Issues and Needed Improvements in State Regulation of the Insurance Business

An analysis of State insurance departments' handling of automobile insurance regulatory issues found problems of unfair discrimination in risk classification and insurance availability. The relativity of risk classifications and claims of redlining were not being adequately evaluated by most State insurance departments. Most States provided only limited protection to consumers who have had adverse underwriting decisions. Consumers in most States need not be informed of why their applications for insurance were rejected; and in many States, no reason for nonrenewal need be given. The insurance regulatory process in nearly every State needs more and better information, more systematic procedures for handling consumer complaints, and better procedures for monitoring insurance company claims handling. Less regulation, however, may be a viable option in regulating the price of insurance; as in most cases, almost no difference in cost was found between States with price regulation and those without regulation. Consumers might be better served if more resources were devoted to regulation that would allow competitive forces to work more effectively, such as providing better price comparison information to consumers.