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UNITED STATES DEPARTMENT OF THE TREASURY

FEDERAL ADVISORY COMMITTEE ON INSURANCE

SUMMARY OF PUBLIC MEETING

May 26, 2016

The Federal Advisory Committee on Insurance was convened at 1:00 P.M. on May 26, 2016 in 

the Cash Room at the U.S. Department of the Treasury, 1500 Pennsylvania Avenue, N.W., 

Washington, D.C., with Daniel Glaser, Chair, presiding.

In accordance with the provision of the Federal Advisory Committee Act, the meeting was open 

to the public.

Committee Members Present:

DANIEL GLASER, President and Chief Executive Officer, Marsh & McLennan Companies, 

Inc., Chair

DAVID (BIRNY) BIRNBAUM, Executive Director, Center for Economic Justice

KURT BOCK, Chief Executive Officer, Country Financial

ELIZABETH BROWN, Professor, Georgia State University 

BRENDA CUDE, Professor, University of Georgia

JOHN FRANCHINI, Superintendent, New Mexico Office of Superintendent of Insurance

(represented by proxy Alan Seeley)

LORETTA FULLER, Chief Executive Officer and Chief Financial Officer, Insurance Solutions 

Associates (represented by proxy Zachary Alexander)

NICHOLAS GERHART, Commissioner, Iowa Insurance Division

GEORGE KEISER, Representative, North Dakota House of Representatives

THEODORE MATHAS, Chairman, President, and Chief Executive Officer, New York Life

Insurance Company

SEAN MCGOVERN, Chief Risk Officer & General Counsel, Lloyd's of London

TERESA MILLER, Commissioner, Pennsylvania Insurance Department Insurance

AL REDMER, Commissioner, Maryland Insurance Administration

MICHAEL RILEY, Commissioner, West Virginia Offices of the Insurance Commissioner

MARGUERITE SALAZAR, Commissioner, Colorado Division of Insurance

Also Present:

TOM BAKER, University of Pennsylvania Law School

ED DUNNE, National Academy of Sciences

MARY HEEN, University of Richmond, School of Law

CAROLYN KOUSKY, Resources for the Future

HOWARD KUNREUTHER, University of Pennsylvania, Wharton School of Business

MIKE PRITULA, McKinsey & Company

ALLEN SCHIRM, Mathematica Policy Research

DANIEL SCHWARCZ, University of Minnesota Law School
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Welcome Introduction and New Members

Director McRaith welcomed the members of the Federal Advisory Committee on Insurance 

(FACI) and convened the meeting.

Update from the Affordability and Accessibility Subcommittee

Chairman Glaser then introduced Birny Birnbaum, Chair of the Affordability and Accessibility 

Subcommittee. Mr. Birnbaum provided a summary of Subcommittee calls held to hear from 

stakeholders who submitted comments on the proposal by the Federal Insurance Office to 

develop an Affordability Index for private automobile insurance premiums. Calls were on 

January 19 and 21, and on March 1, 2016, respectively. Participants included the Insurance 

Research Council and the Financial Services Roundtable on January 19; the Consumer 

Federation of America and a coalition of New York consumer groups on January 21; and the 

Property Casualty Insurers Association and the National Association of Mutual Insurance 

Companies on March 1. Mr. Birnbaum reported that some stakeholders on the calls questioned

the use of a single percentage of income as a threshold for affordability; suggesting instead that a 

comparison of auto expenditures to other optional household expenditures would be a better 

approach. In addition, he reported that subcommittee members asked if an affordability analyses 

could be constructed by collecting data generated in the normal course of business, as opposed to 

asking insurers to create new data. Mr. Bock added that the questions of how costs drive 

affordability and how to obtain the data as some outstanding issues.

Discussion of the Globalization of the Insurance Market

Chairman Glaser introduced the topic, and noted that in the U.S. in recent years there has been a 

fair amount of discussion and interest in the development of global insurance standards. He 

noted that the topic has been around since at least the mid-1990s, but has become increasingly 

important because of the dramatic globalization of the insurance industry over the last 20 years. 

Chairman Glaser then introduced Mike Pritula, a Director at McKinsey & Company for a 

presentation on the topic. Mr. Pritula provided an overview of the overall insurance market 

measured by premium and provided estimates of the property-casualty market at approximately

1.5 trillion and the life market at 2.4 trillion. He indicated that for the last five years the U.S. and 

China contributed the lion's share of the growth in global property-casualty market. He 

concluded that the larger carriers are growing more international, are likely to consolidate, but 

will become more focused and perhaps easier to regulate because they are less complex from an 

insurance standpoint. Chairman Glaser, Mr. Birnbaum, Mr. Keiser, and Mr. McGovern asked 

questions of Mr. Pritula.

Discussion of the Role of Behavioral Economics in the Insurance Industry

Chairman Glaser introduced the topic and noted that behavioral economics, in part, is the study 

of how individuals contemplate and make economic decisions, and stated that a fundamental 

aspect of insurance is how a consumer perceives and values different forms of risk, making 

behavioral economics an important feature of the insurance value proposition. He then 

introduced two professors from the University of Pennsylvania, Tom Baker from the Law 

School, and Howard Kunreuther from the Wharton School of Business, to make their

presentation. The professors shared that academia is still at an early stage of understanding 

behavioral economics and the insurance industry, but offered some observations: over confident 
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consumers are less likely to buy insurance for matters over which they have control; take-up 

rates tend to be higher after a disaster, such a flood or an earthquake; insurance premiums should 

reflect risk and should be transparent so that a consumer knows that the premium charged is 

connected to certain risk the consumer presents; and, as it relates to flood insurance,

policymakers should consider such issues as implementing mitigation measures and addressing 

affordability. Professor Cude, Mr. Mathas, Mr. Bock, Commissioner Gerhart, and Director 

McRaith asked questions of Professors Baker and Kunreuther.

Discussion of Anti-Discrimination Efforts in Insurance

Chairman Glaser introduced and welcomed Professor Mary Heen from the University of 

Richmond School of Law, and Professor Daniel Schwarcz from the University of Minnesota

Law School. Professor Heen provided a brief historical perspective on anti-discrimination 

efforts in insurance; outlined nondiscrimination in insurance as an important civil rights issue, as 

well as an issue of accessibility and affordability of insurance; and, emphasized the need for 

effective leadership on these issues from state or federal lawmakers, regulators, and the industry. 

Professor Schwarcz presented on state anti-discrimination insurance laws and noted that there are 

a lot of variabilities with respect to the laws on the books and how they are applied. Among his 

observations are that discrimination should be prohibited for both rating and underwriting; and a 

better understanding is needed of how insurers use characteristics that correlate with suspect 

characteristics as an effective a proxy to evade state law. Mr. Birnbaum, Rep. Keiser, Mr. Bock, 

and Director McRaith asked questions of the professors. 

Discussion of Affordability in the National Flood Insurance Program, NFIP

Chairman Glaser introduced the topic and then called on Professor Ed Dunne from the National 

Academy of Sciences to provide an update on the work performed by the committee formed by 

the National Academy Sciences to study the National Flood Insurance Program (NFIP). 

Professor Dunne introduced, Dr. Carolyn Kousky, a Research Fellow at Resources for the 

Future; Professor Howard Kunreuther, the James G. Dinan Professor at the University of 

Pennsylvania, Wharton School of Business, and Co-Director of the Wharton Risk Management 

and Decision Process Center; and, Dr. Allen Schirm, Director of Methods and a Senior Fellow at 

Mathematica Policy Research. Professor Dunne and fellow presenters reported on and provided 

a summary of the two reports produced by the committee. The first report focuses on an 

affordability framework and provides advice on how FEMA might go about designing such a 

framework. The second report provides advice on how FEMA might develop policy options to 

evaluate affordability issues. Rep. Keiser, Professor Cude, Mr. Birnbaum asked questions of the 

presenters.

Update on the Progress of Negotiating a Covered Agreement with the EU

Chairman Glaser call on Director McRaith who provided on update on the negotiations of a 

“covered agreement” with the European Union (EU). Director McRaith explained that a 

“covered agreement” is an agreement between the United States and one or more foreign 

jurisdictions that relates to prudential insurance or reinsurance measures. Director McRaith 

reported that Treasury and the United States Trade Representative notified Congress on 

November 20th of 2015 of the intent to negotiate a covered agreement with the EU on a number 
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of prudential insurance and reinsurance measures that have been a source of conflict or 

contention with the EU for a number of years. Director McRaith reported that the first meeting 

of the negotiations took place in Brussels in February, and the second in Washington in May 

2016.

New Business

Prior to the Committee adjourning, Chairman Glaser raised the item of new business, certifying 

the minutes from the November 4, 2015 FACI meeting. The minutes were then certified.

At 4:50 P.M., Chairman Glaser concluded the meeting.