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R Street’s Insurance Regulation Report Card

Posted By Administration, Tuesday, December 10, 2019

The R Street Policy Study’s 2019 Insurance Regulation Report Card has been released. R Street is a conservative nonprofit, nonpartisan public policy research group. The idea behind R Street is the promotion of free markets and limited but effective government.

The report is an annual look at insurance regulation and the effect that regulation and reforms have on insurance policies. It looks at:

  Auto insurance

  Homeowners insurance

  Residual markets

  Underwriting freedom

  And more

The only state to get an F is Louisiana. Most states — however, and at best — rate an average score. Nine states made the honor roll with an A- or above. Two of them — Arizona and Nevada — are PIA Western Alliance states. These are the states with a grade of A- or above:

Vermont

Virginia

Kentucky

Indiana

Nevada

Arizona

Florida

Utah

Wisconsin

One PIA Western Alliance state — California — is in the bottom tier with a D+ or lower. As noted earlier, Louisiana with an F is the worst and the others — in descending order — are:

Colorado

Hawaii

North Dakota

Mississippi

California

Arkansas

Massachusetts

North Carolina

New York

Two PIA Western Alliance states — Montana and New Mexico — are among the most improved. Florida is the most improved going from a B to an A-. As for the two PIA Western Alliance states:

Montana — D to a C-

New Mexico — B- to a B+

The PIA Western Alliance state of Oregon is among those seeing the biggest scoring drop:

Colorado — C to a D+

Maine — A- to a B

Oregon — B to a C+

In the report conclusion, R Street’s researchers said, “there are ways in which the thicket of state-by-state regulations leads to inefficiencies, as well as state policies that have the effect of discouraging capital formation, stifling competition and concentrating risk. Central among these are rate controls.”

Here are the rankings and statistics of PIA Western Alliance States. It is interesting to note that two are in the top-10 and two more are in the top 20. Two states are in the middle of the pack and two are in the bottom tier.

Here they are in order of their R Street ranking:

Nevada

Rank — 6

Score — 70.3

2019 grade — A

2018 grade — A-

 

Strengths: Low tax and fee burden, ahead on financial exams, small residual markets

Weaknesses: None

Arizona

Rank — 7

Score — 70.1

2019 grade — A

2018 grade — A

 

Strengths: No regulatory surplus, significant underwriting freedom

Weaknesses: Large runoff obligations, thinly capitalized markets

Idaho

Rank — 12

Score — 67.9

2019 grade — B+

2018 grade — A-

 

Strengths: No runoff obligations, competitive auto market

Weaknesses: Very high homeowners loss ratio, large workers' compensation state fund

New Mexico

Rank — 15

Score — 67.5

2019 grade — B+

2018 grade — B-

 

Strengths: Low politicization, no runoff obligations

Weaknesses: High tax and fee burden, thinly capitalized markets, large workers' compensation state fund

Oregon

Rank — 27

Score — 61.1

2019 grade — C+

2018 grade — B

 

Strengths: Low tax and fee burdens

Weaknesses: Large regulatory surplus, large workers' compensation state fund

Washington

Rank — 30

Score — 60.1

2019 grade — C+

2018 grade — C

 

Strengths: Ahead on financial exams, no runoff obligations

Weaknesses: Politicized market, monopoly on workers' compensation fund, little underwriting freedom, desk drawer rules

Montana

Rank — 40

Score — 55.4

2019 grade — C-

2018 grade — D

 

Strengths: No special strengths

Weaknesses: Politicized market, high tax and fee burdens, very high homeowners loss ratio, large workers' compensation state fund

California

Rank — 45

Score — 50.6

2019 grade — D

2018 grade — D

 

Strengths: Competitive auto market

Weaknesses: Politicized market, very high homeowners loss ratio, not much underwriting freedom, desk drawer rules, credit scoring restrictions, territorial restrictions

Alaska

Rank — 46

Score — 50.2

2019 grade — D

2018 grade — D

 

Strengths: No runoff obligations, small residual markets

Weakness: High taxes and fees are a burden, concentrated auto and homeowners markets, little underwriting freedom

 

Source links: R Street — link 1, link 2

 

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