Ending Public Utility Style Rate Regulation in Insurance

Abstract

Many property-casualty insurers are subject to an elaborate state-based regulatory regime that enforces prohibitions against "excessive" and "unfairly discriminatory" rates. Extensive economics research suggests that this regulation is not in the public interest. Building on this literature, this Essay suggests that insurance rate regulation evolved out of a set of market and regulatory conditions that no longer prevail in most property-casualty insurance markets. The persistence of traditional insurance rate regulation in many states thus represents a failure of these jurisdictions to evolve along with the markets they oversee.