While I completely agree with this article it is hardly breaking news. Anyone who has ever written insurance in the past 50 years is well aware of this.
Perhaps we should sign up and be remunerated for doing a study on why insurance costs are going up due to the hard market. We can do any number of theories from Obamacare to storm losses to drought to Global Warming. It should make for interesting reading and we can get paid for it as well. I don’t like studies done by academics. They don’t live in the real world like we do.
You don’t like studies done by academics? Really – then who is qualified to do them? Actually, they DO live in the real world – the real world of statistics and numbers. Pure data – numbers and statistics are not influenced by the criterion such as your obvious political bias. And – for the record – it’s climate change, not global warming. Storm losses are theories? Really?
Hey Brokie, you should remember that our current government is being run by college professors from the top down. I think the last 6 economic advisors were Progressive advocates from universities including the current one from Princeton who designed the wonderful cash for clunkers program. They have no business experience and couldn’t run a lemonade stand but are trying to run the most complex economy in the world. How is that working out for us? I would much rather trust a smart CPCU who has actually been in the business arena.
this article points out that there are costs to regulations… duh. I did not see a solution presented in this article. Which is too bad, because to the common citizen, if they read an article that says individual state regulation is bad, then they may draw the conclusion that a single federal regulator is the best. That would not be the best. While, it is indeed a pain to deal with the States,,, it is a better option than dealing with Uncle Sam. I submit to you that each state is very different when it comes to risk. Federal regulation would mess up the little differences between states. The system of state level regulation works… yes, its not perfect. As a result, I would love to see this article present some solutions, we all know what the problem is, where is the 2012 solution to an age old problem?
This article goes to show that we have way too much government involved with business operations. Between the State and the Feds, it is no wonder small business is suffering. With the advent of the pending Obamacare, many companies will be laying off employees or going out of business because the costs are too great. California was voted the worst state in the union for business. No wonder businesses are fleeing that state in favor of friendlier places like Texas.
“Estimating the costs associated with duplicative state regulation is an important contribution to the literature on insurance regulation. However, to appropriately assess the social desirability of state-based regulation, the benefits of duplicative
regulation (e.g., regulatory competition between the 50 different states or the fact that state regulation may be able to more effectively address local preferences) also need to be evaluated. An empirical evaluation of the benefits of duplicative regulation is a fruitful area for future research.”
Simply put, an analysis of a regulatory structure’s costs without a corresponding analysis of its benefits isn’t very valuable!
The first sentence if very misleading. Read by itslef, a $100,000 policy includes $31,000 of cost for multistate regulation. Later on, if you are reading carefully, the “expense item” on Insurance Company financials for regulatory expense is 31% higher if they are multistate. That is very different. That probably makes it less than 1% of premium cost to the consumer. Not that any waste of money should be tollerated, it’s just a poorly written article making the problem preposterously large, presumably to attract attention.
And by the way, boo-hoo. Yes, state regulation adds expense. But state regulation is demonstrably effective. The same cannot be said of federal regulation.
All we need is a federal regulator giving their blessing to an insurance product of the same caliber as credit default swaps.
The states can do much more to streamline the insurnce process to make it more uniform from state to state. 75-80 of the process could be the same in every state. I too agree that if you turn this over to Feds, it will explode.
The author of this article – purportedly an insurance professor – is apparently unaware that the very large majority of laws and regulations adopted in any/all states are those proposed by the National Assn. of Insurance Commissioners who publish model laws and regs on almost every aspect of insurance and its regulation.
If not ignorant of this, then the author must have been given a large Federal grant to come up with his hogwash study and report.
And as someone who has experience in about 40 states, those differences from one to another are important to the residents of those states. Leave it alone – it isn’t broken.
Amen Brother. The last thing we want to have is the Feds involved. They like to poke their nose into everything and it usually ends badly. I am in Texas and although it is a regulated state, it has worked pretty well over the years. Some of the agencies are a bit of a pain in the butt like the Texas Dept of Transportation with all their rules about registration on Commercial vehicles and fees involved, but we can live with them.
You hit the nail on the head Expert. The National Association of Insurance Commissioners should work out the model laws and regulations of the States and then they would be uniform nationwide. We certainly don’t need the Feds involved since they are hugely wasteful and inefficient. They can’t even get the Flood Program squared away and it goes down to the wire each time for funding. They are a joke and the joke is on us if we allow them to continue to intrude in business.
Comparing RRGs to licensed carriers is really apples and bowling balls in terms of regulation. I don’t even know where to start with that “comparison” since there isn’t any. As for federal regulation of insurance markets – maybe, just maybe costs for carriers will be lower – though I doubt it. But consumer protections will be lost. Not a good idea.
Congress can’t even pass legislation that makes sense, so can you imagine congress trying to create reasonable legislation to manage the insurance industry? All they know how to do is to run for the next election and vote for benefits that help themselves. Good luck with that idea professor!
I, too am skeptical about anything Congress does. As bad as they are, they can’t hold a candle to a rogue administration who has gotten used to the idea they can govern by executive order. What is to keep them from coming into the first 5 companies and “crucifying” them to make the others more manageable like the EPA does?
Imagine the premium increases that would come if federal regulation became a reality! The words “Too Big To Fail” come to mind… No thanks. I greatly prefer the state model of regulation that allows each state to address its unique needs.
I read this article as saying “the state model just makes it so darn HARD for a huge mega corporation to take over and dominate the entire national insurance market.” And my response is, “EXACTLY!”
While I completely agree with this article it is hardly breaking news. Anyone who has ever written insurance in the past 50 years is well aware of this.
Perhaps we should sign up and be remunerated for doing a study on why insurance costs are going up due to the hard market. We can do any number of theories from Obamacare to storm losses to drought to Global Warming. It should make for interesting reading and we can get paid for it as well. I don’t like studies done by academics. They don’t live in the real world like we do.
You don’t like studies done by academics? Really – then who is qualified to do them? Actually, they DO live in the real world – the real world of statistics and numbers. Pure data – numbers and statistics are not influenced by the criterion such as your obvious political bias. And – for the record – it’s climate change, not global warming. Storm losses are theories? Really?
Hey Brokie, you should remember that our current government is being run by college professors from the top down. I think the last 6 economic advisors were Progressive advocates from universities including the current one from Princeton who designed the wonderful cash for clunkers program. They have no business experience and couldn’t run a lemonade stand but are trying to run the most complex economy in the world. How is that working out for us? I would much rather trust a smart CPCU who has actually been in the business arena.
this article points out that there are costs to regulations… duh. I did not see a solution presented in this article. Which is too bad, because to the common citizen, if they read an article that says individual state regulation is bad, then they may draw the conclusion that a single federal regulator is the best. That would not be the best. While, it is indeed a pain to deal with the States,,, it is a better option than dealing with Uncle Sam. I submit to you that each state is very different when it comes to risk. Federal regulation would mess up the little differences between states. The system of state level regulation works… yes, its not perfect. As a result, I would love to see this article present some solutions, we all know what the problem is, where is the 2012 solution to an age old problem?
This article goes to show that we have way too much government involved with business operations. Between the State and the Feds, it is no wonder small business is suffering. With the advent of the pending Obamacare, many companies will be laying off employees or going out of business because the costs are too great. California was voted the worst state in the union for business. No wonder businesses are fleeing that state in favor of friendlier places like Texas.
As one involved in a compliance and regulatory function, my vote goes to ONE regulatory body, not 50.
I question the 31% number, since the sum total of all compliance costs generally comes out to 3-5% of premium…
I have to agree with Jen. IJ needs to reconsider their definition of breaking news to be more in line with our idea of breaking news…
From the “Conclusion” of the report:
“Estimating the costs associated with duplicative state regulation is an important contribution to the literature on insurance regulation. However, to appropriately assess the social desirability of state-based regulation, the benefits of duplicative
regulation (e.g., regulatory competition between the 50 different states or the fact that state regulation may be able to more effectively address local preferences) also need to be evaluated. An empirical evaluation of the benefits of duplicative regulation is a fruitful area for future research.”
Simply put, an analysis of a regulatory structure’s costs without a corresponding analysis of its benefits isn’t very valuable!
The first sentence if very misleading. Read by itslef, a $100,000 policy includes $31,000 of cost for multistate regulation. Later on, if you are reading carefully, the “expense item” on Insurance Company financials for regulatory expense is 31% higher if they are multistate. That is very different. That probably makes it less than 1% of premium cost to the consumer. Not that any waste of money should be tollerated, it’s just a poorly written article making the problem preposterously large, presumably to attract attention.
And by the way, boo-hoo. Yes, state regulation adds expense. But state regulation is demonstrably effective. The same cannot be said of federal regulation.
All we need is a federal regulator giving their blessing to an insurance product of the same caliber as credit default swaps.
The states can do much more to streamline the insurnce process to make it more uniform from state to state. 75-80 of the process could be the same in every state. I too agree that if you turn this over to Feds, it will explode.
The author of this article – purportedly an insurance professor – is apparently unaware that the very large majority of laws and regulations adopted in any/all states are those proposed by the National Assn. of Insurance Commissioners who publish model laws and regs on almost every aspect of insurance and its regulation.
If not ignorant of this, then the author must have been given a large Federal grant to come up with his hogwash study and report.
And as someone who has experience in about 40 states, those differences from one to another are important to the residents of those states. Leave it alone – it isn’t broken.
Amen Brother. The last thing we want to have is the Feds involved. They like to poke their nose into everything and it usually ends badly. I am in Texas and although it is a regulated state, it has worked pretty well over the years. Some of the agencies are a bit of a pain in the butt like the Texas Dept of Transportation with all their rules about registration on Commercial vehicles and fees involved, but we can live with them.
You hit the nail on the head Expert. The National Association of Insurance Commissioners should work out the model laws and regulations of the States and then they would be uniform nationwide. We certainly don’t need the Feds involved since they are hugely wasteful and inefficient. They can’t even get the Flood Program squared away and it goes down to the wire each time for funding. They are a joke and the joke is on us if we allow them to continue to intrude in business.
Comparing RRGs to licensed carriers is really apples and bowling balls in terms of regulation. I don’t even know where to start with that “comparison” since there isn’t any. As for federal regulation of insurance markets – maybe, just maybe costs for carriers will be lower – though I doubt it. But consumer protections will be lost. Not a good idea.
Congress can’t even pass legislation that makes sense, so can you imagine congress trying to create reasonable legislation to manage the insurance industry? All they know how to do is to run for the next election and vote for benefits that help themselves. Good luck with that idea professor!
I, too am skeptical about anything Congress does. As bad as they are, they can’t hold a candle to a rogue administration who has gotten used to the idea they can govern by executive order. What is to keep them from coming into the first 5 companies and “crucifying” them to make the others more manageable like the EPA does?
Imagine the premium increases that would come if federal regulation became a reality! The words “Too Big To Fail” come to mind… No thanks. I greatly prefer the state model of regulation that allows each state to address its unique needs.
I read this article as saying “the state model just makes it so darn HARD for a huge mega corporation to take over and dominate the entire national insurance market.” And my response is, “EXACTLY!”