Competition, Not Regulation

Published September 15, 2008

Competition, not regulation, is the key to creating a thriving insurance market. Regulators in Washington have begun to move down a path that will lead to fewer providers setting up shop instate, leaving consumers with fewer options at higher prices.

In a study of state insurance regulation and competitiveness conducted by The Heartland Institute, Washington, while scoring well in some areas and earning an overall “B” for encouraging an open and competitive insurance market, still suffered from serious shortcomings.

Despite having set up a file-and-use system, the rate requests made by insurers are often rejected by regulators, creating a de facto prior approval system.

Insurers need to be able to react to risk and charge premiums that allow them to remain solvent. Insurers have the unenviable responsibility of crafting rate and premium structures that allow both profitability for shareholders and fairness to consumers. Maintaining accuracy in rate-making is important for consumers as well: Accurate rates ensure that one consumer does not end up subsidizing another’s risky behavior.

Matthew Glans([email protected]) is a legislative specialist for The Heartland Institute.