Regulation of the town mutuals and small domestic mutuals operating in Wisconsin
Local mutual insurance companies were among the earliest forms of cooperative endeavors in Wisconsin and the U. S. Both statewide and local town mutual insurance companies have played a significant role in providing insurance protection for over a century. These companies operate on cooperative and mutual principles on a local basis and are true models of self-help, self-protection, and neighbor insuring neighbor.
Despite constant escalating costs and changing attitudes about insurance by the consumer, the local mutuals continue to set an example of cost containment in order to provide insurance protection that the consumer can afford.
Recognizing the need for policyholder service, promotion of safety and the ability and willingness to provide insurance protection in areas that are not serviced by others, these mutuals must be allowed to operate within an atmosphere of minimum governmental regulation if they are to continue to provide stability to markets that need them.
The Wisconsin Association of Mutual Insurance Companies, therefore, urges that state and federal regulations impacting both local town mutuals and small state wide mutuals to recognize their inherent features and contributions to the market place and would therefore keep regulations to a minimum and that they would consider input from the representatives of the local and statewide mutuals.
Federal regulation of mutual insurance companies
Currently the states have sole regulatory authority for the regulation of the business of insurance. Individual insurance departments in each state are better able to handle the different characteristics that insurance companies are confronted with in terms of risks, property values, building techniques, climate conditions and storm scenarios that are unique to a state.
The insurance industry has an exemption under the McCarran-Ferguson Act which is reaffirmed by Section 104 of Title 1 of the Gramm-Leach-Bliley Financial Services Modernization Act. The exemption permits companies to use standardized forms when issuing policies to consumers and also allows for the collection of loss and premium data among the industry which ultimately promotes competition and lower rates for the consumer.
The Association will oppose any proposal to establish either a federal or a bifurcated system of regulation of insurance, and will oppose any rule or regulation that would otherwise pre-empt state regulation of insurance. The Association also urges that Federal representatives will continue to support the insurance industry’s exemption under the McCarran-Ferguson Act.
National Flood Insurance Program
Congress created the National Flood Insurance Program (NFIP) in 1968 to address the need for flood insurance protection. Because of the unique nature of the flood peril, the private marketplace found that it was unfeasible to make flood protection available. This was due to concentration of risk and adverse selection of the risk whereby only those that were in a flood plain would buy the insurance however when a flood would occur everyone would have a claim.
While flood insurance, which is provided by the NFIP, fills the need for those that wish to purchase it, the peril of wind is already adequately provided by the market place. Despite the availability in the private market, there have been attempts to add wind coverage to the NFIP.
The Association supports a long term extension of the NFIP including charging actuarially sound rates, eliminate subsidies which are paid for all taxpayers, update and improve the accuracy of flood plain maps and discourage rebuilding properties that repetitively have losses. The association also opposes adding wind coverage to the NFIP.
State regulation of insurance
Regulatory burdens can fall disproportionately on smaller insurers because of the cost to comply with regulations is more expensive as a percentage of written premium for small insurers. Additionally small insurers typically do not have on staff experts that can interpret and comply with complex regulations.
Incorporating a Wisconsin Department of Insurance into the Department of Financial Institutions would negatively affect mutual insurers because of the loss of the independence that such an agency requires and would also infuse politics into regulation of mutual insurers which are already responsible to their customer/members.
The Association strongly opposes any merger of these two agencies and supports maintaining the Office of the Commissioner of Insurance as a separate agency to preserve the unique and separate regulation important to this industry and subsequently to all citizens.
Stronger, safer building codes for Americans and their families can save lives, reduce property loss, and reduce public disaster aid. The Building Code Coalition (BCC); has proposed that congress create a financial incentive for states that adopt and enforce statewide building codes. These incentives would increase the amount of federal monies available to a state under current disaster relief legislation if that state follows and enforces building code standards.
The Association supports Congressional legislation, such as the Building Code Safe Incentive Act (110th and 111th Congress), that would encourage states to adopt and enforce strong building codes and would increase federal disaster aid to states that adopt and enforce stronger codes.