Regulation

The entire edifice of insurance regulation by state governments is a leftover from the New Deal. Since World War II, in virtually every industry other than insurance, this type of regulatory control has been replaced by more realistic, market-based mechanisms. The recent attempts by the State of Florida to regulate insurance prices demonstrate the compelling need to modernize today’s dysfunctional state insurance regulatory system.

The problems of insurance industry regulation merit the review currently underway at the Treasury Department. The review should concentrate on identifying the most critical problems these industries face as a consequence of government action (or inaction), and target a few discrete initiatives, such as regulatory competition, that should set the political process on a straight road to reducing those problems.