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February 25
10:51 2019

Public Policy Analysis & Opinion

By Kevin P. Hennosy


Reading between the lines: politics and intrigue

More predictable than even the coming of snow to Vermont in December, the winter brings a flurry of technical reports from the National Association of Insurance Commissioners (NAIC). The annual publication of two reports seems timed to receive as little attention as possible: the 2015-2016 Auto Insurance Database report and the Report on Profitability by Line by State in 2017.

The NAIC auto insurance data report carries a boatload of political mojo—both positive and negative.

NAIC buries the release of these reports beneath holiday office parties, frantic shopping, and family vacations. This timing ensures that the information in the reports receives the least possible attention from any human being on the face of the Earth.

Why would NAIC produce reports that it does not want anyone to read? At one time the association sold the reports for a profit. Today both reports are available free of charge through NAIC’s website.


On December 17, 2018, NAIC published the 2015-2016 Auto Insurance Database report. The release of the annual report is highly anticipated in NAIC circles. The report carries a boatload of political mojo—both positive and negative.

The commissioners who reign in “low-premium” states revel in the report’s findings. For example, imagine the following news release:

State of Confusion Insurance Commissioner Chet DeMoss announced today that, according to a national report, and thanks to his personal actions, automobile owners pay less for automobile insurance than anyone else in the United States.

“My friends—and you are my friends—I am pleased as punch that through my enlightened and benevolent approach to regulation, drivers in my jurisdiction pay less for auto insurance than anywhere else in the country,” said Commissioner DeMoss.

Deputy Insurance Commissioner, and DeMoss for Commissioner campaign treasurer, Winston Wolfe praised the commissioner’s efforts and reminded the public that they might want to visit the campaign website and share some of their savings with either the commissioner’s reelection campaign or his legal defense fund. “Neither yard signs nor skilled criminal lawyers come cheap, and we are coming up on an election year,” observed Deputy Commissioner Wolfe.

Journalists interested in obtaining a copy of the report are dissuaded from following through with that idea; however, well-behaved reporters may receive an explanatory interview from department’s Public Information Officer, Dr. Altfact Ziegler II.

Ah, but once again we digress into mean-spirited stereotypes of corrupt politicians. Where is the fun in that? Where is the sport in that?

Of course, the report also lists the jurisdictions where insured drivers pay the highest premiums. Being listed as a high-premium state can send elected commissioners, state regulators, and governors through the roof.

In those jurisdictions you will not see a news release trumpeting the publication of the report. Some will issue statements in response to media inquiries. Those statements tend to be dismissive of the report, the NAIC, and even the use of numbers in general.

Sure, the 2015-2016 Auto Insurance Database report runs more than 250 pages, but if a state ends up being listed as a high-premium jurisdiction, some local reporter will write a story about it. That story will not contain any of the numerous repetitive caveats that the NAIC inserts in the body of the report, such as: CAUTION: Because of these differences, direct comparisons between state results should be treated with a high degree of caution.

Then when the next election cycle rolls around, some opposition researcher will find the story. Before long, radio, television, social media and other outlets will carry presentations on how voting against the incumbent is a strike against the injustice of expensive auto insurance.

The report is available free on the NAIC website. Key findings include:

  • As of 2016, the Consumer Price Index (CPI) for auto insurance had increased by 22.57% since 2012.
  • The national combined average premium per insured vehicle increased by 5.24% to $1,062 from 2015 to 2016 and 14.91% since 2012.
  • For 2012-2016, national average written premiums per insured vehicle for collision increased by 18.94%, comprehensive increased by 15.02%, and liability increased by 12.57%.

The 2015-2016 Auto Insurance Database report is useful because of the breadth of the database that the NAIC constructs every year. NAIC begins with basic national data sets from the U.S. Census and the Federal Highway Safety Administration. Then it draws data from numerous statistical entities: American Association of Insurance Services (AAIS); Insurance Services Office (ISO); National Independent Statistical Service (NISS); Independent Statistical Service, Inc. (ISS); Massachusetts Commonwealth Automobile Reinsurers (M-CAR); and Maryland Auto Insurance Fund (MAIF). In addition, NAIC draws data from the California and Texas insurance departments.


On December 12, 2018, NAIC released the Report on Profitability by Line by State in 2017, which estimates and allocates carrier profitability in property/casualty insurance.

The profitability report can be dangerous for NAIC as an institution because it can anger insurance company executives. Insurance commissioners serve only as “members” of NAIC, whereas company executives exert the powers of “ownership and control” over the Delaware-chartered corporation.

The fact that the profitability report documents the investment income realized by an insurer can make insurance executives nervous. What if some state official who gets through the “interested party” vetting process wants to regulate the business of insurance consistently with the McCarran-Ferguson Act? That rogue addition to the regulatory ranks might point out that insurer profitability does not arise only from premium dollars brought in minus claims dollars paid out.

Because the business of insurance is to be conducted in the public interest, perhaps insurers’ investment income should be considered in rate regulation just as the carriers argue that commissions paid to producers should be recouped through premium increases. A regulator might order a rate reduction consistent with a fair rate of return that includes investment income.

Of course, such a regulatory approach would constrict the carriers’ access to money to shovel into their investment portfolio—which strikes at the foundation of the business model of financial services institutions. Insurance, banking, and securities firms all offer products to entice people to send money that the wealthy institutions can invest—and profit from that investment.

In the early 1990s, insurance carriers and their trade groups fought hard against NAIC when it considered including investment income in its profitability computations. At that time then-Congressman John Dingell was hammering NAIC to use its nebulous role in insurance regulation to improve the system, so it amended the profitability report. It presents two sets of results: one with investment income and one without.

  • The profitability report findings summarized below are based on nationwide direct numbers:
  • Total premium earned for property and casualty lines of business increased by more than $25 billion from 2016 to 2017. The following lines of business had a decrease in premiums earned: fire, medical professional liability, workers compensation, and financial guaranty.
  • Total personal auto losses were down [in 2017] for the first time since 2013, but they were still above the 10-year average.
  • Total commercial auto losses continued an upward trend, rising for the fourth consecutive year after a slight dip in 2013.
  • Homeowners losses increased by more than 40% from 2016 to 2017, well above the 10-year average. Losses in allied lines more than doubled from 2016 to 2017. Both lines of business are impacted by catastrophic events. Many of the states that experienced natural disasters in late 2016 and throughout 2017 have noticeably high losses in homeowners and/or allied lines.

The unknown

Who knows what else the NAIC circulated late in 2018? The Old Gray Mare of American Insurance Regulation might have broadcast any number of other reports or statements through some regulators-only network on the Internet or in some niche of the Dark Web. One or more secret working groups may be keeping an eye on some failing company or multi-state fraud scheme. The latter happens more often than one might think.

These activities remain in the realm of The Unknown; as a writer finds out from time to time, however, some people will share their special and secret knowledge of that realm. The Unknown is intriguing, so therein lies great danger—unless the writer seeks documentation from independent sources.

From time to time, reprobate tale-tellers will call a writer to spin fascinating yarns, and the truth is not in them. Such revelations usually are intended to make someone else the messenger for inaccurate information. To enhance their credibility, these mischief-makers might even point to their once exalted positions as insurance commissioners.

Yes, someone knows exactly who I am thinking of. They also know I have a reputation for holding a grudge.

The author

Kevin P. Hennosy is an insurance writer who specializes in the history and politics of insurance regulation. He began his insurance career in the regulatory compliance office of Nationwide Insurance Cos. and then served as public affairs manager for the National Association of Insurance Commissioners (NAIC). Since leaving the NAIC staff, he has written extensively on insurance regulation and testified before the NAIC as a consumer advocate.

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