Washington, D.C. — At a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee, U.S. Senator Elizabeth Warren (D-Mass.) highlighted the recent withdrawals of major insurance companies from states that have a high and growing  risk of climate disasters, the impact of this insurance crisis on homeowners, and the need for increased transparency from insurance companies.

 

Mr. Douglas Heller, Director of Insurance, Consumer Federation of America, agreed with Senator Warren that the data collection proposed by the Federal Insurance Office (FIO) would help the federal government better understand climate-related financial risk and assess the potential for major disruptions of private insurance coverage across the country.

 

 

Senator Elizabeth Warren: Thank you, Mr. Chairman.

 

Insurance is there for natural disasters like floods, fires, or storms. But climate change means that natural disasters are hitting harder and more frequently than ever before, and that is upending the insurance market and pushing insurers out of entire cities or even entire states.  

 

Without insurance, millions of families will be at greater risk for climate crises. And, as whole communities lose access to insurance, the impact is going to be felt all the way through our economy. 

 

Let’s talk about what some of the tools are to make some changes here. More than two years ago, President Biden issued an Executive Order telling the Federal Insurance Office (FIO), whose job it is to monitor the insurance industry, to examine the impact of climate change on private insurance in the U.S.

 

So FIO proposed to collect new data from insurers that would help the federal government better understand climate-related financial risk and to assess the potential for major disruptions of private insurance coverage across the country. 

 

Mr. Heller, would the data that FIO is proposing to collect help identify the threats to consumers and the economy from climate change? Would these data be useful?

 

Mr. Douglas Heller, Director of Insurance, Consumer Federation of America: Yes, thank you Senator Warren. Of course they would. We really need to understand with granular data where the industry is more exposed, where coverage offerings are shrinking and consumers become more exposed, and how risk transfer has changed over time – think growing deductibles, these lower rebuilding costs. The pressure to keep information from getting to the public and to public policymakers not just through FIO, but for years that we’ve seen in this needing data but not getting the data – it is one of the reasons the market crisis we are talking about today feels so sudden because we have not been collecting this data that would have given us the tools to prepare.

 

Senator Warren: Okay, so I can tell I'm talking to another data nerd. We want the numbers because they are helpful in helping us understand and assess risk. If the information is important and we need the information, the president has asked for the information, why don't we have it? This has been more than two years now. It turns out that the insurers and the regulators, state regulators, are pushing back on this. They say that collecting this information is unnecessary – I’m just going to quote them here – “ill-advised,” and burdensome. 

 

They’ve claimed that this data call would threaten so-called “existing efforts” that insurers have made to mitigate the risks of climate change on policyholders. They’re even saying that the FIO and the Biden administration is “strong-arming” insurers and regulators to adopt climate-risk mitigating strategies, and that this could lead to higher compliance costs on insurers and higher premiums on Americans. 

 

Now, it seems to me here that the insurers and regulators are going out of their way to hide information about premiums, claims, profits, and coverage. Without that information, consumers have no way of knowing if a hiked premium is justified or if it’s just padding an insurance company’s profits.

 

Mr. Heller, you explained why we need the data. So why are the insurance companies resisting so hard on providing these data? What are they trying to hide?

 

Mr. Heller: Well, the insurance companies don't want us as the public, but also public policymakers, to really understand where things stand because it allows them to do what we've seen in California, which is trying to bully regulators and policymakers by saying, well, we're going to leave if you don't do exactly what we want. If you don't deregulate this market, we're just going to walk away from you. The reason FIO made this request for data was because there was a black hole where all the data needed to be where we could actually figure this out for ourselves and understand, is it, as some are suggesting, is it just a problem of regulatory burden? Or is it insurance companies that did not do the preparation that we've been calling for 20 years? Is it the insurance companies that have been shifting around their books of business to protect their profits and expose more consumers? And that data call would reveal it. And that's why the insurance companies have lobbied so hard to keep it out of our hands.

 

Senator Warren: Well, I very much appreciate the notion and I've seen nods here. I take it, Ms. Norris, that you would agree with this that we need the data and the data are essential, both for making good policy and just evaluating what the insurance companies are up to?

 

Ms. Michelle Norris, Executive Vice President of External Affairs and Strategic Partnerships, National Church Residences: Absolutely. We know that the insurance companies themselves have – big data is out there. They're using big data to evaluate risk and decide what the premiums are. We should all be able to see the transparency.

 

Senator Warren: Well, I'm all for transparency in this. I appreciate the work that you're doing here. This is just a reminder that the insurance companies have kind of been playing every part of this game. They've underwritten financing fossil fuels, and then they profit from selling protection from the impacts of those fossil fuels on climate. And now when climate risks are rising, they're trying to hang American families out to dry here and demanding either higher premiums or to get out of the market altogether. So there's a lot that's going on here that poses real risk to our economy. We need these data and we need them now. Thank you. Thank you, Mr. Chairman.