People are facing a riskier world than ever before. While they look to insurance companies to help protect against those risks and make them whole when the worst happens, those carriers are feeling the impacts of the same risker world. Many of the most consequential risks are not in Insurers’ control; yet, they are committed to fulfilling their mission of serving their policyholders.
To continue on in this new era of risk, insurers, policymakers, and regulators must work together to make sure insurance products are available to generations to come. This NAMIC issue analysis dives into the current key risks and offers potential solutions.
Extreme Weather
If it seems as if there are more catastrophic events than before, it is because it’s our reality. From 1980 to 2022, the annual average of billion-dollar weather and climate disasters came in at 8.1; the annual average between 2019 and 2023 was 20. Part of this is because there are just more disasters. Another part of it is because people are flocking to disaster-prone areas.
While we can’t control Mother Nature or where people decide to live, some solutions include:
- Taking scientifically based mitigation actions;
- Advancing modern and enforced building codes and encourage federal resilience support; and
- Implementing state programs to bolster resiliency.
Download the issue analysis to read more about each solution.
Economic and Inflationary Pressure
Insurance companies are not immune to the economic environment that is making everything more expensive for the policyholders. Net underwriting losses in 2023 grew to more than $21.1 billion, meaning insurers are paying out more than they are bringing in. Much of this is because the costs of materials and labor to make policyholders whole again are more expensive than ever – and catastrophes and crashes are on the rise.
As with extreme weather, insurers cannot control inflation. NAMIC believes policymakers can help ease the burdens on policyholders by:
- Promoting sound underwriting;
- Embracing consumer choice;
- Removing restrictions on discounts;
- Enhancing the accuracy of records;
- Preserving territory rating systems; and
- Enhancing studies and education for all citizens.
Download the issue analysis to read more about each solution
Legal System Abuse
The times of litigation being a policyholder’s last resort are long gone. It now seems to be a first choice, which is racking up attorney fees and outsized verdicts, and eventually making insurance more expensive for everyone. The confluence of issues includes third-party litigation funding, non-economic damages, one-way attorney fees, and pre- and post-judgment interest among several others.
Ensuring the judicial system is transparent with an emphasis on just and balance outcomes is vital to a healthy insurance marketplace that serve policyholders. Solutions to this issue include:
- Automatic, upfront disclosure of any TPLF agreement and reasonable expense rate caps;
- Capping non-economic damages at a reasonable amount that will compensate a victim for a loss but not provide untenable windfalls; and
- Only allowing attorney-fee shifting for the most egregious intentional conduct of a defendant
Download the issue analysis to read about more solutions.
Regulatory Overreach
Property/casualty insurance regulation has traditionally been left to the states. But as insurance discussions become more mainstream, many legislators and regulators are seeking more involvement in the business. While interest in the issues that impact constituents is understandable, more involvement can grow into overreach when interest moves into a level of control of private business. Regulatory overreach can lead to duplicative work and increased costs that can hinder insurers from accomplishing their core mission of keeping their promises to their policyholders.
The solutions to this key issue are:
- To keep insurance industry regulation at the state level; and
- To ensure that regulatory appetite sticks to solvency rather than getting into the daily business of insurance companies.
Download the paper for a deeper dive into these solutions.
Plowing Ahead in the New Era of Risk
As property/casualty insurance carriers move forward in this new area of risk, they know old ways of managing risk will not find success. Yet, they are keeping the promises they have made to their policyholders at the forefront. Insurers are also looking to policymakers to help limit proposals that undermine a healthy insurance market. It is through partnership that we can protect and serve consumers.
