Report on Protection of Insurance Consumers 

and Access to Insurance

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

NOVEMBER 2016
Report on Protection of Insurance Consumers and Access to Insurance

Federal Insurance Office, U.S. Department of the Treasury

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Table of Contents

I. Introduction........................................................................................................................ 1

II. Insurance and Technology ................................................................................................ 4

A. Big Data and the Insurance Industry’s Use of Consumer Data........................................ 4

1. Big Data in Insurance ................................................................................................... 4

2. Data Brokers and Other Third Parties .......................................................................... 5

3. Consumer Implications of Big Data ............................................................................. 6

4. Consumer Resources and the Path Forward................................................................. 6

B. Cyber Risk and Protecting Consumers’ Personally Identifiable Information.................. 7

1. Cyber Risk and the Insurance Industry ........................................................................ 7

2. Federal Efforts Involving Cybersecurity for Insurers................................................... 8

3. State Efforts Involving Cybersecurity for Insurers....................................................... 9

4. Consumer Resources and the Path Forward............................................................... 10

III. Environmental Hazards and Insurance......................................................................... 11

A. Human-Induced Earthquakes and Insurance.................................................................. 11

1. Overview of Earthquake Insurance ............................................................................ 11

2. Insurance Coverage for Human-Induced Earthquakes............................................... 12

3. Consumer Resources and the Path Forward............................................................... 13

B. Climate Resiliency ......................................................................................................... 14

1. Climate Change and the Price of Insurance................................................................ 14

2. Hazard Mitigation and Insurance ............................................................................... 15

3. Consumer Resources and the Path Forward............................................................... 16

IV. Fairness in Insurance Practices...................................................................................... 17

A. Risk Classifications: Marital Status ............................................................................... 17

1. Questioning the Use of Marital Status in Personal Lines Insurance Pricing.............. 17

2. Consumer Resources and the Path Forward............................................................... 18

B. Risk Classifications: Sex and Gender ............................................................................ 18

1. Anti-Discrimination Efforts........................................................................................ 19

Box 1: Sex vs. Gender .......................................................................................................... 19

2. The Path Forward ....................................................................................................... 20

C. Transparency in Homeowners Insurance Coverage....................................................... 21

1. Homeowners Insurance and the Policy Form............................................................. 21

2. Increasing Use of Non-Standardized Policies............................................................ 21
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3. The Path Forward ....................................................................................................... 22

D. Mandatory Arbitration Clauses...................................................................................... 23

1. Mandatory Arbitration for Consumer Insurance Contracts........................................ 23

2. Consumer Resources and the Path Forward............................................................... 25

E. The Costs of Filing an Insurance Claim......................................................................... 25

1. The Path Forward ....................................................................................................... 26

V. Fairness in State Insurance Standards .......................................................................... 27

A. State Insurance Guaranty Associations.......................................................................... 27

1. Understanding State Insurance Guaranty Associations.............................................. 27

2. The Need for National Uniformity ............................................................................. 27

3. Guaranty Funds: Public Awareness............................................................................ 28

4. Consumer Resources and the Path Forward............................................................... 29

B. Workers’ Compensation Insurance ................................................................................ 29

1. Current Trends and Taxpayer Impact......................................................................... 31

2. Cost Shift to Taxpayers.............................................................................................. 31

3. State Opt-Out Efforts.................................................................................................. 32

4. Unequal Worker Protection Across the Country........................................................ 33

5. Employer Misconduct................................................................................................. 34

6. The Path Forward ....................................................................................................... 35

VI. Retirement and Related Insurance Issues..................................................................... 36

A. Retirement Security: Life Insurance and Annuities....................................................... 36

1. Understanding the Need for Retirement Security....................................................... 36

2. Role of Insurance Products in Retirement Security.................................................... 37

3. Consumer Resources.................................................................................................. 38

B. Secondary Market for Life Insurance and Annuity Products......................................... 38

1. Structured Settlement Buyouts................................................................................... 38

2. The Path Forward ....................................................................................................... 40

C. Long-Term Care Insurance ............................................................................................ 41

1. State Regulation of Long-Term Care Insurance......................................................... 41

2. Failure in the Long-Term Care Insurance Market...................................................... 42

3. Impact on Consumers and Taxpayers......................................................................... 43

4. The Path Forward ....................................................................................................... 43

D. Unclaimed Death Benefits ............................................................................................. 44

1. State Efforts................................................................................................................ 44
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2. Access to the Death Master File................................................................................. 45

3. Consumer Resources.................................................................................................. 46

VII. Conclusion ........................................................................................................................ 47

Appendix I

Contact Information for Insurance Regulators.......................................................................... 48

Appendix II

Summary of Federal Resources Referenced in Report .............................................................. 51
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Glossary

A-PLUS .......... Automobile-Property Loss Underwriting Service

CFPB .......... Consumer Financial Protection Bureau

CLUE .......... Comprehensive Loss Underwriting Exchange

DMF .......... Death Master File

Dodd-Frank Act .......... Dodd-Frank Wall Street Reform and Consumer 

Protection Act of 2010

FDIC .......... Federal Deposit Insurance Corporation

FIO .......... Federal Insurance Office

FTC .......... Federal Trade Commission

IAIS .......... International Association of Insurance Supervisors

IDSML .......... NAIC Insurance Data Security Model Law

IPCC .......... Intergovernmental Panel on Climate Change

IRA .......... Individual Retirement Account

IRS .......... U.S. Internal Revenue Service

LTC .......... Long-Term Care

LTCI .......... Long-Term Care Insurance

Model Life Guaranty 

Act

.......... NAIC Life and Health Insurance Guaranty 

Association Model Act

NAIC .......... National Association of Insurance Commissioners

NCOIL .......... National Conference of Insurance Legislators

NFIP .......... National Flood Insurance Program

NIST Cybersecurity 

Framework

.......... National Institute of Standards and Technology

Framework for Improving Critical Infrastructure 

Cybersecurity

NYDFS .......... New York Department of Financial Services

OSHA .......... Occupational Safety and Health Administration

PHI .......... Protected Health Information

PII .......... Personally Identifiable Information

Report .......... This Report on Protection of Insurance Consumers 

and Access to Insurance

Secretary .......... Secretary of the Treasury

SSA .......... Social Security Administration

SSDI .......... Social Security Disability Insurance

Treasury .......... U.S. Department of the Treasury

USGS .......... United States Geological Survey
Report on Protection of Insurance Consumers and Access to Insurance

Federal Insurance Office, U.S. Department of the Treasury

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I. Introduction

Protection of insurance consumers and access to insurance are critical to the functioning of a 

stable and fair insurance marketplace. Recognizing the significance of consumer protection, the 

Federal Insurance Office (FIO) has highlighted numerous consumer protection issues in its prior 

reports.1 Such significant issues, though, demand more focused attention. Accordingly, rather 

than include all consumer protection issues in its Annual Report on the Insurance Industry, FIO 

has prepared this separate first annual Report on Protection of Consumers and Access to 

Insurance (Report).

2

This Report recognizes that certain themes commonly recur in discussions of insurance and 

consumer protection – themes such as technology, the environment, fairness, and the role of 

insurance as an investment tool – and addresses a range of topics within those broad themes. 

The Report is designed to illuminate a wide variety of significant consumer protection issues 

relating to insurance. However, due to the breadth of insurance products, benefits, laws, and 

regulations, the Report, by necessity, does not address every significant consumer-related 

insurance issue.

State and federal laws address a far broader range of insurance consumer protection topics than 

can be encompassed in a single Report. In this regard, the business of insurance in the United 

States is primarily regulated at the state level.3 Insurance laws are passed by state legislatures, 

signed into law by governors, and implemented and enforced by state insurance regulators. In 

addition to prudential regulation (frequently referred to as “solvency” regulation) – which 

consists of matters related to an insurer’s financial condition – state insurance laws govern the 

conduct of insurers in a state marketplace, and establish standards for consumer protection. 

Consumer protection issues addressed in state law include, but are not limited to, the pricing of 

premiums, product approval, advertising, minimum standards governing the terms of insurance 

policies, the licensing of insurance producers,4 privacy protection, and claims payment, among 

other things.

This Report highlights some gaps and inconsistencies in state insurance consumer protections

and recommends a path forward in each instance. In addition, the Report is intended to serve an 

 1 These FIO reports are available at https://www.treasury.gov/initiatives/fio/reports-and-notices and include: How to 

Modernize and Improve the System of Insurance Regulation in the United States (December 2013) (Modernization 

Report); Annual Report on the Insurance Industry (September 2014) (2014 Annual Report); Report Providing an 

Assessment of the Current State of the Market for Natural Catastrophe Insurance in the United States (September 

2015) (Catastrophe Insurance Report), and Annual Report on the Insurance Industry (September 2015) (2015 

Annual Report).

2 FIO’s annual reports on the insurance industry may continue to feature some consumer protection issues as 

warranted.

3 See, e.g., the McCarran-Ferguson Act, 15 U.S.C. § 1011; the Gramm-Leach-Bliley Act, 15 U.S.C. § 6711; 

National Association of Insurance Commissioners (NAIC), State Insurance Regulation (2011), available at

http://www.naic.org/documents/topics_white_paper_hist_ins_reg.pdf. 4 “Producers” as used in this Report, and as commonly understood in the industry, refers both to insurance brokers 

and insurance agents.
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educational function, emphasizing significant issues for consumers’ attention and providing a 

resource for further exploration of the topics presented. The Report advances this two-fold 

purpose – education and recommending reform – while exploring five broad themes: 

• Insurance and Technology. Big Data and cyber risk illuminate how technological 

developments applied in the insurance sector can create new opportunities for consumers, 

insurers, and state insurance regulators while also creating new risks such as cyber breaches.

• Environmental Hazards and Insurance. Insurance plays a significant role in addressing 

evolving environmental hazards. In particular, the Report considers insurance-related issues 

posed by human-induced earthquakes and climate change.

• Fairness in Insurance Practices. Insurers’ practices can raise fundamental questions of 

fairness. As examples, the Report considers the appropriateness of using marital status, sex, 

and gender in the underwriting of non-health insurance policies, and the detriment such 

practices may cause some consumers. The Report also examines the transparency of 

homeowners’ insurance coverage, and the problems that can arise when insurers increasingly 

use non-standardized coverage forms. Insurers also increasingly include mandatory 

arbitration clauses in insurance policies. Such clauses affect consumers in many sectors, not 

just insurance. The Report also examines how insurers renew (and cancel) policies after 

consumers file claims.

• Fairness in State Insurance Standards. Disparity in state insurance standards can give rise 

to a variety of consumer protection issues. This Report examines two key examples. First, 

the Report discusses the state insurance guaranty association system, including the 

inconsistent financial protection that policyholders in neighboring states may experience

following the failure of an insurer. Second, the Report outlines developments in the workers’ 

compensation market, including the impact of ongoing legislative efforts in certain states on 

taxpayers and workers.

• Retirement and Related Issues. Insurance can assist consumers in achieving financial 

security – and raise consumer protection issues in the process. By way of example, the 

Report examines consumer insurance issues related to the later phases of life: retirement 

security, the secondary market for life insurance and annuities, long-term care insurance (in 

coordination with the Department of Health and Human Services), and unclaimed death 

benefits.

This Report identifies options available to consumers, industry, and state and federal 

policymakers to address the highlighted gaps in protection for insurance consumers. State 

regulators, who enforce state-based consumer protection laws, also are an essential resource for 

both consumers and industry. For this reason, Appendix I of the Report includes contact 

information for each state insurance regulator. Appendix II lists, for ease of reference, federal 

sources cited in the Report.
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The protection of insurance consumers and American taxpayers underpins much of FIO’s 

statutory foundation: Title V of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act of 2010 (Dodd-Frank Act), which established FIO within the U.S. Department of the 

Treasury (Treasury).5

 In addition to advising the Secretary of the Treasury (Secretary) on major 

domestic and prudential international insurance policy issues in connection with all lines of 

insurance except health insurance,

6 FIO is authorized to:

• monitor all aspects of the insurance industry, including identifying issues or gaps in the 

regulation of insurers that could contribute to a systemic crisis in the insurance industry 

or the U.S. financial system; 

• monitor the extent to which traditionally underserved communities and consumers, 

minorities, and low- and moderate-income persons have access to affordable insurance 

products regarding all lines of insurance, except health insurance;

• recommend to the Financial Stability Oversight Council (on which FIO’s Director serves 

as a non-voting member) that it designate an insurer as an entity subject to regulation as a 

non-bank financial company supervised by the Board of Governors of the Federal 

Reserve System (Federal Reserve);

7

• assist the Secretary in administering the Terrorism Risk Insurance Program, established 

in Treasury under the Terrorism Risk Insurance Act of 2002, as amended; 

• coordinate federal efforts and develop federal policy on prudential aspects of 

international insurance matters, including representing the United States in the 

International Association of Insurance Supervisors (IAIS);

• assist the Secretary in negotiating covered agreements and determine whether state 

insurance measures are pre-empted by covered agreements; 

• consult with the states (including state insurance regulators) regarding insurance matters 

of national importance and prudential insurance matters of international importance; and 

• perform such other related duties as may be assigned to FIO by the Secretary.8

Also, before the Secretary (in consultation with the President) may determine whether to appoint 

the Federal Deposit Insurance Corporation (FDIC) as the receiver for an insurer under Title II of 

the Dodd-Frank Act, the Secretary must receive a written recommendation with the affirmative 

approval of the FIO Director and the Federal Reserve (in consultation with the FDIC).

9

 

 5 31 U.S.C. § 313 et seq. 6 31 U.S.C. § 321(a)(9).

7 Additionally, FIO and the Federal Reserve coordinate to conduct annual analyses of nonbank financial companies 

supervised by the Federal Reserve to evaluate whether such companies have the capital, on a consolidated basis, 

necessary to absorb losses as a result of adverse economic conditions. 12 U.S.C. § 5365(i)(1)(A).

8 31 U.S.C. § 313(c)(1).

9 12 U.S.C. §§ 5383(a)(1)(C), (b).
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II. Insurance and Technology

A. Big Data and the Insurance Industry’s Use of Consumer Data

The use of big data holds promise for both insurers and consumers, as it facilitates innovation 

and modernization in insurance product design, distribution, and delivery. The increasing use of 

big data, though, may also present risks for consumers, creating an increased need for 

policymakers and insurance regulators to guard against unlawful discrimination.

“Big data refers to the ability to gather large volumes of data, often from multiple sources, and 

with it produce new kinds of observations, measurements and predictions.”10 The information 

that fuels big data comes from a variety of sources. For example, “high velocity” data, which

includes GPS information from mobile phones and the clicks of internet users,

11 is generated 

constantly by computer systems and mobile phones.

12 Other data sources include “the public 

web; social media; mobile applications; federal, state and local records and databases; 

commercial databases that aggregate individual data from a spectrum of commercial transactions 

and public records; geospatial data; surveys; and traditional offline documents scanned by optical 

character recognition into electronic form.”13 Additional data comes from the increasing 

digitalization of devices and products that fill the modern American home, from thermostats and 

stereo equipment to cars in garages; this technology is referred to as the “Internet of Things.”14

1. Big Data in Insurance

Data is among the most important assets an insurer possesses. The use of big data can help 

almost every aspect of the business of insurance, but is particularly useful for underwriting, i.e., 

determining whether to accept a risk, and if so, at what amount of coverage and for what amount 

of premium.15 The use of data supports the risk-based approach familiarly known as “risk 

classification” that is generally used by insurers to establish the premium prices for insurance 

products. In risk classification, insurers analyze a number of data points which are used to assign 

consumers to rating tiers associated with particularized coverage limits and premium prices.16 

Big data allows insurers to increase the number of variables assessed in the risk classification 

 10 Executive Office of the President of the United States, Big Data and Differential Pricing, at 2 (February 2015), 

available at https://www.whitehouse.gov/sites/default/files/docs/Big_Data_Report_Nonembargo_v2.pdf (EOP Big 

Data Differential Pricing).

11 IBM Big Data and Analytics Hub, The Four V’s of Big Data, available at

http://www.ibmbigdatahub.com/infographic/four-vs-big-data.

12 Nir Kshetri, “Big Data’s Impact on Privacy, Security, and Consumer Welfare,” Telecommunications Policy

38(11) (2014).

13 Executive Office of the President, Big Data: Seizing Opportunities, Preserving Values, at 5 (May 2014), 

available at https://www.whitehouse.gov/sites/default/files/docs/big_data_privacy_report_may_1_2014.pdf.

14 See id.at 2. 15 International Risk Management Institute, Inc., Glossary of Insurance and Risk Management Terms: Underwriting, 

available at https://www.irmi.com/online/insurance-glossary/terms/u/underwriting.aspx (IRMI Glossary).

16 Modernization Report, supra note 1, at 56.
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process; as a result, risk assessments become more finely-tuned.17 For example, using big data, 

auto insurers now populate algorithms with thousands of data points, such as real-time driving 

information from cars and even reputational data from websites such as Yelp.18

For an increasing number of insurers,19 big data also supports the practice of “price 

optimization,” which “involves the analysis and incorporation of data not related to expected . . .

loss and expense experience.”20 For example, an insurer could use big data related to individual 

shopping habits or perceived tolerance for price changes, referred to as the “price elasticity of 

demand,” in setting premiums for an individual consumer.21 To date, 14 states and the District 

of Columbia have prohibited or restricted price optimization22 because it allows insurers to use a 

variety of non-traditional factors to price risk, which can result in consumers with otherwise 

identical risks paying different prices for the same coverage.23

2. Data Brokers and Other Third Parties

As big data has grown, the insurance scoring industry has expanded its tools to collect and 

analyze data. Data brokers, who do not interact directly with consumers, purchase and sell 

personal information about consumers to help other businesses develop consumer profiles.24 

Data brokers also create “derived data,” in which certain inferences are based on available data 

(for example, an individual with a Sports Illustrated subscription has an interest in sporting 

events).25 The Federal Trade Commission (FTC) concluded that these data brokers operate 

without transparency or accountability, and recommended that Congress consider legislation to 

address the issue.26

Insurers use data brokers and other third-party vendors to assist with the collection and analysis 

of big data. For instance, insurers use vendors that provide analytical services and software 

 17 EOP Big Data Differential Pricing, supra note 10. 18 Alex Woodie, “How Big Data Analytics is Shaking Up the Insurance Business,” Datanami (January 5, 2016), 

available at http://www.datanami.com/2016/01/05/how-big-data-analytics-is-shaking-up-the-insurance-business/.

19 Approximately half of large insurers, and just over a quarter of all insurers in North America, use price 

optimization in some manner. See Andrea Wells, “The Price of Price Optimization in Insurance,” Insurance Journal

(November 17, 2015), available at http://www.insurancejournal.com/news/national/2015/11/17/389153.htm.

20 Id.

21 Scott Kersgaard, “Colorado 15th state to ban price optimization,” Insurance Business America (December 3, 

2015), available at http://www.ibamag.com/news/west-news/colorado-15th-state-to-ban-price-optimization27083.aspx. 22 California, Colorado, Delaware, Florida, Indiana, Maine, Maryland, Montana, Minnesota, Ohio, Pennsylvania, 

Rhode Island, Vermont, Washington, and the District of Columbia prohibit or restrict price optimization in personal 

lines ratemaking. See id. 23 Wells, Price Optimization, supra note 19. 24 EOP Big Data Differential Pricing, supra note 10.

25 Federal Trade Commission, Data Brokers: A Call for Transparency and Accountability (May 2014), available at

https://www.ftc.gov/system/files/documents/reports/data-brokers-call-transparency-accountability-report-federaltrade-commission-may-2014/140527databrokerreport.pdf (FTC Data Brokers).

26 Id.
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products related to big data,27 such as a product designed to provide insurers with social media 

risk-scoring solutions tracking “wide ranging data across the social web and broader internet.”28 

In all but the rarest of cases, even though these vendors develop the pricing formula on which 

many insurers rely and, thereby, have a direct effect on the affordability and accessibility of 

insurance to a consumer, the vendors themselves are outside the scope of supervision by state 

insurance regulators.29

3. Consumer Implications of Big Data

The increasing use of big data can benefit consumers by allowing the potential for the 

development of tailored products and premium prices based on the unique needs of individual 

consumers.30 However, the use of big data by insurers may also be detrimental in some 

circumstances. For example, price optimization may disadvantage loyal consumers if, for 

example, they fail to shop for new coverage at the time of renewal. In addition, certain big data 

methodologies may hide intentional or unintentional discrimination against protected classes “by 

generating customer segments that are closely correlated with race, gender, ethnicity, or 

religion.”31 Moreover, the existence of a pattern does not necessarily mean the pattern is

significant or predictive and, therefore, may not be an appropriate basis for pricing.

32

The lack of transparency by – or oversight of – big data vendors is another area of concern 

because of the significant effect these vendors have on consumers. For example, health-related 

data relevant to certain types of insurance underwriting can be gleaned from internet search 

terms, and online or pharmacy purchases.33 Consumers have little power to control how data is 

collected or used by data brokers and vendors, and many state insurance regulators have only 

limited authority over the ways that insurers use big data. As noted above, in most cases, state 

insurance regulators do not directly regulate third-party vendors used by insurers.34

4. Consumer Resources and the Path Forward

Consumers are encouraged to educate themselves about the ways that daily acts, from searching 

the internet to purchasing goods at the grocery store, are being used by a variety of industries –

 27 NAIC, Casualty Actuarial and Statistical (C) Task Force, Price Optimization White Paper (November 19, 2015), 

available at http://www.naic.org/documents/committees_c_catf_related_price_optimization_white_paper.pdf.

28 “Social Intelligence Launches Social Media Risk Scoring for P&C Insurers,” Business Wire (April 22, 2015), 

available at http://www.businesswire.com/news/home/20150422005849/en/Social-Intelligence-Launches-SocialMedia-Risk-Scoring. 29 Modernization Report, supra note 1, at 56.

30 FTC Data Brokers, supra note 25.

31 EOP Big Data Differential Pricing, supra note 10. See also, e.g., Federal Trade Commission, Big Data – A Tool 

for Inclusion or Exclusion: Understanding the Issues (January 2016), available at

https://www.ftc.gov/system/files/documents/reports/big-data-tool-inclusion-or-exclusion-understandingissues/160106big-data-rpt.pdf (outlining federal laws that may apply to big data practices). 32 EOP Big Data Differential Pricing, supra note 10. 33 Kshetri, supra note 12.

34 Modernization Report, supra note 1, at 57.
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including the insurance sector. Consumers may wish to consult the sources in Appendix II, 

among others, for more information.

While big data provides promising opportunities for developing more individualized insurance 

products and pricing, as well as potentially expanding access to insurance products, the insurance 

sector should confront the unique regulatory and public policy challenges that arise from its use. 

As the use of big data becomes more prevalent, regulatory and other consumer protection efforts 

should advance apace. State insurance regulators should ensure that insurers use big data only in 

a manner consistent with applicable state and federal laws and regulations. As FIO has 

previously noted, “[s]imply because data may be available regarding consumers does not mean 

that any data is relevant to determining the insurance premiums they should pay.”35 State 

insurance regulators also should examine the increasing prevalence of big data and verify that the 

criteria and methodologies used by insurers and third-party vendors do not violate wellestablished standards against unlawful discrimination. With rare exceptions, state insurance 

regulators have not asserted regulatory authority over third-party vendors that provide insurers 

with pricing and rating tools. This failure results in a significant regulatory gap, which should be 

closed to prevent potential harm to individuals, families, and businesses.

B. Cyber Risk and Protecting Consumers’ Personally Identifiable 

Information

Insurance can touch all aspects of a consumer’s life – and gather significant data about 

consumers in the process. Insurers routinely collect, store, and use a variety of information –

including personally identifiable information (PII) and protected health information (PHI) –

obtained from policyholders who apply for or purchase insurance products, as well as from 

claimants and other beneficiaries. These data collections can create cyber risk for insurers and 

consumers, and cybersecurity challenges for insurers and the government. This section focuses 

on protecting consumer information held by the insurance industry itself. Beyond the scope of 

this Report is the separate (and important) topic of what insurers can do to help with cyber risk 

transfer and mitigation for other sectors by underwriting and offering cyber insurance.

1. Cyber Risk and the Insurance Industry

Cyber risk – which has been described as “the risks of doing business, including managing and 

controlling data, in a digital or ‘cyber’ environment” 36 – is a significant concern. Data breaches 

at institutions such as insurers and other financial institutions resulted in the exposure of personal 

data for 348 million people around the world in 2014.37 U.S. consumers lost nearly $30 billion 

 35 Id. 36 CRO Forum, Cyber Resilience: The cyber risk challenge and the role of insurance, at 3 (December 2014), 

available at http://www.thecroforum.org/wp-content/uploads/2014/12/Cyber-Risk-Paper-version-24.pdf. 37 Norton by Symantec, Norton Cybersecurity Insights Report, at 3 (January 2016), available at 

https://us.norton.com/norton-cybersecurity-insights-reportglobal?inid=hho_norton.com_cybersecurityinsights_hero_seeglobalrpt.
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to cyber-crime in the previous year, with global consumer losses of $150 billion.38 Insurers

collect unique personal information and are at significant risk for cyber attack. For example, one 

of the largest data breaches in the United States occurred in 2015, when PII and PHI of up to 91 

million policyholders at Anthem Blue Cross Blue Shield and Premera Blue Cross were 

compromised.39 Some insurers also outsource a variety of services to third-party vendors, which

may increase the risk of exposure to cyber attack.

40 With these heightened risks, insurers must 

do everything reasonable to protect against cyber risk and data breaches.

2. Federal Efforts Involving Cybersecurity for Insurers 

Under the 2013 National Infrastructure Plan framework, Treasury is the federal agency charged 

with coordinating the cybersecurity and resiliency of the nation’s critical financial services 

infrastructure.

41 Treasury also serves as the day-to-day federal interface for matters involving 

cyber threats and cybersecurity for all institutions within the financial services sector.42 FIO, 

along with other Treasury offices, assists with these efforts. In this work, Treasury actively 

supports the efforts of the insurance industry to implement enhanced cyber protection measures, 

including identifying best practices and encouraging participation in industrywide groups, such 

as the Financial Services – Information Sharing and Analysis Center (FS-ISAC), which share 

information on cyber threats and cybersecurity. In addition, Treasury works with financial 

regulators, including state insurance regulators, to develop best practices and a consistently 

rigorous approach to cybersecurity oversight for insurers. Further, through the IAIS, FIO works

with the international supervisory community to develop international standards for regulatory 

examinations and risk management practices in the insurance sector relative to cybersecurity.

 38 Norton by Symantec, Norton Cybersecurity Insights Report: Global Comparisons (January 2016), available at

http://us.norton.com/norton-cybersecurity-insights-report-us?inid=hho_norton.com_ cybersecurityinsights_ 

p3_seectryrpts. 39 Anthem, AllClearID Frequently Asked Questions, available at https://anthem.allclearid.com/faq.html; Premera, 

Free Credit Monitoring, available at http://www.premeraupdate.com/free-credit-monitoring/. In response to the 

breaches, Anthem and Premera provided affected individuals with 24 months of identity protection services. Given

the long-term risks presented by the exposure of health information, some consumers may choose to bear the cost of 

continuing identity protection services after the two-year period ends. 40 See, e.g., IAIS, Issues Paper on Cyber Risk to the Insurance Sector, at 9 (August 2016), available at

http://www.iaisweb.org/page/supervisory-material/issues-papers/file/61857/issues-paper-on-cyber-risk-to-theinsurance-sector. 41 U.S. Department of Homeland Security, Financial Services Sector, available at http://www.dhs.gov/financialservices-sector (DHS Financial Services). Critical infrastructure is defined as the “essential services that underpin 

American society and serve as the backbone of our nation's economy, security, and health.” See U.S. Department of 

Homeland Security, What Is Critical Infrastructure, available at http://www.dhs.gov/what-critical-infrastructure. 

The financial services sector, including insurance, is among the sixteen sectors identified as part of the nation’s 

critical infrastructure. See DHS Financial Services, supra. 42 U.S. Department of the Treasury, Remarks of Deputy Secretary Raskin at The Texas Bankers’ Association 

Executive Leadership Cybersecurity Conference (December 3, 2014), available at https://www.treasury.gov/presscenter/press-releases/Pages/jl9711.aspx.
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3. State Efforts Involving Cybersecurity for Insurers

In the United States, supervision by state insurance regulators plays an important role in the 

protection of consumer PII and PHI. Attention to cybersecurity by the state insurance regulatory 

community increased in 2013, when state insurance regulators established the Cyber Security 

Task Force, a group of state insurance regulators who “consider issues concerning cybersecurity 

as they pertain to the role of state insurance regulators.”43

In March 2016, state insurance regulators released a draft model law, the Insurance Data 

Security Model Law (IDSML),44 relating to data breaches of PII and PHI. Under the IDSML, 

consumers would be authorized to bring suit against an insurer relating to data breaches, but 

recoverable damages would be limited to “appropriate equitable relief.”45 As of September 30, 

2016, the IDSML has not yet been finalized and has not been enacted by any state.

State insurance regulators also revised the Financial Condition Examiners Handbook – used to 

assess the financial condition of insurers during periodic examinations every three to five years 

by state insurance regulators – to provide specific guidance for examiners who review an 

insurer’s cybersecurity practices. In addition to adopting an approach to cybersecurity consistent 

with the National Institute of Standards and Technology Framework for Improving Critical 

Infrastructure Cybersecurity (NIST Cybersecurity Framework), the handbook encourages 

examiners to use cybersecurity experts if the insurer has significant exposure to cyber risk.46

The New York Department of Financial Services (NYDFS) has been a national leader with 

respect to the insurance sector and cybersecurity. In 2013 and 2014, the NYDFS surveyed 43 

regulated insurers about cybersecurity issues and published a report of its findings in February 

2015.47 Since then, the NYDFS has increased its focus on cybersecurity, proposed new 

regulatory requirements regarding cybersecurity at regulated insurers, and highlighted the 

continuing cybersecurity challenge arising from reliance by insurers on third-party service 

providers.48

 43 NAIC, Cybersecurity (EX) Task Force, available at http://www.naic.org/cmte_ex_cybersecurity_tf.htm.

44 NAIC, Draft Insurance Data Security Model Law (March 2, 2016), available at

http://www.naic.org/documents/committees_ex_cybersecurity_tf_160524_draft_ins_data_sec_model_law.pdf. 

Regulators released a revised draft on August 17, 2016. See NAIC, Preliminary Working and Discussion Draft –

Insurance Data Security Model Law (Draft: 8/17/2016 (version 2)), available at

http://www.naic.org/documents/committees_ex_cybersecurity_tf_exposure_mod_draft_clean.pdf. “Model” laws are 

not valid in a state until they are duly passed and enacted through state legislative and executive branches.

45 Id.

46 NAIC IT Examination Working Group, Revisions to Exam Handbook Guidance Section 1-3 (September 21, 

2015).

47 NYDFS, Report on Cyber Security in the Insurance Sector (February 2015), available at 

http://www.dfs.ny.gov/reportpub/dfs_cyber_insurance_report_022015.pdf. 48 NYDFS, Potential New NYDFS Cyber Security Regulation Requirements (Nov. 9, 2015), available at 

http://www.sutherland.com/portalresource/pr151109_letter_cyber_security.pdf.
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4. Consumer Resources and the Path Forward

Insurers hold substantial amounts of confidential information about consumers, claimants, and 

beneficiaries. To protect against the unauthorized disclosure or use of confidential information, 

consumers, insurers, and state insurance regulators should remain vigilant and in constant pursuit 

of best practices to prevent cyber breaches.

Consumers can take basic steps to protect against or minimize potentially harmful outcomes 

resulting from a data breach or identity theft scam. For example, the Department of Homeland 

Security recommends that, among other steps, individuals keep operating systems, browsers, and 

other critical software optimized by installing updates.49 Consumers affected by a data breach 

should be proactive, such as by taking advantage of resources available through the FTC at 

www.identitytheft.gov.

Insurers should adopt baseline protections based on leading cyber risk management standards

and best practices.

50 For instance, best practices include, but are not limited to, limiting access to 

information technology assets and associated facilities to authorized users, processes, or devices, 

and coordinating response activities with internal and external stakeholders including, as 

appropriate, law enforcement agencies.51 In addition, insurers that rely on third-party vendors 

should review the cyber risk management practices of those vendors and determine whether the 

vendors use baseline protections based on the NIST Cybersecurity Framework or other leading

cyber risk management standards and best practices. Insurers should consider developing a 

comprehensive cybersecurity strategy that addresses topics such as: cybersecurity governance; 

risk identification and assessment; protection and detection (including implementation of 

controls and mitigation measures, and continuous monitoring); testing; response and recovery 

options; information sharing; and learning from cyber incidents.

Meanwhile, state governments should review existing and proposed laws and regulations and 

enact laws uniformly that improve the rigor of consumer privacy protection. Consistent with this 

goal, insurance regulators should follow the lead of the NYDFS in developing an improved 

inventory of the cyber risks facing the insurance industry. For some states, hiring additional 

examination staff with cybersecurity expertise may be necessary. Cybersecurity examinations 

should occur more frequently than the current financial examination schedule of once every three 

to five years, given the fast-evolving nature of cyber risk.52 For both the insurance industry and 

its regulators, cybersecurity strategies and technologies, and the oversight of those strategies and 

technologies, should be adaptable and current.

 49 U.S. Department of Homeland Security, Stop. Think. Connect.: Cybersecurity 101, available at

https://www.dhs.gov/sites/default/files/publications/cybersecurity-101_4.pdf. 50 One significant way that insurers can address cyber risk is by adopting the NIST Cybersecurity Framework. 51 National Institute for Standards and Technology, Framework for Improving Critical Infrastructure Cybersecurity, 

Version 1.0 (February 12, 2014), available at http://www.nist.gov/cyberframework/upload/cybersecurityframework-021214.pdf. 52 See, e.g., NAIC, Model Law on Examinations (October 1999), available at http://www.naic.org/store/free/MDL390.pdf.
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III. Environmental Hazards and Insurance

A. Human-Induced Earthquakes and Insurance

Earthquakes occur in the United States thousands of times every year and in every region of the 

country.53 According to the United States Geological Survey (USGS), the number of 

earthquakes in the central and eastern United States has increased dramatically over the past few 

years.54 In the central region of the United States, the average annual number of earthquakes 

magnitude 3 and larger between 2009 and 2014 was 193, including a record high 688 

earthquakes in 2014.55

Questions have arisen about the connection between the increase in earthquakes in some areas of 

the United States and human activity, including the increasing prevalence of hydraulic fracturing, 

also known as fracking, and the use of waste water disposal wells associated with fracking and 

other petroleum extraction activities.56 The distinction between naturally occurring earthquakes 

and human-induced earthquakes can impact consumers who purchase earthquake insurance and 

experience a loss, because most earthquake insurance policies cover only damage resulting from 

natural earthquakes.

1. Overview of Earthquake Insurance

Standard property insurance policies typically exclude coverage for damage caused by 

earthquakes.57 Homeowners and business owners seeking protection against damages caused by 

earthquakes must separately purchase either an endorsement to a property insurance policy, if 

available, or a separate earthquake insurance policy. Earthquake insurance “provides protection 

from the shaking and cracking that can destroy buildings and personal possessions” caused by 

natural earthquakes,58 and is generally available throughout the United States.

Earthquake insurance, however, is not “generally required by mortgage lenders as a loan 

condition.”59 In addition, an earthquake insurance policy typically has a deductible ranging from 

 53 See, e.g., USGS, Earthquake Statistics (as of March 10, 2016), available at 

http://earthquake.usgs.gov/earthquakes/browse/stats.php. 54 USGS, Induced Earthquakes, available at http://earthquake.usgs.gov/research/induced/. 55 USGS, Science Features, 6 Facts About Human-Caused Earthquakes (June 10, 2015), available at

http://www.usgs.gov/blogs/features/usgs_top_story/6-facts-about-human-caused-earthquakes/. 56 William Ellsworth, et al., Increasing seismicity in the U.S. midcontinent: Implications for earthquake hazard, The 

Leading Edge (June 2015), available at

https://profile.usgs.gov/myscience/upload_folder/ci2015Jun0413502655600EllsworthTLE.pdf.

57 Catastrophe Insurance Report, supra note 1. 58 Insurance Information Institute, Earthquakes: Risk and Insurance Issues (July 2016) available at

http://www.iii.org/issue-update/earthquakes-risk-and-insurance-issues (III on Earthquakes).

59 California State Senate Committee on Insurance, Informational Hearing, Catastrophic Risk in California: Are 

Homeowners and Communities Prepared?, at 8 (May 14, 2014), available at 

http://sins.senate.ca.gov/sites/sins.senate.ca.gov/files/14.05-14.Background.Catastrophic%20Risks% 

20in%20California.PDF.
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2 percent to 25 percent of the structure’s replacement value,

60 with insurers requiring higher 

deductibles (at least 10 percent) for high risk areas.61 Perhaps for cost reasons, only a minority 

of homeowners purchase coverage for losses caused by earthquakes. A 2014 survey found that 

the national rate for the purchase of earthquake insurance was 7 percent, down from 10 percent 

in 2013 and 13 percent in 2012.62 However, increased earthquake activity in the central and 

eastern United States has led to an increase in the purchase of earthquake insurance in certain 

states. For example, the take-up rate for earthquake insurance by Oklahomans rose from 2

percent in 2011 to 15 percent in 2014, which is even higher than the 10 percent take-up rate by

California residents.

63

2. Insurance Coverage for Human-Induced Earthquakes

The cause of an earthquake, whether natural or human-induced, and the effect on earthquake 

insurance coverage, is an evolving issue for consumers, insurers, and state policymakers and 

insurance regulators. Typically, earthquake insurance coverage excludes damage caused by 

human-induced earthquakes (i.e., any earthquake that is not naturally occurring).64 If an 

earthquake is induced by human activity, a claim by a consumer for damages under an 

earthquake endorsement or earthquake policy may be denied. For this reason, some state 

insurance regulators are addressing whether human activity like fracking and deep injection 

waste disposal is responsible for a portion of the recent increase in seismic activity.

In March 2015, the Oklahoma Insurance Department issued a bulletin to insurers operating in 

Oklahoma stating: “At present, there is no agreement at a scientific or governmental level 

concerning any connection between injection wells or fracking and ‘earthquakes.’”65 

Additionally, the bulletin expressed concern that insurers might be denying earthquake claims 

based on insufficient evidence that the earthquakes were caused by fracking. According to the 

Oklahoma Insurance Department, in 2014, only 8 of the 100 earthquake claims submitted to 

larger insurers were paid.66 In October 2015, the Oklahoma Insurance Commissioner ordered 

that insurers clarify within 45 days whether policies cover earthquake damages specifically 

 60 III on Earthquakes, supra note 58; Washington State Office of the Insurance Commissioner, Earthquake 

Insurance, available at http://www.insurance.wa.gov/your-insurance/home-insurance/earthquake/.

61 III on Earthquakes, supra note 58. 62 Id. 63 See Miguel Bustillo and Daniel Gilbert, “Energy’s New Legal Threat: Earthquake Suits,” The Wall Street Journal

(March 30, 2015), available at http://www.wsj.com/articles/frackings-new-legal-threat-earthquake-suits1427736148; Insurance Information Institute, Another Northern California Quake Underlines Importance of Having 

Earthquake Insurance (January 29, 2015), available at http://www.iii.org/press-release/another-northern-californiaquake-underlines-importance-of-having-earthquake-insurance-012915. 64 NAIC, Hydraulic Fracturing (Fracking) (last updated September 8, 2016), available at

http://www.naic.org/cipr_topics/topic_hydraulic_fracturing.htm. 65 Oklahoma Insurance Department, Earthquake Insurance Bulletin No. PC 2015-02 (March 3, 2015), available at

http://www.ok.gov/oid/documents/030415_Earthquake%20Bulletin%203-3-15.pdf.

66 Id.
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caused by oil and gas wells.67 In addition, Oklahoma lawmakers are considering “legislation to 

create a state-level ‘earthquake reinsurance program’ modeled on the California Earthquake 

Authority.”68

In April 2015, following an increase of earthquakes in areas of Pennsylvania, the Pennsylvania 

Insurance Department issued a bulletin stating that Pennsylvania earthquake endorsements 

“should cover all earthquakes, whether believed to be ‘naturally occurring’ or caused by ‘human 

activity.’”69

3. Consumer Resources and the Path Forward

Consumers living in earthquake-prone areas should consider the purchase of earthquake 

insurance and should carefully review the earthquake policy or earthquake endorsement. If 

consumers have questions about insurance coverage for earthquakes, they may wish to contact 

their insurance producer, insurer, or state insurance regulator (contact information for state 

insurance regulators is listed in Appendix I).

Since FIO raised the issue of human-induced earthquakes in its 2015 Annual Report on the 

Insurance Industry,70 little has changed in state regulation. While the Earthquake Study Group 

of the National Association of Insurance Commissioners (NAIC) continues to assess this issue,71

no states individually (other than Oklahoma and Pennsylvania) have taken action to address 

earthquake insurance coverage. State insurance regulators in states at risk for human-induced 

earthquakes should follow the lead of the state insurance regulators in Oklahoma and 

Pennsylvania by addressing the question of whether earthquake insurance coverage includes only 

naturally occurring earthquakes and seek clarity for consumers regarding coverage.

 67 Sheldra Brigham, “Insurance companies given deadline to clarify earthquake coverage,” Kfor.com (October 21, 

2015), available at http://kfor.com/2015/10/21/insurance-companies-given-deadline-to-clarify-earthquakecoverage/. 68 Ian Adams, “Oklahoma ponders “California model” for earthquake insurance,” R Street (February 22, 2016), 

available at http://www.rstreet.org/2016/02/22/oklahoma-ponders-california-model-for-earthquake-insurance/. The 

California Earthquake Authority (CEA) is a public instrumentality made up of homeowners insurers that write 

standalone earthquake insurance policies for homeowners, renters, and condominium-unit owners. Participating 

insurers are responsible for selling and adjusting policies for their policyholders and, in return, receive agent 

commissions and reimbursement of administrative expenses by CEA. Catastrophe Insurance Report, supra note 1. 69 Pennsylvania Insurance Department, Insurance Department Notice No. 2015-04 (April 11, 2015) available at

http://propertyinsurancelawobserver.com/wp-content/uploads/sites/11/2015/05/Department-Notice-2015-04.pdf. 70 2015 Annual Report, supra note 1, at 50-51. 71 NAIC, Earthquake (C) Study Group, Agenda (April 3, 2016), available at

http://www.naic.org/meetings1604/committees_c_earthquake_2016_spring_nm_agenda.pdf?1463510818367.
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B. Climate Resiliency

With climate change causing increasingly frequent severe weather, assessment of resilience to 

strong winds, flooding, wildfires, and other natural hazards will continue to be an important 

aspect of insurance underwriting. Recognizing the shared priorities of the federal government 

and the insurance industry in responding to natural hazard risk and increasing the resilience of 

homes and communities, the President’s Climate Action Plan, released in June 2013, called for 

continued engagement between the federal government and the insurance industry “to explore 

best practices for private and public insurers to manage their own processes and investments to 

account for climate change risks and incentivize policyholders to take steps to reduce their own 

exposures to these risks.”72 Relatedly, representatives of the insurance industry released a joint 

statement in June 2014 expressing support for “resilience and pre-event property loss mitigation” 

and the goal of “[s]upporting and utilizing research and targeted incentives (such as tax credits, 

loans, or grants) to promote effective loss mitigation, in order to reduce current and future risk to 

people, property, natural features, ecosystems, and critical infrastructure.”73 The related issues 

of climate change, natural hazards, and insurance will continue to intersect, both in terms of the 

prices consumers pay for homeowners insurance and the public policy goal of increasing 

resilience.

1. Climate Change and the Price of Insurance

2015 was the warmest year since modern recordkeeping began in 1880, with 15 of the 16 

warmest years on record occurring since 2001.74 According to the Intergovernmental Panel on 

Climate Change (IPCC), which includes more than 1,300 scientists from the United States and 

other countries, “the range of published evidence indicates that the net damage costs of climate 

change are likely to be significant and to increase over time.”75

Climate change is already affecting every region of the United States and its effects are expected 

to increase in severity and frequency. For example, among other risks, sea level rise will 

threaten both coasts of the continental United States.76 The Northeast is expected to face heat 

 72 Executive Office of the President, The President’s Climate Action Plan, at 13-14 (June 2013), available at

https://www.whitehouse.gov/sites/default/files/image/president27sclimateactionplan.pdf.

73 Joint Statement of American Insurance Association, Insurance Institute for Business & Home Safety, National 

Association of Mutual Insurance Companies, Property Casualty Insurers Association of America, and Reinsurance 

Association of America (September 23, 2014), available at https://www.disastersafety.org/news/joint-statementseptember-23-2014/.

74 National Aeronautics and Space Administration, NASA, NOAA Analyses Reveal Record-Shattering Global Warm 

Temperatures in 2015, Release No. 16-008 (Jan. 20, 2016), available at http://www.nasa.gov/press-release/nasanoaa-analyses-reveal-record-shattering-global-warm-temperatures-in-2015. 75 IPCC, Climate Change 2007: Synthesis Report, Section 5.7: Costs, benefits and avoided climate impacts at global 

and regional levels (2007), available at https://www.ipcc.ch/publications_and_data/ar4/syr/en/mains5-7.html. 76 Jerry M. Melillo, et al., eds., Climate Change Impacts in the United States: Highlights, U.S. Global Change 

Research Program, at 88 (2014), available at

http://s3.amazonaws.com/nca2014/low/NCA3_Highlights_LowRes.pdf.
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waves, coastal, and riverine flooding,77 and the Midwest is expected to experience increased heat 

wave intensity, extreme rainfall, and flooding.78 Heat waves are also expected in the Southwest, 

which will face drought and insect outbreaks too.

79 These risks will compromise infrastructure, 

agricultural yields, fisheries, and ecosystems throughout the nation.80

Climate change also affects the property insurance sector, which offers a variety of insurance 

products associated with losses from natural hazards and natural catastrophes.81 All property 

insurers factor into insurance product pricing the risks posed by climate change, with high prices 

sending “signals to individuals as to the hazards they face.”82 In short, climate change and 

natural hazards can increase insurance costs, and mitigation can be used to lower risk and 

potentially reduce insurance premiums.

2. Hazard Mitigation and Insurance

The increasing frequency and severity of climate change-related natural hazards and natural 

catastrophes could result in greater loss of life and property, imposing increased costs on 

individuals, communities, and the government. Hazard mitigation, or actions “to reduce loss of 

life and property by lessening the impact of disasters,”83 is a proven way to reduce the risks and 

costs associated with natural hazards, for both the government and individuals. For example, 

“[n]ationwide, mitigation efforts reduced the cost of natural disasters by an estimated $3.2 billion 

in fiscal year 2013.”84 A 2007 study of Florida homeowners after Hurricane Charley revealed 

that homes meeting wind-resistant construction standards instituted after 1994 had nearly 60 

percent fewer insurance claims and 40 percent less damage than homes built before those 

standards were enacted.

85 State, local, and tribal governments can mitigate the damage and 

associated costs of natural hazards by, for example, passing and enforcing resilience-based 

building codes and engaging in thoughtful planning and zoning.

 77 Id. at 70. 78 Id. at 74. 79 Id. at 78.

80 Id. at 6. 81 For more information about insurance products relating to natural catastrophes, see Catastrophe Insurance Report, 

supra note 1. 82 Howard Kunreuther and Erwann Michel-Kerjan, Managing Catastrophic Risks through Redesigned Insurance: 

Challenges and Opportunities, at 17 (July 30, 2012), available at

http://opim.wharton.upenn.edu/risk/library/J2013Kunreuther+Michel-Kerjan_Managing-Cat-Risks-throughRedesigned-Insurance.pdf. 83 Federal Emergency Management Administration, What is Mitigation?, available at http://www.fema.gov/whatmitigation. See also 44 CFR § 201.2 (defining “hazard mitigation” as “sustained action taken to reduce or eliminate 

the long-term risk to human life and property from hazards”). 84 U.S. Department of Homeland Security, National Preparedness Report, at 37 (March 30, 2014), available at

https://www.fema.gov/media-library-data/1409688068371-

d71247cabc52a55de78305a4462d0e1a/2014%20NPR_FINAL_082914_508v11.pdf. 85 Cassandra R. Cole, David A. Macpherson, Kathleen A. McCullough, A Comparison of Hurricane Loss Models, at 

6 (April 2010), available at

http://www.stormrisk.org/sites/default/files/A%20Comparison%20of%20Hurricane%20Loss%20Models.pdf.
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Insurance can play a role in financing hazard mitigation. For example, some states, including 

Florida, Louisiana, Maryland, and Mississippi, mandate insurance premium discounts when 

homeowners undertake specified mitigation measures.86 Private market solutions tied to 

insurance can also help encourage hazard mitigation. For example, MyStrongHome, an initiative 

focused on “making our communities stronger in an age of increasingly frequent and severe 

weather events,”87 helps individuals finance mitigation investments by lending funds for upfront 

construction costs and using reductions in insurance premiums to assist individuals in paying

back the loan over five years.88

3. Consumer Resources and the Path Forward

Strengthening homes and communities through hazard mitigation requires a sustained

commitment from, and coordination by, local, tribal, state, and federal government officials, as 

well as participation by individual consumers, insurers, and others in the private sector. As an 

example of this coordination, in partnership with the Federal Emergency Management Agency, 

FIO is jointly hosting a series of stakeholder meetings with private sector, public sector, 

consumer advocate, and academic participants through 2016 about flood insurance and the 

National Flood Insurance Program (NFIP).

To the extent possible, consumers should understand the natural catastrophe risks in their region 

and the measures available to mitigate those risks. Consumers may wish to consult the 

mitigation resources listed in Appendix II.

Local, tribal and state officials, including state insurance regulators, should promote programs to 

raise awareness of the value of mitigation. Insurers should consider offering financial incentives 

for homeowners who invest in mitigation measures that reduce risks and costs associated with 

extreme weather and other effects of climate change. Working both independently and in 

partnership with the public sector, insurers should continue to support consumer education about 

the risks associated with climate change, the implications for these increased risks on the price of 

insurance, and the value of mitigation for homeowners. Further, local, tribal, state, and federal 

governments should continue to support investment in resilience and mitigation efforts in order 

to lessen the public and private costs following such events.

 86 See, e.g., Institute of Building and Home Safety, Fortified Home FAQs: How Can I Participate in Fortified 

Homes, available at https://www.disastersafety.org/fortified/fortified-home-faqs/; Florida Office of Insurance 

Regulation, Premium Discounts for Hurricane Loss Mitigation, available at

http://www.floir.com/Sections/PandC/HurricaneLossMitigation.aspx; Maryland Insurance Administration, Bulletin 

09-08 (April 16, 2009), available at http://insurance.maryland.gov/Insurer/Documents/bulletins/bulletinpc09-08-

windstorm.pdf. Other states and cities offer income tax credits or building permit rebates for consumers seeking to 

strengthen their homes. See, e.g., South Carolina Department of Insurance, State Income Tax Credits for 

Fortification Measures, available at http://www.doi.sc.gov/593/State-Income-Tax-Credit-for-Fortificatio; City of 

Orange Beach, Alabama, Ordinance No. 2012-1145: An Ordinance Adopting Technical Codes and Supplemental 

Provisions (2012), available at http://www.cityoforangebeach.com/pages_2011/pdfs/ordinances/2012/2012-

1145_Building_Codes_2012_Adopted.pdf. 87 MyStrongHome, About, available at http://www.mystronghome.net/about/.

88 MyStrongHome, Our Approach, available at http://www.mystronghome.net/our-approach/.
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IV. Fairness in Insurance Practices

A. Risk Classifications: Marital Status

Insurers examine numerous factors when underwriting an insurance policy, that is, when 

determining whether to accept a risk, and if so, under what terms and for what price (or 

premium).89 Underwriting generally involves “risk classification,” where insurers analyze a 

number of data points that are used to assign consumers to rating tiers associated with 

particularized coverage limits and premium prices.

Marital status is a factor that many insurers use in the rating and pricing of some personal lines 

insurance. According to a recent study, five major insurers charge higher premiums for 

automobile insurance to single, separated, and divorced consumers than to married consumers.90 

A smaller subset of insurers charge higher premiums to individuals in domestic partnerships as 

compared to those who are married.91 Higher premiums may even apply to widows: women 

who have lost a spouse face, on average, 20 percent higher premiums for state-mandated liability 

coverage, compared to when they were married.92 These findings are consistent with a separate 

study which concluded that, on average, married 20-year-olds pay 21 percent less than single 20-

year-olds for the same auto insurance policy.93 Marital status also may affect the cost of home 

insurance.94

1. Questioning the Use of Marital Status in Personal Lines Insurance 

Pricing

Whether marital status should remain a factor for rating and pricing insurance is an important 

public policy question. Some maintain that marital status is an appropriate factor in rating auto 

insurance because married drivers are safer,95 married drivers make fewer claims than unmarried 

drivers96 and, more broadly, that the consideration of a wide variety of underwriting factors 

 89 See IRMI Glossary, supra note 15.

90 Consumer Federation of America, New Research Shows That Most Major Auto Insurers Vary Prices 

Considerably Depending on Marital Status (July 27, 2015), available at http://consumerfed.org/press_release/newresearch-shows-that-most-major-auto-insurers-vary-prices-considerably-depending-on-marital-status/ (identifying

Farmers, GEICO, Liberty, Nationwide, and Progressive). 91 Id. (identifying GEICO and Progressive).

92 Id.

93 Nick DiUlio, “The surprising impact of age, gender and marriage on car insurance,” insurancequotes.com (March 

26, 2015), available at http://www.insurancequotes.com/auto/surprising-impact-of-age-gender-marriage-on-carinsurance.

94 See, e.g., “Being married can save you money on insurance,” insure.com (Dec. 7, 2009) (“[s]ome home insurance 

companies may also use marital status as a factor in determining your cost for home insurance, although marital 

status is used more widely in pricing auto insurance” and noting that one insurer, for example “does not use marital 

status to set prices for home or car insurance, but the company does offer a 5 percent ‘personal status discount’ for 

married couples”), available at http://www.insure.com/general-insurance/married.html. 95 Id. 96 Alexis O’Connell, “4 Facts About Marriage and Car Insurance,” everquote.com (November 13, 2014), available 

at https://www.everquote.com/blog/car-insurance/marriage-car-insurance-facts/.
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contributes to a competitive insurance market.97 However, penalizing otherwise safe drivers for 

a personal legal status unconnected to driving can raise issues of fairness. Is it fair for the victim 

of an abusive spouse who obtains a divorce to face higher auto insurance premiums for ending a 

dangerous relationship? Is it fair for a widow (or widower) to pay more for auto insurance after 

experiencing the loss of a spouse?98 Further, for any number of reasons, many people in stable, 

long-term relationships may choose not to pursue or obtain the legal status of marriage.99

2. Consumer Resources and the Path Forward

Unlike most states, Hawaii, Massachusetts, Michigan, and Montana prohibit the use of marital 

status in setting the price of auto insurance.100 Some states also prohibit consideration of marital 

status in pricing homeowners insurance.101 State insurance regulators should continue to assess 

whether marital status is an appropriate rating or pricing consideration for all personal lines 

insurance. Consumers with questions about the effect of marital status on the cost of auto or 

other personal lines insurance should contact their insurance producer, insurer, or state insurance 

regulator (contact information for state insurance regulators is listed in Appendix I) for more 

information.

B. Risk Classifications: Sex and Gender

Sex and gender, like marital status, are risk classifications commonly used by insurers. Although 

health insurers are prohibited by the Patient Protection and Affordable Care Act from using sex 

and gender as risk classifications when underwriting health insurance policies,102 insurers 

 97 Insurance Information Institute, Media Advisory: Use of a Variety of Factors Beyond Driving Record Makes for a 

Competitive Auto Insurance Marketplace (August 3, 2015), available at http://www.iii.org/press-release/mediaadvisory-use-of-a-variety-of-rating-factors-beyond-driving-record-makes-for-a-competitive-auto-insurancemarketplace-080315.

98 The Delaware Insurance Commissioner, for one, answered “no”: “This so-called ‘widow’s penalty’ is completely 

unfair. . . . I will not approve any auto insurance filings that cannot provide actuarially sound data for including 

widows and widowers in a higher single rate category.” “Commissioner Stewart Outlaws ‘Widow’s Penalty’ in 

Setting Auto Insurance Rates,” Insurance Matters, Issue 21, at 4 (Fall 2015), available at 

http://www.delawareinsurance.gov/newsletter/DOInewsletter_21thEdition.pdf. 99 The issue of same-sex marriage illuminates the considerations insurers and policymakers must weigh when 

determining the fairness of using marital status as an underwriting or pricing factor. Prior to the Supreme Court’s 

2015 decision in Obergefell v. Hodges, 135 S. Ct. 2584 (2015), which held that same-sex couples have the 

fundamental right to marry and that the Constitution requires a state to recognize the marriage of a same-sex couple 

validly married in another state, many same-sex partners could not legally marry. That a person legally excluded 

from the institution of marriage had to pay higher insurance premiums because of that exclusion illuminates the 

potential unfairness of using the legal status of marriage as an underwriting and rating factor.

100 Haw. Rev. Stat. § 431:10C-207; Mich. Ins. Code § 500.2111(4); Mont. Code Ann. § 49-2-309; Massachusetts 

Division of Insurance, 211 CMR 79.00.

101 See, e.g., Mass. Gen. Law ch. 175, § 4C (“No insurer . . . shall take into consideration when deciding whether to 

provide, renew, or cancel homeowners insurance the race, color, religious creed, national origin, sex, age, ancestry, 

sexual orientation, children, marital status, veteran status, the receipt of public assistance or disability of the 

applicant or insured.”) (emphasis added).

102 See, e.g., 42 U.S.C. § 18116 (non-discrimination).
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continue to use sex and gender as risk classification factors for non-health insurance products 

such as life insurance, annuities, and auto insurance. For instance, insurers have provided 

separate annuity rates (i.e., prices) for men and women since the mid-nineteenth century.103 

Also, men on average pay higher premiums than women for both life insurance and auto 

insurance, with one study finding that, over a lifetime, men pay approximately $15,000 more for 

auto insurance than women.104

1. Anti-Discrimination Efforts

Sex- and gender-based approaches to the pricing of insurance products raise questions of 

fundamental fairness. Insurers assert that sex is an appropriate basis for underwriting and pricing 

insurance products, noting, for example, that from a claims perspective, women are safer drivers 

than men. Previous attempts to prohibit sex-based discrimination in insurance pricing through 

federal legislation did not succeed.105 In the absence of federal legislation, states and courts have 

begun to explore the propriety of sex-based pricing of insurance and whether to classify sex- or 

gender-based underwriting as discriminatory and prohibit the practice.106

Box 1: Sex vs. Gender

Although many use the words “sex” and “gender” interchangeably, the terms have distinct 

meanings. According to the World Health Organization: “Sex refers to the biological and 

physiological characteristics that define men and women. Gender refers to the socially 

constructed roles, behaviors, activities, and attributes that a given society considers appropriate 

for men and women.”107 The difference between sex and gender has relevance to the question of 

fairness in auto insurance pricing. People identifying as transgender, i.e., “[w]hen one’s gender 

identity and biological sex are not congruent,”108 may have a different gender identity than the 

sex noted on their birth certificate or driver’s license. A sex-neutral approach to insurance 

underwriting and pricing would treat all people equally, regardless of sex or gender.

 103 Mary Heen, From Coverture to Contract: Engendering Insurance on Lives, 23 YALE J. OF LAW AND FEMINISM

335, 337, 377 (2011), available at http://scholarship.richmond.edu/cgi/viewcontent.cgi?article=1105&context=lawfaculty-publications. 104 Kathy Kristof, “How men can beat gender bias in car insurance,” CBS Moneywatch (May 15, 2012), available at

http://www.cbsnews.com/news/how-men-can-beat-gender-bias-in-car-insurance/. See also Daniel Kurt, “7 Factors 

that Affect your Life Insurance Quote,” Investopedia, available at 

http://www.investopedia.com/articles/investing/102914/7-factors-affect-your-life-insurance-quote.asp.

105 Mary Heen, Nondiscrimination in Insurance: The Next Chapter, 49 GEORGIA L. REV. 1 (Fall 2014), available at

http://scholarship.richmond.edu/cgi/viewcontent.cgi?article=2049&context=law-faculty-publications 106 Id.

107 World Health Organization, Gender, women and health: What do we mean by “sex” and “gender”?, available at

http://apps.who.int/gender/whatisgender/en/. 108 American Psychological Association, Definitions Related to Sexual Orientation and Gender Diversity in APA 

Guidelines and Policy Documents, available at http://www.apa.org/pi/lgbt/resources/sexuality-definitions.pdf.
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As previously mentioned, some states prohibit the use of sex or gender in the pricing of certain 

non-health insurance products.109 In 1985, Montana banned the use of gender as a factor in 

setting premium rates, including for automobile policies.110 Massachusetts’ Private Passenger 

Motor Vehicle Insurance Rates regulation prohibits the use of a variety of factors, including sex, 

in underwriting and pricing auto insurance, as do statutes in Hawaii, Michigan, and North 

Carolina.111 Pennsylvania “prohibits insurers from denying benefits or coverage to individuals 

on the basis of unfair sex or marital status discrimination in the terms or conditions of insurance 

contracts and in the underwriting criteria of insurers,” but allows differentiating prices on the 

basis of sex with “sound actuarial justification.”112

Additionally, in 1983, the U.S. Supreme Court addressed the issue of sex-based insurance 

pricing, albeit in the limited context of employer-provided retirement benefits. In Arizona 

Governing Committee v. Norris, the Supreme Court held that Title VII of the Civil Rights Act of 

1964 “prohibits an employer from offering its employees the option of receiving retirement 

benefits from one of several companies selected by the employer, all of which pay a woman 

lower monthly retirement benefits than a man who has made the same contributions,” even 

though women at retirement age tend to outlive men.113 As a result, “sex-neutral systems [are in 

place] for payment of employee retirement annuity and pension benefits.”114

Further, policymakers outside of the United States also are addressing sex-based discrimination, 

with a number of countries implementing consumer protection measures related to the practice of 

sex-based pricing. For example, in 2004, the Council of the European Union released a directive 

mandating that insurers offering voluntary, commercial insurance in Europe begin to transition to 

sex-neutral pricing.

115

2. The Path Forward

Consumers with questions about the effect of sex or gender on the price of insurance products 

should contact their insurance producer, insurer, or state insurance regulator (contact information 

for state insurance regulators is listed in Appendix I) for more information.

 109 See, e.g., Massachusetts Office of Consumer Affairs and Business Regulation, Massachusetts Consumer Bill of 

Rights for Automobile Insurance, available at http://www.mass.gov/ocabr/insurance/vehicle/autoinsurance/massachusetts-consumer-bill-of-rights-for.html; Michigan Department of Insurance and Financial 

Services, Information on Purchasing Auto Insurance, available at http://www.michigan.gov/difs/0,5269,7-303-

13222_13224-66774--,00.html#q5; Pennsylvania Department of Insurance, Automobile Insurance Guide, available 

at http://www.insurance.pa.gov/Documents/auto_guide.pdf. 110 Mont. Code Ann. § 49-2-309.

111 Massachusetts Division of Insurance, 211 CMR 79.00; Haw. Rev Stat § 431:10C-207; Mich. Ins. Code § 

500.2111(4); N.C. Gen. Stat. § 58-3-25(a). 112 31 Pa. Code § 145.1. 113 Arizona Governing Committee v. Norris, 463 U.S. 1073 (1983).

114 Mary L. Heen, Sex Discrimination in Pension and Retirement Annuity Plans after Arizona Governing Committee 

v. Norris: Recognizing and Remedying Employer Non-Compliance, 8 WOMEN’S RTS. L. REP. 155, 156 (1985)

available at http://scholarship.richmond.edu/cgi/viewcontent.cgi?article=1260&context=law-faculty-publications.

115 Heen, Nondiscrimination, supra note 105, at 71-77.
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Additionally, state and federal policymakers should continue to assess whether sex and gender 

are appropriate underwriting considerations for insurers. Congress should examine how states 

are addressing the issue and consider whether sex or gender are valid factors for insurers to use 

in pricing insurance products. For over thirty years, Congress has considered the need for 

enhanced federal civil rights legislation that would broadly ban discrimination as it relates to 

insurance.116 Such federal legislation may be necessary to address the issue of sex- or genderbased discrimination in the insurance industry.

C. Transparency in Homeowners Insurance Coverage

1. Homeowners Insurance and the Policy Form

In a homeowners insurance policy, the insurer, in exchange for the payment of a premium, 

agrees to pay for damage to the covered property that arises out of the covered perils of the 

policy. The policy “form” contains the terms governing how much coverage will be provided 

and under what circumstances. An insurer can develop its own homeowners insurance policy 

forms or choose to adopt and use standardized forms developed by an insurance advisory 

organization (such as the homeowners special policy form 3, or HO-3).117

Standardization of homeowners insurance policy forms traditionally has been a significant part 

of the homeowners insurance business because, among other reasons, it provides clarity of policy 

language by relying on established interpretations of coverage.118 Additionally, the 

standardization of insurance policy forms allows consumers the opportunity to compare policies 

based on price and reputation of the insurer, knowing that the different policies provide 

consistent coverage.

2. Increasing Use of Non-Standardized Policies

Notwithstanding the continued use of standardized policies in the U.S. homeowners insurance 

market, some insurers also use non-standardized policy forms that can limit or extend coverage 

as compared to standardized policy forms. An empirical study of homeowners policies found 

that 5 of 16 analyzed insurers used policies that were “substantially less generous than the HO-3 

policy.”119 In other words, some non-standardized forms reduce the protection provided to 

consumers in the homeowners insurance policy. For example, some non-standardized 

homeowners policies exclude all mold-related property damage or place sub-limits on moldrelated losses, whereas the standard HO-3 policy covers at least some losses caused by mold 

(such as loss attributed to mold that is hidden within walls, floors, or ceilings).120

 116 Id. at 23-25. 117 Catastrophe Insurance Report, supra note 1.

118 Daniel Schwarcz, Reevaluating Standardized Insurance Policies, 78 U. CHI. L. REV. 1263, 1272-73 (2011), 

available at http://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=5550&context=uclrev. 119 Id. at 1314.

120 Id. at 1285.
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The reduced coverage of some non-standardized policies is made more problematic by a lack of 

transparency which, in turn, hinders the ability of consumers to understand the coverage in their 

homeowners insurance policies. Generally, policy forms are not made available to a consumer 

by insurers until after the purchase of the policy, thus reducing the opportunity for a consumer to 

discover the coverage terms of a homeowners policy.121 Relatedly, without meaningful 

transparency, consumers face much more difficulty in comparing policies on the basis of 

coverage terms. Without understanding the coverage differences among competing homeowners

policies, consumers cannot evaluate options from a coverage or price perspective in a fully 

informed manner.

State insurance regulators and state consumer protection agencies historically have neither 

provided policy forms to consumers nor educated consumers about the existence of the coverage 

limitations in some non-standardized policies. This practice is beginning to change. The Nevada 

Division of Insurance provides policy forms used by the ten largest homeowners insurance 

groups in Nevada.122 In addition, the California Department of Insurance has developed an 

online comparison tool for consumers shopping for homeowners, renters, and condominium 

insurance.123 Similarly, the Texas Office of Public Insurance Counsel, which “represent[s] the 

interests of consumers in insurance matters” primarily before the Texas Department of 

Insurance,124 provides a web-based tool for consumers to compare homeowners insurance 

policies.125 

3. The Path Forward

Insurers and state insurance regulators should join in a concerted effort to improve transparency 

to consumers of the coverage provided by homeowners insurance policies. Insurers should 

provide consumers with access to homeowners insurance policy forms before purchase, whether 

by providing a copy as part of an insurance quote, by posting prototype policies on a website, or 

by other means. Policies should be in a clear format that allows consumers to easily understand 

the limits, terms, conditions and exclusions. The existence of publicly available and 

understandable policy forms will better afford an interested homeowner the opportunity to 

comparison shop for coverage.

State insurance regulators should work to improve the transparency of consumer disclosures 

regarding policy forms and coverage limits. The NAIC’s Transparency and Readability 

Working Group notes in its 2016 mandate that it should “[s]ystematize and improve presale 

disclosures of coverage”; “increase consumer accessibility to different carriers’ policy forms on a 

 121 Id. at 1319-1323. 122 Nevada Division of Insurance, Policy Forms Used by the 10 Largest Homeowners’ Insurance Groups in Nevada, 

available at http://doi.nv.gov/Consumers/Homeowners-Insurance/Policy-Forms/. 123 California Department of Insurance, Homeowners/Renters/Condominium Owners Coverage Comparison, 

available at https://interactive.web.insurance.ca.gov/apex/f?p=143:1.

124 Texas Office of Public Insurance Counsel, Agency Information, available at http://www.opic.texas.gov/opicinfo/agency-overview. 125 Texas Office of Public Insurance Counsel, Homeowners Insurance Comparison, available at

http://www.opic.texas.gov/residential-property/compare-policy-coverages/homeowners.
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presale basis” and “facilitate consumers’ capacity to understand the content of insurance policies 

and assess differences in insurers’ policy forms.”126 State insurance regulators should prioritize 

the charges of the Transparency and Readability Working Group and provide greater assistance 

with homeowners insurance policies to consumers in every state.

D. Mandatory Arbitration Clauses

1. Mandatory Arbitration for Consumer Insurance Contracts

Mandatory arbitration clauses are provisions that appear in some consumer contracts requiring

the parties to resolve some or all disputes through the process of arbitration instead of litigation. 

Arbitration is a dispute resolution process conducted in front of one or more non-judicial thirdparty decisionmakers. Typically, an arbitration clause specifies that the results are binding and 

subject to very limited judicial review, and that a set of rules established by an arbitration body 

will apply to the proceeding rather than state or federal rules of civil procedure or evidence. 

Arbitration rules, among other differences, may provide for limited or no discovery as compared 

to state or federal rules of civil procedure. In a March 2015 report, the Consumer Financial 

Protection Bureau (CFPB) found that mandatory arbitration clauses are a common feature of 

consumer financial contracts for tens of millions of consumers.127 Some insurers also 

incorporate mandatory arbitration clauses in insurance contracts, particularly for commercial 

lines such as commercial liability policies.

128 While some states have laws prohibiting the use of 

such arbitration clauses, most do not.129

Proponents of arbitration argue that such proceedings are faster and less costly than going to 

court, and that experienced arbitrators bring substantive expertise to the dispute resolution 

process.130 Indeed, mandatory binding arbitration provisions are common in a range of 

commercial contexts, including reinsurance contracts, where parties with commensurate 

bargaining power have agreed on this method of dispute resolution. Nevertheless, mandatory 

arbitration clauses can be problematic if balanced bargaining power does not exist. For instance, 

critics charge that such clauses are harmful to consumers and are included in contracts in order to 

disable “consumer challenges to practices like predatory lending, wage theft and discrimination” 

 126 NAIC, Transparency and Readability of Consumer Information (C) Working Group: 2016 Charges, available at

http://naic.org/cmte_c_trans_read_wg.htm.

127 Consumer Financial Protection Bureau, Arbitration Study, Report to Congress, pursuant to Dodd-Frank Wall 

Street Reform and Consumer Protection Act § 1028(a) (March 2015), available at

http://files.consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-2015.pdf. 128 Darren S. Teshima and Harry Moren, Closing the Courthouse Door to Insurance Disputes: Mandatory 

Arbitration Clauses in Insurance Policies Gain Traction, Orrick (May 27, 2015), available at

http://blogs.orrick.com/insurance/2015/05/27/closing-the-courthouse-door-to-insurance-disputes-mandatoryarbitration-clauses-in-insurance-policies-gain-traction/.

129 Public Citizen, State Laws Regulating Arbitration in Insurance Contracts, available at

http://www.citizen.org/congress/article_redirect.cfm?ID=6560.

130 JAMS, JAMS Arbitration Process, available at http://www.jamsadr.com/adr-arbitration/.
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by preventing class action lawsuits and preventing individuals from bringing a lawsuit.

131 Critics

further assert that in this “alternate system of justice,” the “rules tend to favor businesses, and 

judges and juries have been replaced by arbitrators who commonly consider” companies to be

the “clients” and “cultivate close ties with companies to get business.”132

In response to these concerns, the CFPB published, in May 2016, a proposed rule that would 

prohibit the use of pre-dispute arbitration clauses to block class actions by providers of certain 

non-insurance consumer financial products and services related to lending, storing, moving, or 

exchanging money.

133 According to the CFPB, under the proposed rule, consumers would 

regain access to “the legal system . . . so they could file a class action or join a class action when 

someone else files it.”134

The CFPB’s authority excludes the business of insurance and any person regulated by a state 

insurance regulator,

135 leaving insurance consumers to rely on non-uniform state-by-state

approaches to the use of mandatory arbitration clauses in insurance contracts. Twenty-four states 

allow unrestricted use of mandatory arbitration clauses in insurance policies; 16 states prohibit 

insurers from enforcing arbitration clauses in all types of policies; and the remaining states have 

laws or regulations prohibiting mandatory arbitration clauses in certain situations.136 States that 

take a targeted approach to regulating or prohibiting arbitration clauses often focus on personal 

lines insurance products. For instance, Rhode Island prohibits the use of mandatory arbitration 

clauses only in life insurance policies,137 Mississippi prohibits such use for uninsured motorist 

coverage,138 and Delaware insurance regulations allow for non-binding arbitration in coverage 

actions involving auto and homeowners insurance, but allow determinations from such 

proceedings to be appealed in court.

139 As of August 2016, at least one state is considering 

 131 Jessica Silver-Greenberg and Robert Gebeloff, “Arbitration Everywhere, Stacking the Deck of Justice,” New 

York Times (October 31, 2015), available at http://www.nytimes.com/2015/11/01/business/dealbook/arbitrationeverywhere-stacking-the-deck-of-justice.html.

132 Jessica Silver-Greenberg and Michael Corkery, “In Arbitration, a ‘Privatization of the Justice System,’” New 

York Times (October 31, 2015), available at http://www.nytimes.com/2015/11/02/business/dealbook/in-arbitrationa-privatization-of-the-justice-system.html.

133 Arbitration Agreements, 81 Fed. Reg. 32829 (May 24, 2016). 134 Consumer Financial Protection Bureau, CFPB Proposes Prohibiting Mandatory Arbitration Clauses that Deny 

Groups of Consumers their Day in Court (May 5, 2016), available at http://www.consumerfinance.gov/aboutus/newsroom/consumer-financial-protection-bureau-proposes-prohibiting-mandatory-arbitration-clauses-denygroups-consumers-their-day-court/. 135 See 12 U.S.C. § 5517. 136 Public Citizen, State Laws Regulating Arbitration in Insurance Contracts, available at

http://www.citizen.org/congress/article_redirect.cfm?ID=6560. However, the interplay between state laws 

prohibiting the use or enforcement of mandatory arbitration provisions and the Federal Arbitration Act complicates 

the applicability of these laws. While these laws have been upheld or have not been challenged in thirteen states, 

courts in three states (Alabama, Massachusetts, and Vermont) have held that the laws are preempted by the Federal 

Arbitration Act. Id. 137 R.I. Gen. Laws. § 27-4-13. 138 Miss. Code Ann. § 83-11-109.

139 Delaware Department of Insurance, Regulation 901, Arbitration of Automobile and Homeowners’ Insurance 

Claims, available at http://www.delawareinsurance.gov/departments/consumer/Reg10.pdf.
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whether to allow a homeowners insurer to include a mandatory arbitration clause in exchange for 

a premium discount.140

2. Consumer Resources and the Path Forward

Consumers with questions about mandatory arbitration clauses may wish to speak with their 

insurance producer or insurer for more information, or contact their state insurance regulator 

(contact information for state insurance regulators is listed in Appendix I) to receive an 

explanation or assistance in addressing this issue.

Policymakers and state insurance regulators should consider developing appropriate constraints 

on mandatory arbitration clauses in insurance contracts. State policymakers and insurance 

regulators should assess whether the current lack of uniformity in state laws and regulations 

raises questions about whether state consumer protections for insurance consumers should better 

align with those afforded to the consumers of other financial products and services.

E. The Costs of Filing an Insurance Claim

Most consumers purchase property insurance hoping never to file a claim, but with the 

expectation that should one arise the claim will be paid in accordance with the terms of the 

policy. Most consumers do not expect that making a claim could have a negative impact even if 

the policyholder is not at fault. However, in many states, and with many insurers, this is a risk. 

Filing a claim can increase the price of insurance when applying for renewal, and, for some 

consumers, may even result in non-renewal. This practice is sometimes referred to as “use it and 

lose it.”141

Through commonly used insurance databases, insurers collect and share information regarding 

policyholders’ damages and claims, whether paid or not.142 For example, the Comprehensive 

Loss Underwriting Exchange (CLUE), operated by LexisNexis, collects personal auto and 

personal property claims history about consumers going back seven years.143 Another database, 

the Automobile-Property Loss Underwriting Service (A-PLUS), operated by Verisk Analytics, 

contains up to seven years of information regarding claims filed by policyholders and previous 

 140 See, e.g., Sharadha Kalyanam, “Texas Farm Bureau Mutual proposes premium discount in return for waiver of 

right to sue,” SNL (Aug. 9, 2016), available at

https://www.snl.com/web/client?auth=inherit#news/article?id=37363616&KeyProductLinkType=4.

141 Amy Bach, “What’s the point? A ‘use it and lose it’ UPdate,” United Policyholders, available at

http://www.uphelp.org/blog/whats-point-use-it-and-lose-it-update. 142 Alina Tugend, “Short Cuts: The Peace of Mind of Home Insurance, Unless You Use It,” New York Times

(October 1, 2005), available at http://www.nytimes.com/2005/10/01/business/the-peace-of-mind-of-homeinsurance-unless-you-use-it.html?_r=0. 143 Washington State Office of the Insurance Commissioner, CLUE (Comprehensive Loss Underwriting Exchange), 

available at http://www.insurance.wa.gov/your-insurance/tips/clue.html (Washington OIC, CLUE).
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property claims.144 Most insurers report to these databases information arising from incidents for 

which the insurers set up claim files, pay out money, or formally deny a claim. Many insurers 

rely on reports generated by CLUE and A-PLUS when determining whether to accept an 

application for coverage or how much premium to charge for that coverage.145 CLUE and APLUS reports for a particular property can also be accessed by the property owner.

146

According to a 2014 report on the price of homeowners insurance, the average annual insurance 

premium for a U.S. homeowner increased by nine percent after a single claim.147 Consumer 

advocates have observed that even consumers with a claim-free history are dropped from 

coverage after filing a single claim, and such consumers often have difficulty replacing the 

policy at comparable cost.148 A 2015 study focused on auto insurance reported an even more 

significant effect, noting that filing a claim of any type over $2,000 resulted in an average 

premium increase of 75 percent in Massachusetts, 75 percent in California, and 62 percent in 

New Jersey.149 Even consumers in the states with the lowest average premium increases 

(Maryland, Michigan, and Montana) faced average premium increases of at least 22 percent

following a $2,000 claim.

150

1. The Path Forward

Reliance on loss information to price insurance is necessary. A history of claims and insured 

losses can indicate that a consumer presents a higher risk of loss than a consumer without such a 

claims history. However, the effect that a single claim can have on premiums can be especially 

disruptive and potentially unfair for consumers who file a claim even though the consumer is not 

at fault. Consumers are encouraged to review policy terms with insurance producers, or with the 

insurer directly, and to shop for coverage that offers the consumer the best protection available. 

Consumers who believe insurance costs unfairly increase after filing a claim may also wish to 

contact their state insurance regulator (contact information for state insurance regulators is listed 

in Appendix I) and ask for an explanation or assistance in addressing this issue.

Policymakers and insurance regulators should identify any reforms needed to address increased 

premiums after claims caused by accidents for which the policyholder was not at fault.

 144 Verisk Analytics, Policy, Claims and Coverage Information: A-PLUS Property, available at

http://www.verisk.com/underwriting/property/policy-claims-and-coverage-information.html.

145 Washington OIC, CLUE, supra note 143. 146 LexisNexis, Personal Reports, available at https://personalreports.lexisnexis.com/fact_act_disclosure.jsp; Verisk 

Analytics, A-PLUS – How to order your free A-PLUS loss history report, available at

http://www.verisk.com/underwriting/order-an-a-plus-loss-history-report.html. 147 Nick DiUlio, “One home ownership claim can cause your premium to jump by 32%,” Insurance Quotes (October 

16, 2014), available at http://www.insurancequotes.com/home/home-insurance-claim-premium-increase.

148 Bach, supra note 141.

149 Nick DiUlio, “Making one auto insurance claim can drive up your rate by up to 76 percent,” Insurance Quotes

(January 27, 2015), available at http://www.insurancequotes.com/auto/one-auto-insurance-claim-rate-increase.

150 Id.
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V. Fairness in State Insurance Standards

A. State Insurance Guaranty Associations

An important insurance consumer protection goal, similar in purpose to the goals of the Federal 

Deposit Insurance Corporation for deposit accounts, is ensuring payments of benefits to 

consumers even if an insurer becomes insolvent. In order to provide this protection, states

establish guaranty associations (sometimes referred to as guaranty funds) for the benefit of 

policyholders residing in that state.

1. Understanding State Insurance Guaranty Associations

If an insurer can no longer meet its financial obligations to consumers, the insurance regulator of 

the state in which the insurer is domiciled becomes the statutory receiver and often seeks to 

rehabilitate the insurer. If rehabilitation is not feasible, a court will preside over a liquidation and 

the consumer protections provided by the state guaranty associations are triggered.

The benefits of each guaranty association are governed by the laws of its state and each 

association consists of all insurers licensed to do business in that state. When a guaranty 

association is required to pay obligations of an insolvent insurer, the association assesses each 

member insurer a proportionate share of the cost based on the member insurer’s market share in 

the lines of business written by the insolvent insurer.151 State guaranty associations help protect 

consumers by providing a benefit to cover some or all of the gap, if any, between the amount an 

insolvent insurer owes to consumers and the amount the insurer is able to pay. State guaranty 

associations are not, however, required to make a consumer or policyholder completely whole. 

The maximum benefit payable by an association to an individual policyholder is set by the laws 

of the policyholder’s state of residence.

2. The Need for National Uniformity

Coverage limits under state guaranty associations are not consistent state-to-state. For example, 

if a life insurer becomes insolvent, a life insurance policyholder residing in the state of 

Washington may be eligible for up to $500,000 in guaranty fund protection for the policy’s cash 

value, while a policyholder with the same product from the same insurer residing in Oregon is 

limited to only $100,000.152 Similarly, a Michigan resident who owns a property or casualty 

policy may be eligible for up to $5,000,000 in protection for covered claims, while a 

policyholder in Arizona is limited to only $300,000.153

 151 Most states have established separate guaranty associations for life/health and property/casualty lines of business.

152 Wash. Rev. Code § 48.32A.025(3)(b)(i)(A); Or. Rev. Stat. § 734.810(11)(b)(A). See also National Organization 

of Life & Health Guaranty Associations, State Laws and Provisions Report: Benefits Limits (updated as of July 1, 

2016), available at http://www.nolhga.com/factsandfigures/main.cfm/location/lawdetail/docid/8.

153 Mich. Comp. Laws § 500.7925(6); Ar. Rev. Stat. § 20-667(B).
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State regulators attempted to reform and update state guaranty association laws in order to 

achieve uniform national protections. In 2009, state insurance regulators adopted revisions to the

Life and Health Insurance Guaranty Association Model Act (Model Life Guaranty Act).154 

These revisions expanded the list of covered products to specifically include disability and longterm care insurance, and either reconfirmed existing coverage limits or established new limits for 

each line of business.155 As with any NAIC Model Law, the Model Life Guaranty Act does not 

take effect in a state unless approved by the state legislature and signed into law by the governor.

Additionally, because eligibility for coverage and coverage limitations are generally based on the 

policyholder’s residence at the time of insolvency, instead of residence when the policy was 

purchased, the protection available when the consumer buys a policy may later change 

substantially. Under current state laws, if a consumer purchases a life insurance policy in a state 

that has adopted a cash value limit of $300,000 (for example, North Carolina), the limit could 

rise (for example, to $500,000 in Connecticut) or fall (for example, to $100,000 in California)

depending on the location of the policyholder’s next residence.

3. Guaranty Funds: Public Awareness

With the exception of two states (Alabama and Michigan), insurers and insurance producers are 

prohibited from advertising protections provided by the state’s life and health insurance guaranty 

association. This prohibition on advertising also applies to the property and casualty insurance 

guaranty associations in 19 states,156 and prevents insurers and producers from using even the 

existence of the guaranty association to provide assurance to potential consumers about 

consumer protections related to an insurance product. The prohibition is based on concerns that 

state guaranty associations may create a moral hazard and some insurers will underprice or offer 

financially unsustainable products to generate revenue.

157 Supporters of the prohibition also 

observe that state guaranty association coverages and limitations are complicated and difficult to 

explain, potentially leading to misunderstanding by producers and consumers.

Minnesota has adopted an approach that seeks to balance concerns over moral hazard with the 

benefits of transparency and improved decision-making based on availability of information. 

Although Minnesota joins other states in prohibiting the use of the life and health guaranty 

association for sales purposes, its law allows insurers and producers to verbally explain the 

coverage provided by the association at any time during the application process or thereafter.158

 154 The Model Life Guaranty Act is available at http://www.naic.org/store/free/MDL-520.pdf.

155 The limits are $100,000 for health claims, $300,000 for life claims, $100,000 for cash surrender/withdrawal 

values, $300,000 for both disability and long-term care claims, $500,000 for basic or major medical claims, and 

$250,000 in the present value of annuity benefits. See Model Life Guaranty Act, Section 3. Covered products and 

limitations under the Property and Casualty Insurance Guaranty Association Model Act have remained substantially 

the same for decades.

156 See, e.g., P.S. 40 § 991.1820; RI Gen. L. § 27-34-19; and 8 V.S.A. § 3626.

157 NAIC, Proceedings Citations for Life and Health Insurance Guaranty Association Model Act (Model No. 520), 

at PC-520-23, available at http://www.naic.org/store/free/MDL-520.pdf.

158 M.S.A. Section 61B.28, Subd. 4. Minnesota is also one of the 31 states (plus the District of Columbia) that 

require life insurers to provide a document summarizing guaranty association coverage to the policyholder either at 
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The longstanding prohibition against describing the coverage backstop may create a lack of 

transparency in the insurance and retirement products marketplace. This prohibition may also 

contribute to a lack of trust and confidence among prospective insureds, and further complicate

the insurance product buying process.

4. Consumer Resources and the Path Forward

Consumers may wish to proactively seek information about guaranty association coverage of 

their insurance policies and annuities from the websites for the trade associations for state life 

and health insurance guaranty associations and for state property/casualty insurance guaranty 

associations.159 The websites provide additional information on insurer insolvencies, including 

the associations’ roles and relevant state laws and regulations. Consumers with concerns about 

guaranty association benefits may also wish to contact their state insurance regulator (contact 

information for state insurance regulators is listed in Appendix I) to receive an explanation in 

addressing this issue.

State policymakers and insurance regulators should evaluate whether the guaranty association 

benefits provided to consumers in their states are appropriate when compared to those available 

to consumers of the same product from the same insurer in other states. These are issues with 

interstate implications, especially given an increasingly mobile society and, therefore, are of 

national interest. For these reasons, if coverage limits are not standardized nationally by the 

states, then Congress should consider prescribing nationally uniform standards.

B. Workers’ Compensation Insurance

Each year, more than three million workers in the United States are either seriously injured or 

killed as a result of work-related injuries.160 For many of these workers, workers’ compensation 

(a remediation insurance system) provides for costs related to medical care and treatment, 

rehabilitation, lost wages, and other financial loss.161

 or before the time of delivery of the policy, or (in some states) upon request. In general, the summary document 

describes the types of policies that are covered by the association and related coverage limitations, states that the 

policy or contract owner should not rely on guaranty association coverage when selecting an insurer, states the 

advertising prohibition, and provides other information as directed by the state insurance regulator. American 

Council of Life Insurers Law Survey, Guaranty Association Summary Document Requirements (Update May 11, 

2015).

159 The websites of the National Organization of Life and Health Insurance Guaranty Associations 

(www.nolhga.com) and the National Conference of Insurance Guaranty Funds (www.ncigf.org) also provide links to 

the websites of every life and health insurance guaranty association and every property/casualty insurance guaranty 

association, respectively.

160 OSHA, U.S. Department of Labor, Adding Inequality to Injury: The Costs of Failing to Protect Workers on the 

Job (June 2015), available at http://www.dol.gov/osha/report/20150304-inequality.pdf. 161 See 2015 Annual Report, supra note 1, at 72, for an overview of workers’ compensation insurance in the United 

States.
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Each of the 50 states, the District of Columbia, and U.S. territories has unique workers’ 

compensation laws and regulations. Through workers’ compensation, employers assume 

financial responsibility for paying or insuring the statutorily established benefits for employees’ 

work-related injuries.162 Workers’ compensation laws provide defined benefits for specified 

forms of occupational injuries and illnesses in exchange for the injured worker forgoing a private 

lawsuit against his or her employer. Workers’ compensation systems serve as substitutes for 

lengthy, expensive civil trials and, in this way, reduce financial uncertainty for both employees 

and employers.163

With the exception of Texas,164 every state requires private sector employers to possess some 

form of workers’ compensation coverage to benefit injured employees.165 In most states, 

mandatory workers’ compensation coverage does not apply to the self-employed or independent 

contractors;166 and, in some states, mandatory coverage does not extend to some employees in 

certain sectors, such as farm and domestic workers.167

According to the National Academy of Social Insurance, in 2014 approximately 132.7 million 

workers were protected by workers’ compensation insurance, representing about 90 percent of 

the workforce with approximately $6.8 trillion worth of wages.168 Employers’ estimated costs 

 162 NAIC, An Overview of Workers’ Compensation Independent Contractor Regulatory Approaches (2009) 

(Workers Compensation Overview), available at http://www.naic.org/store/free/OWC-OP.pdf.

163 David F. Utterback, Alysha R. Meyers, and Steven J. Wurzelbacher, Workers’ Compensation Insurance: A 

Primer for Public Health, Department of Health and Human Services, Centers for Disease Control and Prevention, 

National Institute for Occupational Safety and Health (January 2014), available at 

http://www.cdc.gov/niosh/docs/2014-110/pdfs/2014-110.pdf. 164 It is not mandatory for employers in Texas to provide workers’ compensation insurance coverage. Under the 

Texas system, employers who “opt out” of providing workers’ compensation insurance need to notify their 

employees and the state that workers’ compensation benefits are not provided. These employers that opt out, also 

referred to as “non-subscribers,” are subject to the tort system and can be sued in court by an injured employee. To 

limit their exposures or to enhance employee benefits, some non-subscribers purchase private insurance – an 

“Employee Injury Benefit Plan” or “Occupational Injury Benefit Plan” – to cover their employees’ injuries by 

providing compensation for medical expenses and lost wages. These plans typically specify any restrictions, 

conditions, or requirements for receiving benefits, and often require employees to sign a binding arbitration 

agreement in exchange for receiving plan benefits. An employee does not have to accept the agreement and can 

retain the right to pursue a claim in the tort system for any sustained injuries. See Texas Department of Insurance, 

Information for Workers’ Compensation Non-subscribers, http://www.tdi.texas.gov/wc/employer/cb007.html; Texas 

Workers’ Compensation Act, 83rd Texas Legislature (R) (2013), available at

http://www.tdi.texas.gov/wc/act/#html.

165 Insurance Information Institute, Workers Compensation (January 2016), available at http://www.iii.org/issueupdate/workers-compensation. 166 Workers Compensation Overview, supra note 162.

167 See, e.g., New York State Workers’ Compensation Board, Who Is And Is Not Covered By The Workers’ 

Compensation Law, available at

http://www.wcb.ny.gov/content/main/Employers/Coverage_wc/empWhoNotCovered.jsp.

168 Marjorie L. Baldwin and Christopher F. McLaren, Workers’ Compensation: Benefits, Coverage, and Costs, 

(2014 Data), National Academy of Social Insurance (October 2016), available at 

https://www.nasi.org/sites/default/files/research/NASI_Workers_Comp_Report_2016.pdf.
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for workers’ compensation (including premiums, payments made under deductibles, benefits, 

and administrative costs) were $91.8 billion in 2014, including $62.3 billion in benefits paid.169

1. Current Trends and Taxpayer Impact

Workers’ compensation insurance presents a number of public policy and consumer protection 

issues. This section discusses some of these issues, including the ongoing cost shift from 

employers to taxpayers, the non-uniformity of workers’ compensation benefits across states, and 

continuing efforts by some states to move away from the requirement that employers have 

workers’ compensation insurance.

2. Cost Shift to Taxpayers

Federal taxpayers are increasingly absorbing the costs of paying benefits for workers’ job-related 

injuries as states continue to reduce the availability or amount of workers’ compensation

benefits.170 Of the approximately 10.9 million Social Security Disability Insurance (SSDI) 

beneficiaries in 2014, approximately 9 million (or 82 percent) were injured workers171 who were 

more likely than not receiving SSDI benefits in part because they did not have the option of 

receiving workers’ compensation benefits.172 A June 2015 report by the Occupational Safety 

and Health Administration (OSHA) found that “[a]n accumulating body of evidence shows that 

at least part of the growth in the SSDI benefit payments is attributable to the program’s subsidy 

for work injuries and illnesses.”173 According to a 2012 study, this cost shift resulted in

increased SSDI expenditures for workers with workplace injuries amounting to roughly $12 

billion.

174

Some federal lawmakers have taken note of current workers’ compensation insurance 

developments and trends. An October 20, 2015 public letter sent by several senators and 

representatives to the U.S. Department of Labor notes the “erosion of workers’ compensation 

protections” over the past decade, citing the fact that 33 states have enacted laws reducing 

 169 Id.

170 Nick Buffie and Dean Baker, Rising Disability Payments: Are Cuts to Workers’ Compensation Part of the 

Story?, Center for Economic and Policy Research (October 2015) (reviewing the potential impact of changes in 

workers’ compensation programs on the federal treasury), available at http://cepr.net/documents/rising-disabilitypayments-2015-10.pdf. See also U.S. Department of Labor, Does the Workers’ Compensation System Fulfill Its 

Obligations to Injured Workers, at 5-6 (Oct. 5, 2016) (DOL Workers’ Compensation Report) (concluding that 

workplace-related disability costs are being transferred to other programs such as Social Security retirement 

benefits, Social Security Disability Insurance, Medicare, and the Affordable Care Act), available at

https://www.dol.gov/asp/WorkersCompensationSystem/WorkersCompensationSystemReport.pdf. 171 Buffie and Baker, supra note 170, at 7-8.

172 Buffie and Baker, supra note 170; DOL Workers’ Compensation Report, supra note 170. 173 OSHA, supra note 160. 174 Id. (citing P. O’Leary, et al., Workplace injuries and the take-up of Social Security Disability benefits, Social 

Security Bulletin 2012; 72:1-17).
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workers’ compensation benefits or making it more difficult to qualify for those benefits.

175 As 

states reduce benefits paid by employers, directly or through insurance, for a workplace injury, 

the cost of these injuries does not decline. Rather, the costs for injured workers are shifted from 

employers or insurers to the government (and the injured workers themselves).

176

3. State Opt-Out Efforts

State lawmakers are increasingly considering legislation that, if enacted, would allow employers 

to opt out of traditional workers’ compensation systems.177 Two states, Texas and Oklahoma, 

enacted legislation allowing employers to opt-out of the workers’ compensation system to 

varying degrees, and similar legislative efforts are currently under consideration in Tennessee 

and South Carolina.

In Texas, employers are not required to offer workers’ compensation benefits, although some 

employers choose to voluntarily offer coverage through the state workers’ compensation 

program,178 or to create an internal benefit plan that typically specifies restrictions, conditions, or 

requirements for receiving benefits.

179 Similarly, in 2013, Oklahoma enacted the Employee 

Injury Benefit Act which – until it was invalidated earlier this year180 – allowed employers to opt 

out of the state workers’ compensation insurance program.181 Unlike in Texas, however, the 

Oklahoma statute required employers to offer some alternative form of workers’ compensation 

coverage that meets the minimum benefit standards of Oklahoma’s traditional workers’ 

compensation plans.182 Analyses showed that injured workers suffered from inadequate care and 

significantly reduced treatment when an Oklahoma employer opted for an alternative to 

conventional coverage.183 The Oklahoma Supreme Court invalidated the law in September 2016, 

finding that injured workers under the Employee Injury Benefit Act have “no protection to the 

coverage, process, or procedure afforded their fellow employees failing under the Administrative 

 175 Letter dated October 20, 2015 to the Honorable Thomas E. Perez, Secretary, U.S. Department of Labor, from 

Congressional Democratic leaders, available at http://democratsedworkforce.house.gov/imo/media/doc/Workers%20Comp%20Letter%20to%20DOL%2010-20-15.pdf. 176 DOL Workers’ Compensation Report, supra note 170, at 3 (noting the “transfer of the economic cost of 

occupationally-caused or aggravated injuries and illnesses to families, communities and other benefit programs, 

further burdening the federal Medicare and Social Security Disability Insurance programs”).

177 Stephanie K. Jones, “Group Aims to Create Alternatives to Workers’ Comp State-by-State,” Insurance Journal

(November 10, 2014), available at http://www.insurancejournal.com/news/national/2014/11/10/346291.htm. See 

also Christopher Mandel, “More States to Offer Work Comp ‘Opt-Out’?” Insurance Thought Leadership.com, 

(November 24, 2014), available at http://insurancethoughtleadership.com/more-states-to-offer-work-comp-opt-out/. 178 Texas Labor Code § 5.406.002.

179 Texas Labor Code § 5.407.041. 180 Vasquez v. Dillard’s, Inc., 2016 OK 89, __ P.3d __ (Okla. Sept. 13, 2016). 181 Oklahoma Employee Injury Benefit Act, § 85A-202.

182 Id.

183 Howard Berkes and Michael Grabell, “Injured Workers Suffer As ‘Reforms’ Limit Workers’ Compensation 

Benefits,” NPR (March 4, 2015), available at http://www.npr.org/2015/03/04/390441655/injured-workers-suffer-asreforms-limit-workers-compensation-benefits. 
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Workers’ Compensation Act,” and that this “impermissible, unequal and disparate treatment of a 

select group of injured workers” was unconstitutional under the Oklahoma Constitution.184

In Tennessee, an opt-out law, the Employee Injury Benefit Alternative Act, was introduced in 

February 2015.

185 The legislation, if passed, would provide that employers offering opt-out plans 

would need to maintain an approved occupational injury benefit system, although medical 

benefits would be capped at $300,000 and lifetime benefits would be eliminated.186 In addition,

employers who opt out would not have the legal protection from being sued by employees.187 

The South Carolina version, the Employee Injury Benefit Plan Alternative, was first introduced 

in May 2015.

188 It would allow employers to provide injury benefit plans that are less 

comprehensive than state-mandated workers’ compensation insurance, and provides that an 

employer’s opt-out plan would be an employee’s only source of benefits for workplace injury or 

death.189 An injured employee covered by an opt-out plan would not be able to sue for workrelated injuries or illnesses.190

4. Unequal Worker Protection Across the Country

States independently establish compensation limits and rules for injured workers with little or no 

meaningful coordination. In fact, states increasingly seem to compete against each other in a 

battle to reduce employer costs.191 As a result, differing laws and dramatic disparities among

benefits, compensability, and eligibility requirements exist from one state to another, potentially 

leaving workers with unequal protections.

192 Employees working in similar jobs in communities 

with similar economic profiles across state lines are provided with significantly different 

financial and legal benefits for identical injuries. For example, an employee in Alabama who 

suffers the loss of a leg due to a workplace injury is compensated $44,000, while an employee in 

Nevada who suffers the same injury is compensated more than ten times that amount, at 

$457,418.193 For an employee who suffers the loss of an arm in Kentucky the workers’ 

 184 Vasquez v. Dillard’s, Inc., 2016 OK 89 at ¶¶ 22, 36, __ P.3d __ (Okla. Sept. 13, 2016). See also DOL Workers’ 

Compensation Report, supra note 170. 185 The Tennessee Employee Injury Benefit Alternative, available at http://openstates.org/tn/bills/109/SB721/. 186 Id. at §§ 1.50-10-103 and 1.50-10-104.

187 Id.

188 South Carolina Employee Injury Benefit Plan Alternative, H4197, available at

http://www.scstatehouse.gov/billsearch.php?billnumbers=4197.

189 Id. at § 1.64-1-180.

190 Id. at § 1.64-1-230.

191 See, e.g., John F. Burton, Jr., Workers’ Compensation: Can the State System Survive? (June 1, 2015), available at

http://workerscompresources.com/wp-content/uploads/2012/11/PA-Centennial-Address-Text-V01.pdf (noting that a 

current challenge for workers’ compensation is a “race to the bottom”).

192 Maureen Gallagher, States of Confusion: Workers Comp Extraterritorial Issues (April 2, 2014), available at

http://insurancethoughtleadership.com/states-of-confusion-workers-comp-extraterritorial-issues/. 193 Lena Groeger, Michael Grabell, & Cynthia Cotts, Workers’ Comp Benefits: How much is a Limb Worth, 

ProPublica (March 5, 2015), available at http://projects.propublic.org/graphics/workers-compensation-benefits-bylimb#.
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compensation benefit is $402,277, while in Ohio it is $193,950, and not more than $52,245 in 

Massachusetts.194

Similarly, as workers’ compensation typically is based on the place where an employee works or 

is injured instead of the place of residence, neighbors working at identical jobs in different states 

may receive different benefits and rights for identical injuries.195 Non-uniform workers’ 

compensation laws may also impact the ability of some injured employees to receive medical 

treatment, family help, or pursue an alternative occupation. This increases the burden on local, 

tribal, and state governments and families, and reduces quality of life for the injured worker. 

While some injured employees with workers’ compensation benefits might have the resources to 

move to a different state, injured employees living or working in states with less generous 

workers’ compensation benefits may be both unable to work and unable to afford to live 

elsewhere.

Additionally, state workers’ compensation laws differ beyond the financial limits assigned to 

particular injuries. For example, Wisconsin law allows the injured employee to choose a medical 

provider,196 whereas Indiana law requires the injured employee to use a medical provider 

selected by the employer.197

5. Employer Misconduct

To avoid mandatory federal and state employment benefit requirements, some employers may 

misclassify workers as independent contractors instead of as employees. Such misclassification 

is a national problem affecting millions of workers.198 Workers misclassified as independent 

contractors are denied access to critical benefits and protections such as unemployment insurance 

and workers’ compensation.199 Misclassification of employees potentially could lead to 

increased cost for insurers and higher premiums for the majority of employers who accurately 

report and classify workers. Both federal and state governments are taking steps to address this 

concern.200

 194 Id. 195 DOL Workers’ Compensation Report, supra note 170, at 9 (“workers who earn the same wages and suffer 

equivalent injuries receive widely different amounts of compensation from one state to another”) (footnote omitted).

196 State of Wisconsin, Department of Workforce Development, Choice of Doctor and Payment of Medical 

Expenses, available at https://dwd.wisconsin.gov/wc/medical/med_treatment_selection.htm. 197 Worker’s Compensation Board of Indiana, Who is Eligible?, available at http://www.in.gov/wcb/2382.htm.

198 Treasury Inspector General for Tax Administration, Employers Do Not Always Follow Internal Revenue Service 

Worker Determination Rulings, Reference No. 2013-30-058 (June 14, 2013), available at

http://www.treasury.gov/tigta/auditreports/2013reports/201330058fr.pdf.

199 U.S. Department of Labor, Wage and Hour Division, Misclassification of Employees as Independent 

Contractors, available at http://www.dol.gov/whd/workers/misclassification/ (Misclassification Website). 200 See, e.g., National Conference of State Legislatures, Employee Misclassification, 

http://www.ncsl.org/research/labor-and-employment/employee-misclassification-resources.aspx (noting that a 

“growing number of states have addressed employee misclassification” and describing actions taken by various 

states); Misclassification Website, supra note 199 (noting that the Department of Labor’s “Wage and Hour Division 

is working with the IRS and many states to combat employee misclassification”).
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6. The Path Forward

Federal, state, local, and tribal policymakers should be wary of the increasing shift of cost to 

taxpayer-supported programs that bear the burden when states reduce workers’ compensation 

benefits. Also, significant fairness considerations arise when the value assigned to work-related 

injuries varies based on state of residence or employment. Policymakers should evaluate the 

fairness of state-by-state differences in body part compensation and consider setting benefit 

minimums or other alternatives to reduce the state-by-state disparity in benefits. Additionally, 

state policymakers and insurance regulators should work to promote fair medical treatment and 

meaningful protections for injured workers and their families.
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VI. Retirement and Related Insurance Issues

A. Retirement Security: Life Insurance and Annuities

The insurance industry and its products have an essential and increasingly important role in 

supporting a secure retirement for millions of Americans. Recent studies show that about half of 

all U.S. households may not be able to maintain the same standard of living after retirement as 

before retirement.201 Nearly 40 million working-age households do not have a traditional 

retirement account, such as an employer-sponsored 401(k) or an Individual Retirement Account 

(IRA).202

Retirement and financial security are widespread concerns for the baby boom generation. 

However, these worries are not limited to older generations. A majority of millennials surveyed 

(ages 20-37) believe that they will not be able to retire when they would otherwise choose, and 

over a quarter believe that they will never be able to fully retire.203 Fortunately, consumers have 

options to achieve a comfortable retirement. As described below, insurance products have an 

important role for many Americans seeking retirement security.

1. Understanding the Need for Retirement Security

A primary reason for the decline in readiness for retirement is that Americans are living longer 

than ever before, thereby increasing the number of years that retirement assets are expected to 

deliver financial security. Increasing life spans have created “longevity risk,” or the risk of 

outliving assets that individuals accumulate during their working years. A married couple aged 

65 has a 50 percent chance that at least one spouse will live to 94, and a 10 percent chance that 

one will live to 104.204 Additionally, longer life spans typically mean rising health care costs for 

longer periods of time.

Another key retirement risk is market uncertainty, or the risk that the value of an investment

portfolio will decline due to poor market returns. Consumers also may find that traditional 

sources of guaranteed retirement income are no longer available and that other sources have 

become less reliable. Historically, employers often offered pension plans (also referred to as 

defined benefit plans) providing lifetime retirement income streams, under which the employer 

selected investments without input from the employees. However, most employers that offer 

retirement benefits have now shifted to defined contribution plans where employees contribute to 

retirement savings through payroll deductions and can direct their own investment options.

 201 Alicia H. Munnell, Wengliang Hou, and Anthony Webb, “NRRI Update Shows Half Still Falling Short,” Center 

for Retirement Research (2014), available at http://crr.bc.edu/wp-content/uploads/2014/12/IB_14-20-508.pdf.

202 Nari Rhee and Ilana Boivie, “The Continuing Retirement Savings Crisis,” at 1, National Institute on Retirement 

Security (March 2015), available at http://laborcenter.berkeley.edu/pdf/2015/RetirementSavingsCrisis.pdf. 203 Insured Retirement Institute and The Center for Generational Kinetics, Will Millennials Ever Be Able to Retire?, 

at 8 (September 2015), available at http://myirionline.org/docs/default-source/research/iri-cgk-study---millennialretirement-research---digital.pdf. 204 Prudential Financial, Inc., Should Americans Be Insuring Their Retirement Income?, at 3 (July 2013), available 

at http://www.annuities.prudential.com/media/managed/documents/pruannuities_investor/dams_545801.pdf.
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2. Role of Insurance Products in Retirement Security

Insurers are in the business of protecting against risk. Life insurers issue several different types 

of products to protect against retirement security risks, most commonly annuities and life 

insurance.

a. Annuities

In an annuity contract, in exchange for a premium, an insurer agrees to make scheduled 

payments for the lifetime of one or more persons, or for a specified number of years. The ability 

to provide guaranteed lifetime income is a unique feature of annuities and is particularly relevant 

in the context of retirement, where individuals may seek to protect against longevity risk. In the 

simplest form of annuity, known as a single premium immediate annuity, an individual pays a 

single premium to an insurer and in return receives a regular stream of payments that continue 

until the purchaser dies. Annuity payments stop at death and, therefore, the owner of the annuity 

bears the risk of dying too soon and not receiving the return of his or her premium, while the 

insurer bears the risk that the owner will live longer than expected.

Until the mid-20th century, most annuities were payment streams in the form of an immediate 

annuity or a distribution from a benefit plan. Another type of annuity is a variable annuity, in 

which the account value builds over time based on the performance of underlying investment 

options selected by the consumer. The first variable annuity was introduced in the 1950s. Since 

then, annuities have evolved into a broad spectrum of products with different features, benefits,

and varying degrees of complexity. Today, most variable annuities offer dozens of underlying 

investment options and the ability to transfer funds among those options. More recently, 

beginning in the early 2000s, variable annuities have typically been offered with optional 

guarantees known as “living benefits.” These benefits are typically contained in “riders” to the 

annuity contract and require a separate fee. Living benefits are complex and varied in their 

details but in general are designed to ensure that certain benefits – accumulated contract values, 

minimum payments upon annuitization (i.e., conversion of the annuity’s value into a payout 

stream), or withdrawals for a specified period or for life – are guaranteed regardless of the 

investment performance of the accounts underlying the annuity.

b. Life Insurance 

In a life insurance policy, an insurer agrees to pay money to a person (the beneficiary) identified 

in advance by the policyholder upon the death of the person whose life is insured. Life insurance 

can also play an important role when the consumer needs protection against the financial risks 

posed by the premature death of a partner. Life insurance is available in two basic types: term 

and permanent (which includes whole life, universal life, variable life, and variable universal 

life).

205 Term insurance pays the beneficiary named under the policy if the insured dies within a 

 205 See American Council of Life Insurers, What You Should Know About Buying Life Insurance, available at

https://www.acli.com/Consumers/Life%20Insurance/Documents/What_You_Should_Know_About_Buying_Life_In

surance.pdf. See also NAIC, Life insurance: it’s more than a death benefit, available at

http://www.insureuonline.org/insureu_type_life.htm (defining different types of permanent life insurance).
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specific period of time. The defined period can be 1 year, 10 years, 20 years, or as long as 30 

years. Premiums for term insurance can be fixed for the length of the term or can start lower and 

increase at a time specified in the policy. Term policies generally do not have a cash value and 

usually are less expensive than permanent insurance for a given amount of insurance protection 

during a like time period. Permanent (cash value) life insurance pays the beneficiary whenever 

the insured dies, as long as premiums have been paid. The policy can build tax-deferred cash 

value.

3. Consumer Resources

For many Americans, Social Security benefits are the cornerstone of retirement income. Social 

Security benefits are often supplemented by income from an employer-sponsored benefit plan or 

other retirement savings account. The private market can serve as another key element of a 

sound retirement plan. Prior to accessing these private solutions, the consumer should first 

understand his or her own needs. Considering the variety of available life insurance and annuity 

products and services, consumers may benefit from the advice of a financial professional, 

including an insurance producer. Consumers may also wish to consult their state insurance 

regulators (contact information for state insurance regulators is provided in Appendix I).

B. Secondary Market for Life Insurance and Annuity Products

When a consumer buys a life insurance policy or an annuity contract from a life insurer, the 

consumer and insurer are acting in what is known as the “primary market.” In most cases, the 

policyholder and the insurer maintain the primary market relationship until the policy terminates 

according to its terms (for example, death or lapse of a life insurance policy, or surrender of an 

annuity contract). However, over the past several decades, markets have emerged that allow the 

consumer to sell or otherwise transfer ownership and benefits of the life insurance policy or 

annuity contract to a business entity for immediate cash. This can be done through a life 

settlement for a life insurance policy, or through the buyout of an annuity contract or payment 

stream.

If a consumer elects to sell or transfer ownership of a life insurance policy or an annuity contract 

to a third party, the direct relationship between the original policyholder and the insurer ends, 

and the policy moves from the primary market to the “secondary market.” The contractual 

relationship in the secondary market is between the new owner – the third party purchaser – and 

the insurer that issued the policy; however, the person whose life is insured under the policy or 

annuity contract remains the same.

Although consumer protection issues arise in the secondary market for both life insurance and 

annuities, the discussion below focuses on buyouts of products known as structured settlement 

annuities, an area of particular consumer protection concern.

1. Structured Settlement Buyouts

Introduced in the 1970s, structured settlements are often the preferred method of settling legal 

disputes or judgments involving severe physical injuries, sicknesses, or permanently disabled 
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injured workers. The purpose of the structured settlement is to provide a reliable, steady source 

of income. This type of legal arrangement provides for the successful plaintiff in a lawsuit to 

receive a stream of payments over a period of time, rather than an immediate lump sum. 

Typically, in order to fund the structured settlement, the defendant purchases an annuity from a 

life insurer.

The secondary market for structured settlement annuities began in the 1990s as a way of 

permitting payees of structured settlements to convert income streams into lump sums of cash. 

In a structured settlement buyout, the payee transfers the right to receive future payments to a 

third party, typically known as a funding company. In exchange for the future payments, the 

funding company pays a lump sum to the payee. The amount of this lump sum payment is 

calculated using a discount rate206 generally ranging from 12 to 22 percent, depending on 

numerous factors such as the length of the payment stream, the costs incurred by the funding 

company, the financial condition of the insurer that issued the underlying annuity, and state law 

restrictions on discount rates.207 For example, if an owner of a structured settlement annuity is 

set to receive $20,000 per year for the next 25 years (nominally totaling $500,000), the present 

value of the payout stream using discount rates of 12 percent and 22 percent would be 

approximately $156,000 and $90,000 respectively.

Structured settlement buyouts can benefit certain consumers by providing access to immediate 

cash not available from other sources. For example, if a payee is experiencing financial stress, 

such as unexpected medical expenses or a home foreclosure, proceeds of a buyout can resolve or 

mitigate the financial burden.

Nevertheless, the structured settlement buyout market has long raised consumer protection 

concerns about whether payees are treated fairly in these transactions.

Recognizing the importance of consumer protections related to structured settlement buyouts, in 

2002 Congress passed the federal Structured Settlement Protection Act.208 The law imposes a 40 

percent excise tax on the funding company unless the transfer is approved by a state court in 

accordance with an applicable state statute.

In response to abuses in the buyout market, state legislatures enacted consumer protection laws 

to help structured settlement annuity payees. In 2001, the National Conference of Insurance 

Legislators (NCOIL) adopted a Model State Structured Settlement Protection Act which has 

been enacted into law, with some variations, in 49 states.209

 206 The discount rate is the interest rate one needs to earn on money today to end up with a given amount of money 

in the future. The discount rate accounts for the time value of money, which means that a dollar today is worth more 

than a dollar tomorrow because the dollar today has the capacity to earn interest. 207 National Association of Settlement Purchasers, Secondary Market FAQ, available at https://naspusa.com/settlement-transfers/secondary-market-faq/.

208 26 U.S.C. § 5891.

209 Patricia LaBrode, “The structured-settlement industry is behind greater transparency,” The Washington Post

(February 5, 2016), available at https://www.washingtonpost.com/opinions/the-structured-settlement-industry-isbehind-greater-transparency/2016/02/05/5f8f4e6a-c91b-11e5-88ff-e2d1b4289c2f_story.html.
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While state laws provide important protections to payees, the laws are not uniform from state to 

state. For example, most states require that payees appear in person during a court proceeding 

where a judge considers a proposed transfer, but some states do not. In-person appearances 

allow judges to speak directly with a payee, ask about the personal and financial circumstances 

of the payee, and make an informed decision about whether the transaction is in the best interest 

of the payee. An independent 2015 media investigation into structured settlement approvals by 

courts in Maryland and Virginia revealed that some court proceedings lacked rigor and failed to 

adequately protect vulnerable consumers, including lead paint poisoning victims.210

2. The Path Forward

Consumers are encouraged to seek financial and legal advice before agreeing to a structured 

settlement buyout. Key considerations include how much of the guaranteed payment stream to 

sell, and the adequacy and fairness of the lump sum payment to be received in exchange.

State policymakers and insurance regulators should promote rigorous protection of consumers

who engage in structured settlement buyout transactions, and may wish to examine the 

legislation recently enacted in Virginia211 and Florida.

212 States should consider improving the 

effectiveness of judicial proceedings to determine whether a proposed buyout serves the 

consumer’s best interest. In particular, states should consider requiring that consumers appear in 

person at a court hearing, to be conducted in the consumer’s county of residence, where the 

proposed purchaser must disclose to the court prior structured settlement buyouts and attempted 

buyouts within a designated number of years. Structured settlements have interstate 

implications, especially given an increasingly mobile society, and are an issue of national 

interest. Indeed, once before (in 2002), Congress passed a law to address differences in state 

level oversight.213 As a result, if the states fail to protect structured settlement payees in a 

sufficiently rigorous manner, then Congress should consider whether additional federallyimposed standards or protections are warranted.

 210 Terrence McCoy, “Company that reaped millions from deals with Baltimore’s lead-paint poisoning victims 

violated law, authorities say,” The Washington Post (May 11, 2016), available at 

https://www.washingtonpost.com/local/social-issues/company-that-reaped-millions-from-deals-with-baltimoreslead-poisoning-victims-violated-law-authorities-say/2016/05/11/051a2bb0-1701-11e6-aa55-

670cabef46e0_story.html; Terrence McCoy, “The flawed system that allows companies to make millions off the 

injured,” The Washington Post (December 27, 2015), available at https://www.washingtonpost.com/local/socialissues/the-flawed-system-that-allows-companies-to-make-millions-off-the-injured/2015/12/27/cce16434-9212-11e5-

a2d6-f57908580b1f_story.html; Terrence McCoy, “Prince George’s court tightens rules on structured-settlement 

buyouts,” The Washington Post (September 13, 2015), available at https://www.washingtonpost.com/local/socialissues/2015/09/13/06d4e2c6-587d-11e5-8bb1-b488d231bba2_story.html. 211 Va. Code § 59.1-475 et seq. 212 Fla. Stat. § 626.99296.

213 26 U.S.C. § 5891.
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C. Long-Term Care Insurance

Long-term care (LTC) refers to the means of meeting the health or personal care needs of 

individuals who are unable to care for themselves without assistance. An estimated 12 million 

Americans currently need LTC, a number that is expected to reach 27 million by 2050 due to: 

(i) growth in the number of individuals age 65 or older; and (ii) increased life expectancy.214 

Seventy percent of individuals who reach age 65 are likely to require LTC at some point, and 

about 14 percent will need LTC lasting five years or more.215

The federal government is the primary funding source for LTC, with approximately two-thirds of 

LTC expenditures paid by Medicaid and Medicare.216 The remaining one-third is covered by a 

combination of other public programs, personal out-of-pocket payments by or for the patient, and 

long-term care insurance (LTCI).

217

1. State Regulation of Long-Term Care Insurance

LTCI, like most other forms of insurance, is regulated primarily by state insurance regulators. In 

most states, the state insurance regulator has the authority to approve fully, approve in part, or 

reject entirely the rates proposed by an insurer. The authority of state regulators to review and 

approve proposed rate increases before those changes are implemented is a critical factor in the 

LTCI marketplace.

Beginning in the 1970s, insurers modeled LTCI pricing on Medicare supplement policies, 

projecting high policyholder lapse rates.

218 Lapsed policies allow insurers to accumulate capital 

without the payment of claims, thereby reducing the potential solvency impact of the claims that 

are made. Contrary to these original expectations, however, LTCI lapse rates have been 

significantly lower – at five percent or less219 – exposing insurers to more claims than expected. 

In addition, due to increased longevity and increased underlying costs, LTCI claims have been 

 214 Bipartisan Policy Center, Initial Recommendations to Improve the Financing of Long-Term Care (February 

2016) (BPC Initial Recommendations), available at http://bipartisanpolicy.org/wp-content/uploads/2016/01/BPCHealth-Long-Term-Care.pdf.

215 Id. 216 Marc A. Cohen, The Current State of the Long-Term Care Insurance Market, presentation to 14th Annual 

Intercompany Long-Term Care Insurance Conference (March 2014), available at 

http://iltciconf.org/2014/index_htm_files/44-Cohen.pdf.

217 Bipartisan Policy Center, America’s Long-Term Care Crisis: Challenges in Financing and Delivery (April 2014), 

available at http://bipartisanpolicy.org/library/americas-long-term-care-crisis/. 218 Marc A. Cohen, et al., Exiting the Market: Understanding the Factors behind Carriers’ Decision to Leave the 

Long-Term Care Insurance Market, Prepared for U.S. Department of Health and Human Services Assistant 

Secretary for Planning and Evaluation Office of Disability, Aging and Long-Term Care Policy, at 12 (July 2013), 

available at https://aspe.hhs.gov/sites/default/files/pdf/177866/MrktExit.pdf.

219 Society of Actuaries and LIMRA, U.S. Long-Term Care Insurance Persistency: 2008-2011 Data, at 4 (2016), 

available at https://www.soa.org/Research/Experience-Study/Ltc/Persistency/research-ltc-insurance.aspx (reporting 

overall voluntary lapse rate of 5.2% from 2002-2004 experience study, 3.8% from 2005-2007 experience study, and 

3.6% from 2008-2011 experience study).
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significantly higher than expected and continue to grow. In the 1990s, LTCI insurers began to 

seek approval from state insurance regulators for rate increases on existing policies.

In 2000, and again in 2014, state insurance regulators adopted model standards to address LTCI 

rate stabilization that were intended to reduce the frequency and size of rate increases.220 

However, these standards have not been uniformly adopted, implemented, or enforced by the 

states, and only apply to policies issued after the date of adoption. Insurers continue to seek 

additional rate increases on LTCI policies sold before 2000 that, in total, often exceed 100 

percent or more. Even after revamping pricing models, insurers continued to underestimate the 

negative pressures on LTCI business. As a result, insurers began seeking increases on more 

recently issued (post-2000) LTCI policies, generating a range of responses from state regulators, 

including formal limits on annual rate increases. Several states have rejected requests for rate 

increases on closed blocks of business, which then triggered similar reactions from other states.

Obtaining approval of LTCI rate increases is a state-by-state process marked by inconsistencies 

in: (i) the willingness of state regulators to approve increases; (ii) the amount of increases 

permitted; and (iii) the length of time necessary to obtain approval. Insurers’ uncertainty 

regarding regulatory treatment of requested rate increases limits insurers’ ability to remain active 

in the LTCI market. Insurers that underpriced LTCI policies will not continue to offer these 

policies without some certainty about future approval of actuarially justified rates. For 

consumers, substantial rate increases impose financial hardship. In addition, consistently rising

rates have created widespread adverse publicity, for example in the Wall Street Journal221 and 

Kiplinger,

222 which deters both insurance producers and potential consumers from LTCI.

Historically, some state insurance regulators have been more averse to approval of rate increases 

and others more receptive. Policyholders in states in which rate increases have been approved 

may subsidize premiums in other states in which rate increases have been rejected. As a result, 

some state regulators are now refusing to approve increases of LTCI premiums unless other 

states have already approved similar increases, thereby increasing the market constriction.

2. Failure in the Long-Term Care Insurance Market

The number of insurers offering individual LTCI declined from more than 100 in the early 2000s 

to only 12 as of year-end 2015.223 From 2013 through 2015, LTCI annual new premiums fell 

from $403 million to $261 million, and new lives covered fell from 171,000 to 104,000.224 In 

 220 See NAIC, Long-Term Care Insurance Model Regulation (Model #641), available at

http://www.naic.org/store/free/MDL-641.pdf. 221 Leslie Scism, “Long-Term-Care Insurance: Is It Worth It?,” Wall Street Journal (May 1, 2015), available at

http://www.wsj.com/articles/long-term-care-insurance-is-it-worth-it-1430488733.

222 Kimberly Lankford, “Long-Term-Care Rate Hikes Loom,” Kiplinger (January 2011), available at

http://www.kiplinger.com/article/insurance/T036-C000-S002-long-term-care-rate-hikes-loom.html. 223 BPC Initial Recommendations, supra note 214, at 10.

224 Source: LIMRA.
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the employer-sponsored LTCI market, the number of participants added to group plans dropped 

by 65 percent between 2013 and 2014, and by another 55 percent in 2015.225

Insurers continuing in the LTCI market have tightened underwriting standards and are offering

new products with fewer benefits at higher prices. These changes likely dampen demand for 

LTCI. In addition, publicity regarding financial difficulties at several major LTCI insurers adds

to the constriction of the market.

3. Impact on Consumers and Taxpayers

The failure of the LTCI market may continue to have direct and negative implications for 

consumers and taxpayers in general. As discussed in Section V.A of this Report, the resolution 

of an insolvent insurer is governed by state receivership laws. If an insurer is liquidated, then the 

deficit between the insurer’s assets and liabilities (i.e., the amount owed to policyholders, 

beneficiaries, or claimants) is paid by the state’s insurance guaranty association to the extent 

permitted by state law. Payment for any one policy by a state guaranty association to an 

individual policyholder, beneficiary, or claimant is limited by state law, and varies state-by-state. 

For LTCI policies, these limits generally range from $300,000 to $500,000, depending on the 

consumer’s state of residence. Although some health insurers previously offered or continue to 

offer LTCI, the product has been predominantly offered by life insurers. Nevertheless, because 

state guaranty association laws classify LTCI as health insurance, guaranty association payments 

on behalf of an insolvent LTCI insurer will be funded in large part by assessments against active 

health insurers. Health insurers may elect to pass on all or part of the higher guaranty fund 

payments to consumers by increasing health insurance premiums.

Additionally, as the amount of available LTCI continues to decline and the need for LTC 

continues to grow, more consumers may be forced to rely on federal and state programs to meet 

the costs of LTC. This increased strain on programs such as Medicare and Medicaid may 

increase the shifting of costs to taxpayers.

4. The Path Forward

The social need for LTC is significant and growing, resulting in major strain on public and 

private payment sources. Given the aging of the U.S. population and increased longevity, the 

number of Americans needing LTC is projected to more than double over the coming decades, 

which will substantially increase the pressure on the public and private sectors.

Consumers, care providers, social services networks, LTCI providers, and others in the private 

sector, as well as regulators and policymakers, should collaborate to develop innovative 

approaches to lowering LTC costs and promoting the viability of existing and new payment 

sources. State policymakers and insurance regulators should address the lack of regulatory 

uniformity that has exacerbated the inherent challenges of the LTCI market. The challenges in 

providing LTC are of acute national interest, and extend far beyond the insurance sector. For 

 225 Id.
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that reason, collaboration between federal and state officials is essential– all must work together 

and embrace the challenge of financing LTC.

D. Unclaimed Death Benefits

Upon the death of an insured under a life insurance policy, the insurer pays the policy benefits to 

the named beneficiaries. The policy requires the beneficiaries to send the insurer written notice 

of death in order to receive the death benefits. In cases where the beneficiaries are not aware of 

the policy or of the death of the insured, death benefits may go unclaimed for many years, or not 

at all. Under state laws governing unclaimed property, if death benefits are not claimed within a 

specified period of time, the insurer must pay the benefits to the last known state of residence of 

the beneficiary.

While insurers usually learn about the death of a policyholder through notification from the

beneficiaries, other methods of identification are available. Since 1980, the Social Security 

Administration (SSA) has maintained a computer database of death records known as the Death 

Master File (DMF).226 In the late 2000s, audits conducted by certain state revenue departments 

revealed that some insurers used the DMF to determine whether annuity owners had died (a basis 

for terminating payments), but failed to use the DMF to determine whether life insurance 

policyholders had died (a basis for paying benefits). Additionally, in some cases where the same 

customers owned both annuity and life insurance policies, insurers used the DMF to terminate 

annuity payments, but did not inform the beneficiaries of their right to receive death benefits 

under the insurance policies.

227

1. State Efforts

In 2009, state insurance regulators began to investigate these “asymmetric” practices and 

concluded that a number of insurers had violated unfair claims settlement laws. To resolve these 

investigations, at least 22 of the largest life insurers in the United States, representing over 70 

percent of the industry by premium volume, entered into settlement agreements with insurance 

regulators which require the insurers to conduct regular searches of the DMF to identify 

deceased policyholders. Parallel settlements with state revenue departments require the insurers 

to remit current unclaimed benefits to the states. Nationally, these settlements have resulted in

the return of over $5 billion to beneficiaries and payment of an additional $2.4 billion to the 

states.228

 226 See generally U.S. Government Accountability Office, SOCIAL SECURITY ADMINISTRATION: Preliminary 

Observations on the Death Master File: Testimony Before the Committee on Homeland Security and Governmental 

Affairs, U.S. Senate, (May 8, 2013), available at http://www.gao.gov/assets/660/654411.pdf. 227 2014 Annual Report, supra note 1, at 34. 228 California Department of Insurance, Multimillion dollar Death Master settlements reached (December 17, 2015), 

available at http://www.insurance.ca.gov/0400-news/0100-press-releases/2015/release115-15.cfm. More 

information regarding “life claim” or DMF settlement agreements can be accessed from the website of the Florida 

Office of Insurance Regulation, available at http://www.floir.com/siteDocuments/LifeClaimsSettlements.pdf. The 

settlements continue. See, e.g., California Department of Insurance, Four additional insurers agree to change their 
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In addition, at least 20 states have enacted some version of the Unclaimed Life Insurance 

Benefits Act, a model law drafted by NCOIL.229 These laws require insurers to perform regular 

comparisons of policy records against the DMF or a database or service at least as 

comprehensive as the DMF.230 However, the laws are not uniform, particularly with respect to 

whether DMF searches must be conducted retroactively (for all policies in force on the effective 

date of the law) or only prospectively (for new policies issued after the effective date).231 The 

laws also differ in other respects, including the frequency of the required death match searches232

and the criteria for determining a match between the DMF and the insurer’s records.233

In 2014, state insurance regulators began to consider model legislation to address insurers’ 

business practices relating to claim settlements, identification and reporting of abandoned 

property, and use of the DMF. Although state insurance regulators have made progress, the 

timeline for completing the model law is unclear. Of course, any such model legislation will not 

have any effect unless adopted by the individual state legislatures, and the states may not adopt 

the legislation uniformly. For these reasons, laws and regulations governing unclaimed death 

benefits are likely to remain inconsistent across the states, meaning that the rights of 

beneficiaries will continue to vary substantially based on their state of residence.

2. Access to the Death Master File

Another factor complicating the regulation of unclaimed death benefits is that life insurers face 

challenges in accessing and relying upon the DMF. The SSA has cautioned that the DMF may 

contain inaccuracies. In addition, the Bipartisan Budget Act of 2013 limited access to the DMF 

to persons certified under a program established by the Secretary of Commerce. In June 2016,

the Department of Commerce published a final rule which restricts access to the full DMF data 

while allowing certified subscribers of the DMF, including insurers, to obtain information about 

 use of Death Master File (August 4, 2016), available at http://www.insurance.ca.gov/0400-news/0100-pressreleases/2016/release092-16.cfm. 229 See Ala. Code §§ 27-15-50 to -53, Ark. Code §§ 23-81-901 to 23-81-905, Ga. Code § 33-25-14, Idaho Code §§

41-3001 to -3003, Ind. Code § 27-2-23-1 et seq., Iowa Code § 507B.4C, Ky. Rev. Stat. § 304.15- 420, Md. Code 

Ins. § 16-118, Miss. Code § 83-7-301, Mont. Code § 33-20-1604, Nev. Rev. Stat. § 688D.090, N.M. Stat. § 59A-16-

7.1, N.Y. Ins. Law § 3240, N.C. Gen. Stat. § 58-58-360, N.D. Cent. Code §§ 26.1-55-01 to -05, R.I. Gen. Laws § 

27-80-1, Tenn. Code § 56-7-3401, Utah Code § 31A-22-1901, W.Va. Code § 33-13D-1 et seq., VT Stat. tit. 27, § 

1244a. In addition, Florida enacted its own version of a law governing unclaimed life insurance benefits in 2016. 

See Fla. Stat. § 717.107. 230 See, e.g., id.

231 See, e.g., United Insurance Co. v. Maryland Insurance Admin., 144 A.3d 1230 (Md. 2016) (dismissing challenge 

to Maryland Insurance Administration’s retroactive enforcement of Md. Code § 16-118). 232 Compare, for example, Ala. Code § 27-15-53(a) (requiring search no less than once every three years) with Ark. 

Code § 23-81-904 (b)(1)(2) (requiring semi-annual searches). 233 Compare, for example, Idaho Code § 41-3002(1)(c) (specifying insurers shall implement procedures to account 

for common nicknames, transposition of month and date of birth, incomplete social security number, etc.) with GA 

Code § 33-25-14 (no similar requirement).
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an individual within three years of the individual’s death.234 The rule becomes effective in 

November 2016. The effectiveness of using the DMF as the primary tool for identifying 

deceased policyholders will be difficult to assess until the final rule is implemented and used in 

actual practice.

3. Consumer Resources

If consumers believe that a family member owned or was insured under a life insurance policy, 

but cannot locate the policy, consumers can conduct a search using public and private sources. 

Several large insurers have established online lost policy finders. In addition, several state 

insurance departments provide a free missing policy service, including: Alabama, Illinois, 

Louisiana, Maine, Michigan, Missouri, New York, Ohio, Oregon, Texas, and Vermont.235 

Massachusetts and Rhode Island provide online forms upon request. Contact information for 

state insurance regulators appears in Appendix I. As an alternative to public sources, several 

private firms offer policy locator services for a fee.

 234Certification Program for Access to the Death Master File, 81 Fed. Reg. 34882 (June 1, 2016), available at 

https://www.federalregister.gov/articles/2016/06/01/2016-12479/certification-program-for-access-to-the-deathmaster-file. 235 Alabama: https://aldoi.gov/LAPSWeb/NewRequestInfo.aspx;

Illinois: https://insurance.illinois.gov/Applications/LifePolicyLocator/; 

Louisiana: http://www.ldi.louisiana.gov/consumers/insurance-type/life-annuities/life-insurance-policy-search; 

Maine: http://www.maine.gov/pfr/insurance/LostPolicyLocator/LifeInsuranceSearchForm.html; 

Michigan: http://www.michigan.gov/difs; 

Missouri: http://insurance.mo.gov/consumers/life-annuities/lifepolicylocator.php; 

New York: http://www.dfs.ny.gov/consumer/lost_policy_find.htm; 

Ohio: http://www.insurance.ohio.gov/Consumer/Pages/MissingLifeWebpage.aspx; 

Oregon: https://www4.cbs.state.or.us/exs/ins/lift/; 

Texas: http://www.tdi.texas.gov/life/life.html; and 

Vermont: http://www.vermonttreasurer.gov/unclaimed-property/insurancepolicy.
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VII. Conclusion

Insurance is a key source of financial security for Americans. Insurance allows individuals, 

families and businesses to protect and accumulate property and assets, provides private market 

options for financial security in retirement, and allows for the inter-generational transfer of 

wealth. In short, insurance can provide economic opportunity for all Americans. In addition, 

well-functioning private insurance markets can reduce the burden on taxpayer-funded 

government programs. The United States has a national interest in promoting fairness, 

affordability, and accessibility in personal and commercial insurance products. For these 

reasons, this Report underscores the critical importance of the protection of insurance consumers 

and access to insurance; highlights areas where the consumer interest is inconsistently 

represented throughout the country, and presents a number of recommended actions for 

consideration as a path forward. FIO intends to continue to analyze these and other insurance 

consumer protection issues in the future.
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Appendix I

Contact Information for Insurance Regulators

Insurance Regulator 

Website

Phone 

Number*

Consumer Services Email/ 

Web Contact Form

Alabama www.aldoi.gov 334-241-4141 ConsumerServices@insurance.alabama.

gov

Alaska www.commerce.alaska.gov/

web/ins

800-467-8725 insurance@alaska.gov

American 

Samoa

www.americansamoa.gov/of

fice-of-the-governor

684-633-4116 info@as.gov

Arizona insurance.az.gov 800-325-2548 consumers@azinsurance.gov

Arkansas insurance.arkansas.gov 800-852-5494 insurance.consumers@arkansas.gov

California www.insurance.ca.gov 800-927-4357 https://interactive.web.insurance.ca.gov/

contactCSD/ContactUs.jsp

Colorado www.colorado.gov/dora/divi

sion-insurance

800-930-3745 dora_ins_website@state.co.us

Connecticut www.ct.gov/cid 800-203-3447 cid.ca@ct.gov

Delaware delawareinsurance.gov 800-282-8611 consumer@state.de.us

District of 

Columbia

disb.dc.gov 202-727-8000 disb@dc.gov

Florida www.floir.com 877-693-5236 Consumer.Services@myfloridacfo.com

Georgia www.oci.ga.gov 800-656-2298 Consumer@oci.ga.gov

Guam www.guamtax.com/about/re

gulatory.html

671-635-1844 https://www.guamtax.com/about/regulat

ory.html

Hawaii cca.hawaii.gov/ins 808-586-2790 insurance@dcca.hawaii.gov

Idaho doi.idaho.gov 800-721-3272 consumeraffairs@doi.idaho.gov

Illinois insurance2.illinois.gov 866-445-5364 consumer_complaints@ins.state.il.us

Indiana www.in.gov/idoi 800-622-4461 consumerservices@idoi.in.gov

Iowa www.iid.state.ia.us 877-955-1212 http://www.iid.state.ia.us/contact

Kansas www.ksinsurance.org 800-432-2484 webcomplaints@ksinsurance.org 

Kentucky insurance.ky.gov 502-564-6034 doi.info@ky.gov

Louisiana ww.ldi.la.gov 225-342-5900 public@ldi.la.gov

Maine www.maine.gov/pfr/insuran

ce

800-300-5000 Insurance.PFR@maine.gov

Maryland insurance.maryland.gov 800-492-6116 lhcomplaints.mia@maryland.gov
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Insurance Regulator 

Website

Phone 

Number*

Consumer Services Email/ 

Web Contact Form

Massachusetts www.mass.gov/ocabr/insura

nce

877-563-4467 doicss.mailbox@state.ma.us

Michigan www.michigan.gov/difs 877-999-6442 difs-ins-info@michigan.gov

Minnesota mn.gov/commerce/industries

/insurance

651-539-1600 consumer.protection@state.mn.us

Mississippi www.mid.ms.gov 800-562-2957 consumer@mid.ms.gov

Missouri insurance.mo.gov 800-726-7390 consumeraffairs@insurance.mo.gov

Montana csimt.gov 800-332-6148 http://csimt.gov/contact/

Nebraska doi.nebraska.gov 877-564-7323 DOI.ConsumerAffairs@nebraska.gov

Nevada doi.nv.gov 888-872-3234 cscc@doi.state.nv.us

New Hampshire www.nh.gov/insurance 800-852-3416 consumerservices@ins.nh.gov

New Jersey www.state.nj.us/dobi 800-446-7467 http://www.state.nj.us/dobi/aboutdobi.ht

m

New Mexico www.osi.state.nm.us 505-827-4601 osi.ask@state.nm.us

New York dfs.ny.gov 800-342-3736 http://www.dfs.ny.gov/insurance/nyins_

csb.htm

North Carolina ncdoi.com 855-408-1212 http://www.ncdoi.com/Consumer/Requ

esting_Assistance.aspx

North Dakota nd.gov/ndins 800-247-0560 insurance@nd.gov

Northern 

Mariana Islands

commerce.gov.mp/divisions/

insurance

670-664-3000 info@commerce.gov.mp

Ohio www.insurance.ohio.gov 800-686-1578 https://gateway.insurance.ohio.gov/UI/

ODI.CS.Public.UI/Comment.mvc/Displ

ayCommentSubmission

Oklahoma www.ok.gov/oid 800-522-0071 https://www.ok.gov/triton/contact.php?a

c=181&id=157

Oregon dfr.oregon.gov 888-877-4894 cp.ins@oregon.gov

Pennsylvania www.insurance.pa.gov 877-881-6388 http://www.insurance.pa.gov/Pages/Con

tactUs.aspx#.V2l5U7grJhE

Puerto Rico www.ocs.gobierno.pr/ocspr 787-304-8686

Rhode Island www.dbr.state.ri.us/division

s/insurance

401-462-9520 http://www.dbr.ri.gov/questioncomplain

ts/

South Carolina doi.sc.gov 800-768-3467 consumers@doi.sc.gov

South Dakota dlr.sd.gov/insurance 605-773-3563 insurance@state.sd.us

Tennessee tn.gov/commerce 800-342-8385 consumer.affairs@tn.gov
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Insurance Regulator 

Website

Phone 

Number*

Consumer Services Email/ 

Web Contact Form

Texas www.tdi.texas.gov 800-252-3439 ConsumerProtection@tdi.texas.gov

U.S. Virgin 

Islands

ltg.gov.vi/division-ofbanking-and-insurance.html

340-774-7166 

(St. Thomas)

340-773-6459 

(St. Croix)

http://ltg.gov.vi/consumer-assistanceprogram.html

Utah insurance.utah.gov 801-538-3800 life.uid@utah.gov

Vermont www.dfr.vermont.gov 800-964-1784 consumercomplaints@vermont.gov

Virginia www.scc.virginia.gov/boi 877-310-6560 bureauofinsurance@scc.virginia.gov

Washington www.insurance.wa.gov 800-562-6900 https://www.insurance.wa.gov/yourinsurance/email-us/index.html

West Virginia www.wvinsurance.gov 888-879-9842 OICConsumerServices@wv.gov

Wisconsin oci.wi.gov 800-236-8517 ocicomplaints@wisconsin.gov

Wyoming doi.wyo.gov 800-438-5768 http://doi.wyo.gov/contact-us

*800 and 888 numbers may be toll-free only within specified state. If calling from out-of-state, 

check that state’s website for additional numbers.
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Appendix II

Summary of Federal Resources Referenced in Report

Federal Insurance Office Reports:

FIO reports are available at www.treasury.gov/initiatives/fio/reports-and-notices. The reports 

cited in this Report are:

Federal Insurance Office, Annual Report on the Insurance Industry (September 2014) 

Federal Insurance Office, Annual Report on the Insurance Industry (September 2015) 

Federal Insurance Office, How to Modernize and Improve the System of Insurance 

Regulation in the United States (December 2013)

Federal Insurance Office, Report Providing an Assessment of the Current State of the 

Market for Natural Catastrophe Insurance in the United States (September 2015)

Insurance and Technology:

Executive Office of the President of the United States, Big Data and Differential Pricing

(February 2015), available at

https://www.whitehouse.gov/sites/default/files/docs/Big_Data_Report_Nonembargo_v2.

pdf

Executive Office of the President, Big Data: Seizing Opportunities, Preserving Values

(May 2014), available at 

https://www.whitehouse.gov/sites/default/files/docs/big_data_privacy_report_may_1_20

14.pdf

Federal Trade Commission, Big Data – A Tool for Inclusion or Exclusion: 

Understanding the Issues (January 2016), available at

https://www.ftc.gov/system/files/documents/reports/big-data-tool-inclusion-or-exclusionunderstanding-issues/160106big-data-rpt.pdf

Federal Trade Commission, Data Brokers: A Call for Transparency and Accountability

(May 2014), available at https://www.ftc.gov/system/files/documents/reports/databrokers-call-transparency-accountability-report-federal-trade-commission-may2014/140527databrokerreport.pdf

Federal Trade Commission, Report identity theft and get a recovery plan, 

www.identitytheft.gov

National Institute for Standards and Technology, Framework for Improving Critical 

Infrastructure Cybersecurity, Version 1.0 (February 12, 2014), available at

http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214.pdf
Report on Protection of Insurance Consumers and Access to Insurance

Federal Insurance Office, U.S. Department of the Treasury

52

U.S. Department of Homeland Security, Stop. Think. Connect.: Cybersecurity 101,

https://www.dhs.gov/sites/default/files/publications/cybersecurity-101_4.pdf

U.S. Department of Homeland Security, Financial Services Sector, available at

http://www.dhs.gov/financial-services-sector

U.S. Department of the Treasury, Remarks of Deputy Secretary Raskin at The Texas 

Bankers’ Association Executive Leadership Cybersecurity Conference (December 3, 

2014), available at https://www.treasury.gov/press-center/pressreleases/Pages/jl9711.aspx

Environmental Hazards and Insurance:

Executive Office of the President, The President’s Climate Action Plan (June 2013), 

available at

https://www.whitehouse.gov/sites/default/files/image/president27sclimateactionplan.pdf

Federal Emergency Management Administration, What is Mitigation?, available at

http://www.fema.gov/what-mitigation

National Aeronautics and Space Administration, NASA, NOAA Analyses Reveal RecordShattering Global Warm Temperatures in 2015, Release No. 16-008 (Jan. 20, 2016), 

available at http://www.nasa.gov/press-release/nasa-noaa-analyses-reveal-recordshattering-global-warm-temperatures-in-2015

U.S. Department of Homeland Security, National Preparedness Report, at 37 (March 30, 

2014), available at https://www.fema.gov/media-library-data/1409688068371-

d71247cabc52a55de78305a4462d0e1a/2014%20NPR_FINAL_082914_508v11.pdf

U.S. Department of Homeland Security, Ready, www.ready.gov

U.S. Geological Survey, Earthquake Statistics (as of March 10, 2016), available at 

http://earthquake.usgs.gov/earthquakes/browse/stats.php

U.S. Geological Survey, Induced Earthquakes, available at

http://earthquake.usgs.gov/research/induced/

U.S. Geological Survey, Science Features, 6 Facts About Human-Caused Earthquakes

(June 10, 2015), available at http://www.usgs.gov/blogs/features/usgs_top_story/6-factsabout-human-caused-earthquakes/

Fairness in Insurance Practices:

Consumer Financial Protection Bureau, Arbitration Study, Report to Congress, pursuant 

to Dodd-Frank Wall Street Reform and Consumer Protection Act § 1028(a) (March 
Report on Protection of Insurance Consumers and Access to Insurance

Federal Insurance Office, U.S. Department of the Treasury

53

2015), available at http://files.consumerfinance.gov/f/201503_cfpb_arbitration-studyreport-to-congress-2015.pdf

Consumer Financial Protection Bureau, CFPB Proposes Prohibiting Mandatory 

Arbitration Clauses that Deny Groups of Consumers their Day in Court (May 5, 2016), 

available at http://www.consumerfinance.gov/about-us/newsroom/consumer-financialprotection-bureau-proposes-prohibiting-mandatory-arbitration-clauses-deny-groupsconsumers-their-day-court/

Fairness in State Insurance Standards:

OSHA, U.S. Department of Labor, Adding Inequality to Injury: The Costs of Failing to 

Protect Workers on the Job (June 2015), available at 

http://www.dol.gov/osha/report/20150304-inequality.pdf

Treasury Inspector General for Tax Administration, Employers Do Not Always Follow 

Internal Revenue Service Worker Determination Rulings, Reference No. 2013-30-058 

(June 14, 2013), available at

http://www.treasury.gov/tigta/auditreports/2013reports/201330058fr.pdf

U.S. Department of Labor, Does the Workers’ Compensation System Fulfill Its 

Obligations to Injured Workers (Oct. 5, 2016), available at

https://www.dol.gov/asp/WorkersCompensationSystem/WorkersCompensationSystemRe

port.pdf

U.S. Department of Labor, Wage and Hour Division, Misclassification of Employees as 

Independent Contractors, available at

http://www.dol.gov/whd/workers/misclassification/

David F. Utterback, Alysha R. Meyers, and Steven J. Wurzelbacher, Workers’ 

Compensation Insurance: A Primer for Public Health, Department of Health and Human 

Services, Centers for Disease Control and Prevention, National Institute for Occupational 

Safety and Health (January 2014), available at http://www.cdc.gov/niosh/docs/2014-

110/pdfs/2014-110.pdf

Retirement and Related Insurance Issues:

U.S. Government Accountability Office, SOCIAL SECURITY ADMINISTRATION: 

Preliminary Observations on the Death Master File: Testimony Before the Committee on 

Homeland Security and Governmental Affairs, U.S. Senate, (May 8, 2013), available at 

http://www.gao.gov/assets/660/654411.pdf