Consumers in five states are paying higher premiums for homeowners insurance than necessary because of ill-advised regulation, according to a new report card jointly released by The Heartland Institute and Competitive Enterprise Institute.
The 2009 Property & Casualty Insurance Report Card found consumers in Florida, Hawaii, Louisiana, Maryland, and Massachusetts pay more for homeowners coverage that is inferior to what is available in states with positive insurance climates. Homeowners in Arizona, Idaho, Utah, and Vermont enjoy lower premiums for broader and more predictable coverage, earning “A” grades on the Heartland/CEI report card.
“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.”
Focus on Freedom
The goal of the study was to discover how free consumers are to buy the insurance products they want and how free insurers are to sell them.
“Our bottom line conclusion was pretty simple: Insurance freedom doesn’t exist in many places,” Lehrer said.
The report focuses on homeowners and automobile insurance, the two types of insurance Americans typically are required to purchase. Forty-six states mandate the purchase of auto insurance, and nearly all mortgage lenders require their clients to secure homeowners coverage.
“We’re hoping to promote positive reform, and we think we’re doing it,” Lehrer said in explaining the motivation for the study. “Several states have asked us about how they can improve their grades already, and some states made changes in the wake of last year’s report card. We can’t take full credit for any of them, but we think we did help.”
Party No Predictor
According to Lehrer, the growing problems with insurance freedom nationwide cross party lines.
“State stereotypes don’t tell you anything. The states with the worst insurance environments are mostly ‘red’ states with political leaders who talk a good game about the free market,” Lehrer said. “Two of the most liberal ‘blue’ states—Illinois and Vermont—ranked near the very top in our report card even though politicians from those states are rarely free-market purists.”
Lehrer added, “If anything, it’s worth noting that Democrats tend to be better reformers than Republicans. States like Massachusetts and North Carolina that have recently seen Republicans defeated in high-profile races are actually moving in the right directions under Democratic leadership committed to all sorts of liberal goals. This is not a partisan issue at all; this is simply an issue of common sense.”
Matthew Glans ([email protected]) is a legislative specialist on insurance and finance at The Heartland Institute.
For more information …
2009 Property & Casualty Insurance Report Card: http://www.heartland.org/publications/policy%20studies/article/25091/
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
