Heartland Institute: Prior Approval Requirement Is a Bad Idea

Published August 30, 2010

The director of the Texas office of The Heartland Institute’s Center on Finance, Insurance, and Real Estate says requiring “prior approval” of insurance rates, an idea recently addressed by former Houston Mayor Bill White, would be bad public policy.

In an August 27 press conference, White said he hoped to “stick up” for state residents by requiring insurers to submit their rates to government officials for prior approval.

Under current Texas statutes, insurers may “file and use” their rates, meaning they submit them to regulators and then can use them after a waiting period. Insurers are routinely told in advance whether their rates will be disapproved. Particularly for large insurers, the current system has few differences from what White is proposing.

Julie Drenner, director of Heartland’s Austin office, says the state should move toward a freer insurance market and reject the idea of government-set insurance rates.

“The state government does not tell retailers how much to charge customers for merchandise,” Drenner said. “Likewise, it has no business ordering private insurance companies to charge certain rates for their products. Outdated practices such as price controls only slow recovery during difficult economic times such as these.”

Drenner can be reached at (512) 799-5706 and [email protected].