Property market data reporting refusals hamper refusers' insurability

Since the National Association of Insurance Commissioners (NAIC), the association of U.S. state insurance regulators, issued its call for property market data from insurers on March 8, some states have said they may not participate.

Charlie Sidoti, executive director of InnSure.

These states, including Louisiana, Florida and Texas, could be acting to the “detriment of their own communities,” said Charlie Sidoti, executive director of InnSure, a non-profit innovation hub that develops climate-related risk solutions for the insurance industry.

For some of the objectors, burdens on insurers in their states and data privacy issues are at issue, according to Sidoti, but the data that would be collected will help address big insurance challenges, namely “maintaining insurability for communities,” he said.

When announcing the data call, NAIC officials said it is meant to address the impact of climate change on insurance, and concerns about availability and affordability. Failing to collect the data could hamper innovation in insurance, as well, according to Sidoti.

“Innovation isn’t necessarily happening as fast for local solutions to local problems,” he said. “The lack of data will be more impactful for the local communities where it wasn’t all collected.”

NAIC’s data call will help the organization get a more accurate understanding of the “protection gap,” which refers to 50% of all catastrophe losses being uninsured nationally in the U.S., Sidoti said. State by state data would show where the gap is higher or lower. Community leaders need to know about insurance coverage to support their decisions on land use, building codes, infrastructure and related issues, he added. 

These decisions affect a community’s resilience to climate change, Sidoti said, adding that most of these leaders don’t have data to understand the protection gaps. Being able to grasp the real protection gap can justify creation of insurance products to fill those gaps, such as parametric insurance and micro insurance, he added.

Creating insurance products requires research and development, which is already underfunded, according to Sidoti. The National Science Foundation’s measure of “R&D intensity” is the percentage of revenues spent on R&D. The financial services industry has one of the lowest R&D intensity scores at about 1% of revenues, with insurance being even less than banks, Sidoti said. In other information and technology intensive industries, R&D intensity averages 5%. Failing to collect data will compound the underfunding of R&D in insurance, he added.

A few states not collecting data is a problem, but if that becomes as many as half of all U.S. states, the impact for insuring climate change losses could be global, Sidoti said.