States in the Southern US are among the worst for insurance regulation, if a recent report from R Street is to be believed.
In its annual review of insurance regulation across the country, the group assessed each state for proficiency in 12 areas, including ensuring carrier pricing flexibility; competitiveness in home, auto and workers’ comp markets; monitoring carrier solvency and efficiency.
And while North Carolina ranked the lowest in terms of free market-promoting regulation, it was the South that took the regional prize – three states were included in its ranking of the top nine states with regulatory issues.
Still, things appear to be heading in R Street’s preferred direction. These nine states were the only ones not to receive a passing grade of “C” or better. Last year, 11 states failed to get a passing grade.
“On balance, we believe states have done an effective job of encouraging competition and, at least since the broad adoption of risk-based capital requirements, of ensuring solvency,” the report said.
States that failed to make the grade include:
1. Mississippi (D+)
Strengths: Workers’ comp market competitiveness
Weaknesses: Politicization, excessive rate regulation, underwriting restrictions
2. Montana (D)
Strengths: Antifraud resources
Weaknesses: Politicization, fiscal efficiency
3. Hawaii (D)
Strengths: Antifraud resources
Weaknesses: Homeowners insurance market competitiveness, excessive rate regulation, underwriting restrictions
4. California (D)
Strengths: Antifraud resources, auto insurance market competitiveness
Weaknesses: Politicization, solvency regulation, excessive rate regulation, underwriting restrictions
5. Florida (D)
Strengths: Fiscal efficiency, workers’ comp market competitiveness
Weaknesses: Politicization, solvency regulation, homeowners insurance market competitiveness, excessive rate regulation, underwriting restrictions
6. Texas (D)
Strengths: Auto insurance market competitiveness
Weaknesses: Solvency regulation
7. New York (D)
Strengths: Antifraud resources
Weaknesses: Solvency regulation, consumer protection, fiscal efficiency, excessive rate regulation, underwriting restrictions
8. Louisiana (D)
Strengths: Antifraud resources
Weaknesses: Politicization
On the opposite end of the spectrum, the best states for insurance regulatory environments (those that received an ‘A’ grade) include: Vermont, Utah, Iowa, Virginia and Kentucky.
Overall, R Street applauded state-based regulation on its job of encouraging competition and carrier solvency. The report noted, however, that some state-by-state regulations lead to inefficiencies in the market.
