting minimum standards and going after insurance fraud.
Powell said for regulators wanting to bring down the cost of insurance the only "lever you have to pull is the losses" which can be outside of a commissioner's control. He also said suppressing prices is only a short-term solution to a long-term problem that often goes awry.
"Note that insurance cannot solve non-insurance problems," Powell said. "Maybe you need to encourage other areas of government to do their jobs ... educate citizens about fire safety and to adopt modern building codes."