Post on 25-Dec-2015
August 3, 2015Mid-Atlantic Mutual Advantage Convention
Farmington, Pa.
NAMIC — It’s (Still) a Team Sport!
Steve LinkousNAMIC Vice Chairman
The more it changes, the more it stays the same
Combined Effort
This has always been the right road to success
The more it changes, the more it stays the same
We call it MUTUALITY
Mutual insurance as we know it began in London in 1696 with the formation of “Contributors for Insuring Houses, Chambers or Rooms from Loss by Fire by Amicable Contributionship.”
The History of Mutual Insurance
1696London
“THE MUTUAL WAS FORMED …… to the end that all persons who are desirous to insure from loss by fire may be accommodated upon more equal and advantageous terms, wherein all are equal sharers in profit and loss in proportion to their interests.”
The United States
Setting the Stage for Farm Mutuals
Homestead Act of 1862 (homesteading) caused hundreds of thousands to “go West”
No laws allowed formation of farm mutuals until mid-1800s (all stock)
Stock companies did not underwrite; high rates; poor service to farmers
Farm income dropped due to RR prices and market;Congress did not act – only 7% of legislators were farmers
President Andrew Jackson investigated; result was Grange
Grange was politically active; became legislators; changed laws to allow farm mutuals
Most companies were formed based on country of origin German, Swedish, Bohemian, Norwegian, and Danish
The United States
Farm Mutuals
Early farm mutuals started in eastern United States Mutual Assurance Society of Virginia (1794) Bucks County Contributionship of Pennsylvania (1807)
Iowa farm mutuals started forming in 1849 American Mutual Insurance Association of Scott County Many more farm mutuals formed in Iowa starting in 1857 By 1882 there were 84 farm mutual in Iowa
The United States
Factory Mutuals
England forbade manufacturing in the colonies
Commercial activity: agricultural related | textile mills in New EnglandOnly stock insurers | no underwriting | single rate
Zachariah Allen (Providence, R.I.)
In 1835, Allen got a law passed to allow the creation of the first factory mutual, Manufacturers Mutual Insurance Company. The first risk was his mill insured at a 25% rate reduction. Individual risk underwriting was used and inspections were required. A 51% dividend was paid in the first year.
Canadian Mutuals
Centered in England
High rates
Unregulated forms until 1877
Only office located in Quebecrequiring travel to Quebec to receive payment
Often contained clauses that nearly prohibited coverage for loss
Farmers banded together to create farm mutuals to “give insurance coverage on a nonprofit basis to unprotected rural property.”
Home District Company of Toronto (1837) – first Canadian Mutual
Gore Mutual – one of the six original mutuals formed, and the only one still in operation
Insurance Associations
The first Canadian insurance association was formed in 1882 as the Purely Mutual Underwriter’s Association of Ontario. It became the Ontario Mutual Insurance Association in 1974.
1879 1880 1882 1883 1892 1895
Ohio Illinois Iowa New York New Jersey Missouri
State associations formed out of the need for joint representation on common cause
Following the 1895 annual meeting of the Iowa Association of Mutual Insurance Companies, several members lingered behind to discuss the idea of forming a national organization that would be similar in structure to the state association.
The chief advocate for a national association was W.A. Rutledge, a 34-year-old who just two years earlier founded the Farmers Mutual Hail Insurance Association of Iowa.
The following year, 20 to 30 mutual insurance men from aroundthe country met in Chicago where they formally established what was then called the National Association of Cooperative Mutual Insurance Companies.
NAMIC History
The Press as an Agent in Building Up Mutual Insurance
NAMIC History
Agenda Topics from 1896
Business Methods and Bookkeeping for Farm Mutuals
On Laws & the Necessary Legislation to Promote the Best Interests of Mutual Insurance
Upon the Need of Cooperation and the Industrial Education
God Bless the Rich Corporations, the Poor People Can Steal
Nebraska
NAMIC History
First states to be represented within NAMIC
Oregon
Indiana
Iowa
18 county/town mutuals and three state-wide insurance company members.
NAMIC Today
MembershipNumbers
58 Canadian members
900 member groups
50 trade members
826 mutual members
664 farm mutual members
8 NAMIC Chairmen1921 – Justin Peters 1969 – Ezra Harris1928 – Henry R. Gibbel 1974 – Otto C. Lee
` 1942 – J.H.R. Timanus 1982 – Henry H. Gibbel1950 – Guy C. Eaby 1996 – James I. Taylor
NAMIC Today
Pennsylvaniaand
NAMIC
66 domestic member companies
103 NAMIC companies write in Pennsylvania accounting for
35.5% of all property/casualty premium in the state
6 NAMIC ConventionsPhiladelphia – 1911, 1936, 1952, 1969, 2008Reading - 1916
Why Choose NAMIC
Clout
Culture
Courage
Educational Clout: Conferences – Management Conference; Farm Mutual Forum;and CEO RoundtablesProfessional accreditations and certifications – Professional
FarmMutual Manager; Farm Mutual Director Certification; and T.E.A.M. Certification
Why Choose NAMIC
Political Clout: Strong, talented political voice at the federal and state levels
6 advocates in Washington, D.C.8 state affairs directors positioned throughout the country
Clout
Service Clout:NAMIC Arbitration, NAMIC Web Services, Statutory
Reporting/Fast Track (NISS), Benefits Benchmarking, Compensation Surveys, Director Registry
Why Choose NAMIC
Based on self help, formed for mutual benefit
Culture
One company – one vote, rotating board of directors
Progressive – in structure, membership, and products and services
allowed woman as members in 1902
D-rive Telematics
Mutual Career Center
NAMIC is culturally one of us!
Why Choose NAMIC
Courage
Willing to take issues head on: willing to fight!
NAIC – climate survey, governance disclosureHUD – preserve our right to underwrite
SOX – exemptions for insurance/small insurersFIO – preserve state regulation
Why Choose NAMIC
Products and Services
Insurance Employee Benefits
NAMIC.org Information Centers
corporate governance
finance and accounting
investment management
human resources
directors and officers liabilityfiduciary liability
employment practices liabilityfidelity bond
insurance agents E&O
cyber liability
group and voluntary lifegroup disability insurance
dental and vision insurance
defined benefit plan (pension)MEP participant directed 401(k)
Benchmarking
Congressional Contact Program
2015 is the 30th year for the program
Educational Events
NAMIC Political Action Committee
Committee Participation
Professional Certifications
Mutual Brand Program
Pennsylvania ParticipationBoards & Committees
Accounting & Financial Issues
Committee
Advisory Council
Audit/Finance/Risk Committee
Claims Committee
Compliance Committee
Convention Planning Committee
Federal Affairs Committee
FMC Board of Directors
FMC Strategy Committee
Membership Committee
NAMIC Board of Directors
NAMICO Audit Committee
NAMICO Board of Directors
NAMICO Investment Committee
Nominating Committee
PAC Board of Trustees
State Affairs Committee
Tax Steering Committee
TRIA Working Group
Pennsylvania Participation
Professional Farm Mutual Manager 7 certified or in process
Farm Mutual Director Certification 2 certified or in process
Pennsylvania Participation
Congressional Contact Program
23 participants have attended CCP
Additional Participation
Merit Society – 10 members
NAMICO – 31 participants
NAMIC Web Services – 9
participants
Mutual Brand – 7 participants
NAMIC Business Model
Core functions supported by
member company dues
PublicPolicy
Public Affairs
Federal and
Political Affairs
State and
Regulatory Affairs
Core Services
Value-added options available to member companies but not supported by dues
Business Resources
and Services
Annual Convention
Educationand
Networking
Insurance Solutions
NAMIC Business ModelValue-Added
State Legislative Agenda
Priorities
Rate Modernization (based on NCOIL model, NSCL principles)
NAIC Solvency Modernization Initiative
Underwriting Freedom (Insurance Scoring, CLUE, Predictive Modeling)
Civil Justice Reform
Natural Disasters & Coastal Issues
Federal Legislative & Regulatory Priority Issues
Disparate Impact
Building Codes
PARTS Act
Insurance Regulation
Tax Reform
The Hot Issues:
HUD Disparate Impact Litigation
Small Insurance Company Tax
PARTS Act
Insurance Regulation
HUD Rule Disparate Impact
Department of Housing and Urban Development
November 2011, HUD issued Notice of Proposed Rulemaking defining discrimination
Would use “disparate impact” – statistical disparities for protected
classes(race, religion, gender, disability, etc.)
Would apply to “the provision and pricing of homeowner's insurance”
Could threaten use of any underwriting factor
Finalized the rule in February 2013 to be effective March 2013
Disparate ImpactFighting HUD's Discriminatory Effects Standard
NAMIC challenged the HUD rule from every available angle
• January 2012 comments / direct contact with HUD
• Congressional questioning of HUD (hearings and letters)
• House adopts language prohibiting use of funds for the rule in HUD
approps
• Outside group input opposing DI for insurers (NCOIL resolution)
• Joint trades efforts (multiple letters to HUD, OIRA meeting)
• Organized and led joint industry legal working group challenge
Disparate ImpactFighting HUD's Discriminatory Effects Standard
Disparate Impact NAMIC and AIA Legal Challenge
NAMIC and AIA decided to launch industry legal challenge to the HUD rule in the District Court of the District of Columbia on June 26, 2013.
The District Court agreed with us and vacated the HUD rule in November 2014
HUD appealed the decision to the D.C. Court of Appeals which stayed the case pending a different case before the US Supreme Court on the same legal issue; i.e. Whether the Fair Housing Act authorized disparate impact actions.
Disparate Impact U.S. Supreme Court
• In decision that surprised even HUD, the Supreme Court ruled in June 2015 that the
Fair Housing Act did allow disparate impact actions.
• The Court’s ruling, however, included key limitation and conditions for disparate
impact actions.
Disparate Impact NAMIC and AIA – Continuing the Legal Challenge
NAMIC and AIA will amend our complaint and continue the legal challenge to the HUD rule in the District Court of the District of Columbia
We have strong member support to seek a District Court order requiring HUD to include the Supreme Court’s key limitation and conditions in the HUD rule.
Applying these limitations and conditions will allow only cases where company actions directly cause discrimination through barriers that are “artificial,
arbitrary and unnecessary.
Small Insurance Company Tax
1986 – property/casualty companies with net written annual premiums less than $1.2 million can elect to be taxed on net investment income.
NAMIC is working to adjust this election level to reflect the last 29 years of inflation.
When indexed to inflation, the premium threshold would be $2.2 million.
Small Insurance Company Tax
Feb. 11, 2015 – The Senate Finance Committee voted unanimously to pass legislation in favor of raising the threshold.
April 14, 2015 – The legislation was introduced in the House of Representatives.
Helps nearly 600 companies continue to offer coverage to consumers in niche rural markets
PARTS ActWithout the Promoting Automotive Repair Trade and Sales Act, auto manufacturers could eliminate the aftermarket part industry by abusing design patents.
NAMIC and other industry players joined together as the Quality Parts Coalition to advocate for the PARTS Act.The PARTS Act was reintroduced in the House and Senate in February 2015.
NAMIC and the QPC anticipate a congressional hearing in September with further consideration of the bill to follow.
Insurance Regulation
International Insurance Regulation
The International Association of Insurance Supervisors is developing new global insurance capital standards for internationally active insurance groups.
The Fed, the Federal Insurance Office, and state regulators are negotiating.Congress has weighed with three hearings, during which NAMIC testified, and two bills H.R. 2141 – led by Rep. Duffy – and S. 1086 – led by Sens. Heller and Tester.
IAIS recently decided to delay ultimate implementation of the new standard.
Thank You
Steve LinkousNAMIC Vice Chairman
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