New Report Card Ranks States’ Insurance Climates

Published June 12, 2009

Consumers in four U.S. states enjoy more attractive homeowners insurance at better prices than citizens in other states, according to a new report card jointly released by The Heartland Institute and Competitive Enterprise Institute.

Homeowners in Arizona, Idaho, Utah, and Vermont are charged lower premiums for broader and more predictable coverage, earning “A” grades on the Heartland/CEI report card. These states provide the best regulatory environment for insurance consumers and providers.

Consumers in Florida, Hawaii, Louisiana, Maryland, Massachusetts, and New York states that earned “F” grades pay more for homeowners coverage that is inferior to what’s available in states with positive insurance climates. The regulatory climates in those states are hostile to insurers and consumers alike.

“On balance,” writes Eli Lehrer, the report’s author, “states with less-regulated insurance markets provide more consumer choice, more predictable rates, and insurance premiums that better reflect actual risk than do states with heavily regulated markets.”

The new report card grades all 50 states according to how well (or poorly) they regulate their property and casualty insurance industries.

The report finds that state regulation raises insurance premiums because “incumbent insurers often lobby political authorities for rules that limit competition and allow them to raise rates. Consumers use their political influence as voters to support rate caps and subsidies to socialize the cost of insuring against risks they face due to the choices they make and should pay themselves.

“Both pressures lead to less consumer choice,” the report concludes. “Major property and casualty insurers have not introduced a single major new product since modern homeowners insurance became available in 1959.”

The report card focuses on two key questions: (1) How free are consumers to decide what insurance products will meet their needs? and (2) How free are insurers to provide products that meet consumers’ real or perceived needs?

The 2009 Property & Casualty Insurance Report Card identifies 11 key variables for evaluating P&C insurance markets. Among the most important are the size of the state’s residual markets, level of political oversight, loss ratio stability, rate regulation, and territorial rating.

“Ill-advised regulation of the insurance industry in many states has distorted property and casualty coverage, resulting in less competition, limited consumer choice, and higher premiums,” said Lehrer.

Lehrer, a senior fellow of the Competitive Enterprise Institute and The Heartland Institute, authored this policy study and is available to provide expert commentary or testimony. If you would like to talk with him, or have any questions about the report, contact Matthew Glans, legislative specialist at The Heartland Institute, at 312/377-4000 or by email to [email protected].

The 2009 Property & Casualty Insurance Report Card is available online at