The Great Homeowners Insurance Data Call: What It Means for You
State insurance regulators have launched an unprecedented data call through the NAIC, requesting granular information from over 400 insurers across 80% of the U.S. property insurance market. The goal? To uncover the root causes of the growing homeowner insurance crisis and develop data-driven solutions to address affordability and availability challenges.
On March 11, 2024, the Massachusetts Division of Insurance highlighted on its website that state insurance regulators have united to issue a comprehensive data call through the National Association of Insurance Commissioners (NAIC). This coordinated effort aims to collect and analyze data representing over 80% of the U.S. property insurance market by premium volume.
The focus on this data call by the Massachusetts Division of Insurance is not surprising, given that Massachusetts Insurance Commissioner Gary D. Anderson will soon be taking the helm of the NAIC as its CEO, effective May 1. As reported by Agency Checklists, Commissioner Anderson will lead the organization and its data-collection effort as part of his new role. [See Agency Checklists’ article of March 17, 2024, “Massachusetts Insurance Commissioner Gary Anderson Named New NAIC CEO.”]
The NAIC’s decision to launch this wide-ranging data call, officially called “The NAIC’s Property & Casualty Market Intelligence (PCMI) data call,” comes as the homeowners’ insurance market faces mounting challenges from the increasing frequency and severity of natural disasters to rising reinsurance costs and inflationary pressures. These factors have led to concerns about the affordability and availability of coverage in many parts of the country, particularly in areas most vulnerable to climate-related risks.
Purpose and Scope of Data Call
Assist state regulators in assessing homeowner insurance markets and insurer practices
The primary purpose of the NAIC’s data call is to provide state insurance regulators with a more precise and detailed picture of the homeowner insurance market, both within their own states and across the nation. By collecting and analyzing data from a wide range of insurers, regulators aim to gain deeper insights into the underwriting practices and market dynamics shaping the availability and affordability of coverage for consumers.
Provide insights into affordability, availability, coverage gaps, and changes
Through this initiative, regulators seek to identify potential gaps in insurance protection and areas where consumers may be facing particular challenges in obtaining adequate coverage at reasonable prices. The data call will shed light on factors such as premiums, deductibles, coverage limits, and insurer underwriting decisions, allowing regulators to assess how these variables impact policyholders in different regions and risk categories.
Comprehensive data call covers over 80% of U.S. property insurance market
The NAIC data call is remarkable for its breadth and depth, encompassing most of the U.S. property insurance market. By casting such a wide net, regulators aim to construct a comprehensive picture of market conditions nationwide.
Gathering data from 400+ insurers operating locally and nationally
Over 400 property insurers are being asked to submit detailed data in response to the NAIC request. This includes local insurers focused on specific states or regions and large national carriers with a presence across the country. Capturing data from this diverse mix of companies will give regulators a balanced view of how different types of insurers are navigating current market challenges.
Over 70 data points requested at the ZIP code level
The data call is not only broad but also highly granular. Insurers are being asked to provide over 70 different data points drilled down to the ZIP code level. This localized data will allow regulators to construct a high-resolution map of market conditions and pinpoint variations between different areas.
Premiums, policies, claims, losses, limits, deductibles, non-renewals, coverage types
Among the critical data points being collected are premiums, total policies in force, claims filed, losses incurred, coverage limits, deductibles, non-renewal figures, and types of coverage offered. Examining these metrics will shed light on the cost of insurance for consumers, the level of protection being purchased, loss trends in each area, and any shifts in insurers’ willingness to take on risk. Comparing data across ZIP codes and insurers will help regulators identify outliers and spot potential issues.
Importance of data in protecting consumers
According to the NAIC’s President and Connecticut Insurance Commissioner Andrew N. Mais, “The PCMI data call represents the collaborative, nonpartisan work that state insurance regulators have undertaken through the NAIC to address the critical challenge of the affordability and availability of homeowners’ insurance and the financial health of insurance companies.”
This statement underscores the vital role that comprehensive, granular data plays in empowering regulators to protect consumers and oversee the health of insurance markets. By gathering detailed information on the cost and availability of coverage, regulators can identify areas where homeowners may struggle to secure adequate protection at reasonable prices.
Motivating Factors and Context
Rising Frequency and Severity of Natural Disasters
The NAIC’s decision to launch this comprehensive data call comes in response to a confluence of factors putting pressure on the homeowner insurance market. In recent years, the increasing frequency and severity of natural disasters have led to a surge in property damage and insurance claims. According to the National Oceanic and Atmospheric Administration (NOAA), the U.S. experienced 18-billion-dollar weather and climate disasters in 2022 alone, totaling $165 billion in damages.
The strain on Insurers’ Financial Resources
This trend has strained insurers’ financial resources as they struggle to keep pace with rising claims payouts. Insurers have also faced escalating reinsurance costs as their reinsurers reassess their risk exposure in light of the changing climate and catastrophe landscape. These higher reinsurance expenses have, in turn, put upward pressure on the premiums insurers charge to policyholders.
Impact of Sustained Inflation
Compounding these challenges, the insurance industry has also been grappling with the impact of sustained inflation. Supply chain disruptions, labor shortages, and rising material costs have increased the expense of repairing and rebuilding damaged properties. This has escalated insurers’ claim costs and contributed to the need for higher premiums to maintain profitability.
Affordability and Availability Challenges
As a result of these converging pressures, homeowners in many parts of the country have seen their insurance premiums rise significantly, while others have struggled to find affordable coverage or had their policies non-renewed by insurers looking to limit their risk exposure. Even in states where the overall insurance market remains stable, pockets of affordability and availability challenges have emerged, particularly in areas most vulnerable to natural disasters.
Need for Granular, Localized Data
These trends have highlighted the need for regulators to have access to detailed, localized data to effectively monitor market conditions and respond to emerging issues. By collecting ZIP code-level data, the NAIC aims to provide state regulators with the tools to identify and address affordability and availability concerns before they escalate into broader market disruptions.
Assessing Climate Change Impact on Insurance Industry
The data call also reflects a growing recognition among regulators of the need to proactively assess and manage the impact of climate change on the insurance industry. As the physical and financial risks associated with climate change become increasingly apparent, regulators seek to better understand how these risks affect insurers’ underwriting practices, risk management strategies, and overall financial stability.
In this context, the NAIC’s data call represents a significant step toward building a more granular and comprehensive picture of the homeowner insurance market. This will enable regulators to make data-driven decisions and interventions to protect consumers and ensure the industry’s long-term health.
Implementation and Timeline
Development Under NAIC’s Property and Casualty Insurance Committee
The NAIC’s Property & Casualty Market Intelligence (PCMI) data call was developed under the oversight of the organization’s Property and Casualty Insurance (C) Committee, chaired by Arkansas Insurance Commissioner Alan McClain. The committee was tasked with creating a process to collect and analyze data that would help regulators better understand the factors affecting the availability and affordability of homeowners insurance in their respective states.
90-Day Submission Window for Insurers
Insurers subject to the data call will have 90 days from the date of receipt to submit the requested information. The NAIC has stated that it expects to receive data from more than 400 insurance companies, representing a significant majority of the homeowners insurance market nationwide.
Secure Online Portal for Data Submission
To facilitate the data submission process, the NAIC has established a secure online portal where insurers can upload their data. The organization has also provided detailed instructions and templates to ensure consistency and accuracy in the data reporting.
Data Sharing with the Federal Insurance Office
Once the data has been collected, the NAIC plans to share an anonymized subset of the information with the Federal Insurance Office (FIO), part of the U.S. Department of the Treasury. This data-sharing arrangement is intended to minimize the reporting burden on insurers by avoiding duplicate data requests from state and federal regulators.
Timeline for Data Receipt and Analysis
In a statement on March 8, 2024, the Treasury Department announced that it expects to begin receiving data from the NAIC in June 2024, with a final dataset to be provided by late September. The FIO plans to use this data to conduct a nationwide assessment of climate-related financial risks in the insurance sector as part of its mandate under President Biden’s Executive Order on Climate-Related Financial Risk.
Collaboration to Understand Market Impacts and Respond to Risks
“Americans across the country are seeing the affordability and availability of their insurance policies decline as a result of increasingly severe climate-related disasters,” said Secretary of the Treasury Janet L. Yellen. “I’m pleased that the Federal Insurance Office, state insurance regulators, and the NAIC are collaborating on this important data collection. Analysis of homeowners insurance data is essential to understanding the market impacts on consumers and helping policymakers across the country respond appropriately to the risks.”
The FIO’s analysis of the NAIC data is expected to provide valuable insights into the impact of climate change on the insurance industry and inform policy decisions at both the state and federal levels. By collaborating with the NAIC on this data collection effort, the FIO aims to leverage the expertise and resources of state regulators while avoiding duplication of efforts and minimizing the compliance burden on insurers.
Hurdles and Limitations
Potential Limited Participation from Key States
While the NAIC’s data call has been widely praised as a significant step toward understanding the homeowner insurance market’s challenges, a New York Times article published on March 21, 2024, titled “National Plan to Look into Homeowners Insurers Hits a Hurdle” identified some potential problems.” The article claimed that some states, particularly those most vulnerable to natural disasters, might only provide limited data or opt out of the program entirely.
Possible Political Resistance in Certain States
The Times article suggested that states like Louisiana, Texas, and Florida, which have been hit hard by hurricanes and other climate-related events in recent years, have been mentioned as potential holdouts. These states are known for their Republican-led governments, which have sometimes been resistant to policies addressing climate change. If these states do not fully participate in the data call, it could leave significant gaps in the nationwide picture that regulators are trying to build.
Regulators Emphasize Value Despite Potential Gaps
However, insurance regulators have emphasized that even if participation is not universal, the data call will still provide unprecedented insight into the homeowner insurance market. “The Property & Casualty Market Intelligence Data Call will provide a more holistic view of the property insurance market within our individual states and across the nation,” said Arkansas Insurance Commissioner Alan McClain, who chairs the NAIC’s Property & Casualty Insurance Committee. “Many individual states already collect ZIP-code-level data on property markets, but not all states gather granular data on how this translates to availability and affordability of coverage for consumers in some areas. The data call intends to address this insight gap.”
Potential Impacts and Next Steps
Unprecedented Insights into the Homeowner Insurance Market
If successful, the NAIC’s data call will provide regulators with unparalleled detail on the state of the homeowner insurance market nationwide. By collecting data at the ZIP code level, regulators will be able to identify areas where affordability and availability challenges are most acute and develop targeted strategies to address them.
Informing Mitigation and Resilience Efforts
One potential outcome of the data analysis could be identifying areas where investment in mitigation and resilience efforts could help reduce insurance costs and increase availability. Regulators and policymakers can prioritize resources for projects like infrastructure hardening, building code updates, and community-level disaster planning by pinpointing the regions most vulnerable to climate-related risks.
Ensuring Access to Affordable Coverage
Ultimately, the data call aims to ensure homeowners nationwide have access to affordable insurance coverage that adequately protects their properties. By using the insights gleaned from the data to inform regulatory decisions and policy interventions, state insurance regulators hope to promote a stable, competitive, and consumer-friendly insurance market.
Long-Term Regulatory Strategy
The NAIC’s data call is part of a broader, long-term strategy to monitor and respond to the insurance industry’s evolving challenges. As climate change continues to reshape the risk landscape, regulators want to remain vigilant and adaptable, using data-driven insights to guide their decision-making.
Balancing Industry Health and Consumer Protection
Moving forward, regulators must strike a balance between ensuring insurance companies’ financial stability and protecting policyholders’ interests. By collecting and analyzing granular market data, the NAIC is laying the groundwork for a more proactive, evidence-based insurance regulation approach to help regulators navigate this complex terrain.
As the data call progresses and the first wave of insights emerge, regulators and industry stakeholders will be watching closely to see how this initiative reshapes the conversation around climate risk, insurance affordability, and consumer protection in the years to come.
