Recent Bills Threaten State Insurance Regulation

Recent Congressional activity has included the consideration of bills that threaten the effective state insurance regulatory system.

First, the American Data Privacy and Protection Act (ADPPA) (H.R. 8152) passed out of the House Energy and Commerce committee earlier this week. The ADPPA would create a national standard for data privacy and, in doing so, preempt most state-passed insurance data privacy laws, to the detriment of insurance consumers around the country. The regulation of insurance appropriately occurs at the state level, and legislators in more than half the states have already passed data notification and privacy laws that are, arguably, better suited to meet the needs of their constituents. Moreover, insurance-related consumer data is already protected by an extensive network of existing federal privacy laws and regulations, the most notable of which is the Gramm-Leach-Bliley Act.

PIA strongly supports the state insurance regulatory system, which has successfully protected consumers for over 150 years. Because insurance is properly regulated by the states, PIA supports the creation of an exemption for the insurance industry from the ADPPA because the federal government lacks the authority to regulate the business of insurance. As the full House contemplates the future of the ADPPA, we will continue to advocate against this intrusion of federal regulation into the business of insurance.

A second issue recently capturing the attention of lawmakers on Capitol Hill is the annual appropriations process. Most congressional committees include reports to their appropriations bills, and, in those reports, committees attempt to direct the actions of the federal agencies affected by the appropriations. Recently, report language included with the House Financial Services and General Government Fiscal Year 2023 (FY23) appropriations bill contained several directives to the Federal Insurance Office (FIO). While report language is not necessarily binding, it is used to explain the intent of Congress for the use of funds in appropriations bills and can influence the actions of federal agencies.

Specifically, the committee report expresses its approval of the FIO’s recent investigation of climate-related insurance risk and noted that its forthcoming report is expected to include a study of the effect of wildfire risk on the insurance sector and how to ensure the continued affordability and availability of home, business, and commercial property insurance against wildfire losses. The committee report directs the FIO to gather data on property damage exclusions in homeowners’ and renters’ insurance policies covering both property damage and liability across the industry. The report requests that the FIO investigate the types of property damage that are excluded from coverage, whether insurance companies offer riders to cover such exclusions, and whether and at what rates consumers purchase these riders. Finally, the committee directs the FIO to examine the impact on the auto insurance market of non-driving related factors, such as credit history, homeownership status, census tract, marital status, professional occupation, and educational attainment, on the affordability of auto insurance premiums for traditionally underserved communities.

While the FY 23 appropriations process is far from finalized, this report language is being circulated on both the House and the Senate side. PIA strongly opposes the ever-expanding domestic functions of the FIO and supports legislation to fully repeal the office. These expansive directives in the House Financial Services appropriations report demonstrate, yet again, that the FIO should be repealed. As long as a federal office focused on domestic insurance activities continues to exist, policymakers will continue to find ways to enlarge its responsibilities, further usurping, each time, the existing state insurance regulatory system.

The appropriations process is ongoing, and PIA is working with our congressional allies to oppose this language from being included in a final appropriations bill.