Commentary: The Senate shouldn’t have to investigate insurance companies

In recent months, a laundry list of property and casualty insurers decided to stop offering policies in California, Louisiana and Florida. Their departures have left consumers in the lurch, with a growing number forced to rely on government-backed policies to protect them from catastrophic damage from fires, hurricanes, floods and other climate-fueled natural disasters.

Policyholders in other markets nationwide should not mistake these announcements for inconsequential decisions made in far-off locations. Climate and environmental threats are only growing, and it will only be a matter of time before insurers decide that operating in drought-prone areas like Arizona, tornado alleys in Texas or low-lying coastal regions like New England isn’t worth the extreme risk.

It's disturbing that insurance regulators have done little to tackle the threats posed by these climate risks and the potential consequences for policyholders when insurers can no longer protect them in the event of property damage or destruction. This is in large part because the National Association of Insurance Commissioners - an organization that is designed to equip state-level insurance regulators across the country with research, best practices and policy recommendations - has failed to focus its considerable resources and policy expertise on climate change and related risks.

In the absence of meaningful action by insurance commissioners and the organizations that exist to support them, Congress is now stepping in to ask tough questions of insurers about which markets they could be leaving next. This effort is led by Sen. Sheldon Whitehouse, D-RI, who is conducting a Senate Budget Committee investigation into more than 40 insurance companies.

Whitehouse’s investigation is timely for Rhode Island policyholders, especially with organizations such as NAIC failing to focus on the threat climate change poses to consumers. That negligence is so apparent that Rhode Island Insurance Commissioner Beth Dwyer told National Public Radio that every part of the country will be hit at some point by the coverage crisis that is already taking place in other states. Whitehouse drew comparisons to the 2008 housing crash, since lenders require homeowners’ insurance to underwrite mortgages. A sudden, rapid withdrawal of insurers from markets would have a grave effect on the housing sector and would likely have vast, downstream economic consequences.

As a member of the committee that oversees insurance regulation in the Arizona statehouse, I know how critical these policies are for consumers and I understand the significant role that the NAIC can potentially play in protecting them. I believe the NAIC should focus on equipping regulators with research and data-driven recommendations that can help them tackle pressing issues, foster collaboration and benefit from resources that are not always available within a state-level regulatory apparatus. In recent years, however, NAIC staff has steered regulators’ focus into politically charged issues, pursuing personal agendas without accountability. Both regulators and consumers would benefit greatly if regulators reminded NAIC staff who is in charge, and the NAIC re-focused its mission on being a resource for insurance commissioners instead of trying to step into their shoes.

The threat of climate change is only growing. Policymakers must address the disruptive forces on consumers and coverage as insurers likely prepare to leave additional markets soon. I applaud Sen. Whitehouse’s leadership in investigating those plans, but the fact that Congress is leading this effort rather than insurance regulators and the organization that exists to support them is troubling. It’s time for a little sunshine on the inner workings of the NAIC.

Hopefully, Sen. Whitehouse’s investigation is the motivation the NAIC needs to sharpen its focus on behalf of its members and the consumers who are counting on them.

State Rep. Cesar Aguilar is a Democrat representing Arizona’s 26^th legislative district.  He serves on the commerce committee, which oversees many insurance-related issues in the state. Contact him at [email protected].

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