The U.S. Senate Committee on Banking, Housing, and Urban Affairs recently held a hearing titled “Perspectives on Challenges in the Property Insurance Market and the Impact on Consumers.”

Witnesses included Douglas Heller, Director of Insurance of the Consumer Federation of America (CFA); Michelle Norris, EVP of External Affairs and Strategic Partnerships for National Church Residences; and Jerry Theodorou, Policy Director, Finance, Insurance and Trade for the R Street Institute.

Sen. Sherrod Brown, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, welcomed panelists to the event and opened by discussing the importance of homeownership.

“Few financial decisions are more important than buying a home. Home buyers are making an investment in themselves, their families, and their communities. Home buying is an act of optimism,” said Sen. Brown. “It’s also stressful. Families buying a new home have so much to think about—making sure they can cover their down payment, navigating the mortgage and closing process, moving in, getting their kids set up in a new school. Buying homeowners insurance has always been a part of that process, and gives families certainty and peace of mind.”

Heller was the first witness to deliver testimony. As Director of Insurance for the CFA, Heller is a nationally-recognized insurance expert. During two decades of work on public policy and regulatory matters related to property-casualty insurance, he has authored op-eds, articles, and reports on auto insurance pricing in the U.S., overseen regulatory challenges to insurance company rates and practices, provided expertise in insurance-related litigation, and, for nine years, served as the Executive Director of the national consumer advocacy organization, Consumer Watchdog. His work has saved policyholders hundreds of millions of dollars on insurance premiums and helped curb unfair auto insurance pricing practices. In addition to conducting research for and providing expertise to consumer rights organizations, Heller is a member of U.S. Department of Treasury’s Federal Advisory Committee on Insurance, an appointee of California’s Insurance Commissioner, serving as a board member of the California Automobile Assigned Risk Plan (CAARP), which oversees that state’s innovative Low-Cost Auto Insurance Program for low-income drivers, and he serves on the Executive Board of the Coalition Against Insurance Fraud.

“As a starting point of any discussion on this issue, we must acknowledge that insurance companies reducing their exposure to property losses in order to protect their profitability does not address, and only worsens, the threats posed by climate change to American homeowners, renters, and other property owners,” said Heller in his testimony. “For decades, insurance companies have taken consumers’ premiums and provided critical protections, giving people the comfort in knowing that their long-term investment in a home and community was reasonable, at least from an insurability perspective. So, it makes no sense to homeowners, and should raise deep skepticism among regulators and policymakers, that insurers are suddenly leaving or dramatically increasing premiums so as to make quality coverage effectively unavailable for far many Americans who long relied upon and trusted those insurers, which accepted the risk and collected the premiums.”

Norris followed Heller’s presentation and discussed climbing insurance rates nationwide and reductions in coverage. As EVP of External Affairs and Strategic Initiative for National Church Residences, Norris guides the organization’s mission on expansion and impact, public policy, community affairs, communications, and public relations. She joined National Church Residences in 1993 as Director of Corporate Financial Services, and later, became COO of Housing Management, overseeing the management operations of the organization’s affordable housing portfolio. She was later promoted to Chief Development Officer, overseeing the team that specializes in development of all new National Church Residences products, including HUD 202 and Low-Income Housing Tax Credit new construction, acquisitions, and substantial rehabs. She served as President of National Church Residences Investment Corp. from 2014-2018.

She keyed in on instability in the marketplace due to climate change.

“The instability of the property insurance market is due to several factors outlined further in this testimony, including the unprecedented frequency of natural disasters,” noted Heller in her prepared comments. “Prior to 2017, the property insurance market was relatively stable in that large catastrophic events were relatively infrequent; thus, allowing insurers to fund and reserve capital as well as plan for the payment of claims for such catastrophes. Further, the market was relatively competitive and new capital continued to enter the broader market, which allowed for brokers to structure insurance programs in innovative ways that offered broad coverage terms with high insurance limits and low deductibles. However, starting around 2017, the property insurance market increasingly began to destabilize as more frequent natural catastrophes occurred, in conjunction with the inflationary impact of higher materials and labor costs as was the occurrence of more recent supply chain issues linked to the COVID-19 pandemic. More recently, insured losses arising from natural disasters were calculated at $121 billion and almost $115 billion in 2021 and 2022 respectively. For National Church Residences, the highest insured losses in our 60-year history all occurred in 2021 and 2022.”

Following Heller, Theodorou discussed competition in the property insurance space. As Director of the Finance, Insurance and Trade Policy Program for R Street, Theodorou works to develop and advance effective free market public policy solutions to complex issues where federal and state governments have intervened. Since he joined R Street, Theodorou has testified on insurance issues three times to the U.S. Senate Budget Committee and the full Banking, Housing, and Urban Affairs Committee.

“California’s burdensome insurance price controls have led to contraction in competition and have catalyzed the exodus of insurers operating in the state. California’s P&C insurance market is the nation’s largest, with the state’s $104.9 billion in direct premium written representing 12% of the country’s $876.2 billion,” explained Theodorou in his testimony. “In the past year, several insurance companies have announced that they will not write new California homeowners’ insurance. Others have taken more drastic steps and are not renewing existing policies upon expiration. The exodus of insurers from California has been driven by policies that have prevented insurers from operating their business in the state soundly. Most of the handicapping measures originated with the passage of Proposition 103 in 1988. Proposition 103 was introduced by consumer advocate Harvey Rosenfield. Mr. Rosenfield employed some flamboyant tactics to campaign for the passage of Proposition 103, including a 1987 publicity stunt where he ‘attempted to deliver a truckload of cow manure’ to the Los Angeles headquarters of State Farm Insurance.”

Click here to view a video recap of the Senate Banking Committee Hearing, “Perspectives on Challenges in the Property Insurance Market and the Impact on Consumers.”