Insurance Price Controls: When Will They Ever Learn?

Recent foreign policy adventures in Venezuela, Gaza, Greenland, Denmark, Iran, and Russia have diverted attention from domestic economic issues—affordability being chief among them. Outsized increases in the cost of essentials like housing, education, automobiles, and food have materially raised the cost of living over the past year.

For example:

• Average apartment rents in New York City are 5.3 percent higher.
• A new car costs an average of 3.6 percent more.
• College tuition has increased 41.7 percent faster than the Consumer Price Index.

Americans’ overall perception of price levels is increasingly negative. In its effort to show progress in addressing this issue, the Trump administration has turned to populist solutions that have failed time after time, such as imposing price controls. While price controls may deliver a short-term fix, they commonly result in shortages, inferior products, and other unintended consequences in the long term. Attempts to combat affordability concerns with executive action and pressure on states have not worked, either—nor have attempts to influence insurance premium levels.

The following initiatives represent recent efforts to pressure insurers into lowering costs.

Reinsurance Costs

The cost of property catastrophe reinsurance is singled out as a major contributing factor to rising homeowners’ insurance costs. While it is true that reinsurance costs have risen in recent years, the reality is that the market has already addressed that concern without government intervention. Reinsurance rates fell by 12 percent at the Jan. 1, 2026 property catastrophe reinsurance treaty renewals. This sharp decline resulted from a lower-than-average natural catastrophe toll in 2025 (with the exception of California’s wildfires). Market dynamics took care of reinsurance costs.

Automobile Insurance Rates

During Donald J. Trump’s 2024 presidential campaign, he promised to cut automobile insurance premiums by 50 percent. He delivered this claim via social media, stating, “Your Automobile Insurance is up 73% – VOTE FOR TRUMP, I’LL CUT THAT NUMBER IN HALF!” In reality, the president does not have the power to cut insurance rates.

Louisiana Dust-up

A skirmish between Louisiana’s governor and insurance commissioner appears to have gotten personal, with a website and a billboard accusing the commissioner of refusing to lower insurance rates. However, the insurance commissioner does not wield the power to raise or lower insurance rates. Their job is two-fold: to protect policyholders on one hand and to maintain insurer solvency on the other. In fact, ensuring that insurers operating within the state remain solvent—that is, capable of paying claims—is itself a form of policyholder protection.

California in Illinois

Illinois has been experimenting with insurance price controls patterned on the disastrous California model, which has caused insurers to cease writing business in the Golden State. The Illinois House recently rejected a bill (HB3799) that would have empowered the state’s department of insurance to regulate homeowner’s insurance rates.

The Folly of Price Controls

History is riddled with examples of price controls backfiring due to unintended consequences such as scarcity and inferior products. Developing countries like Russia, Belarus, Iran, Syria, and the United Arab Emirates have attempted to stabilize price increases in staples like bread and eggs via price caps. For example, Russia’s recent response to high egg prices (sound familiar?) was to introduce a lower-quality egg substitute. And Venezuela’s economic collapse can be attributed in part to price control efforts over the past three decades—particularly following the 2008 Food Price Crisis.

Price Controls Can Be Lethal

Our own nation’s experience with price controls includes the tragic loss of 2,000 soldiers in the winter of 1777, while the Continental Army was encamped at Valley Forge. Here, locals sold food to the troops at elevated prices, leading to price ceilings and shortages that ultimately resulted in deaths from malnutrition and starvation.  

Federal Crop and Federal Flood Price Controls

Both the Federal Crop Insurance Program (FCIP) and the National Flood Insurance Program (NFIP) have become so dependent on price controls and subsidies that they now carry massive debt. For example, FCIP policyholders (i.e., farmers) pay only 37 percent of the premium for crop insurance while taxpayers end up paying the remaining 63 percent. Meanwhile, years of price controls and subsidies have helped the NFIP rack up $22.5 billion in debt.

Disastrous 1970s Wage and Cost Freeze

In the 1970s, President Nixon sought to combat stubbornly high inflation by imposing wage and price controls. His “New Economic Policy” backfired, with inflation rising from 5 percent to the mid-teens. Market signals were distorted, especially for gasoline—resulting in long lines at gas stations and empty supermarket shelves. And attempts to keep gas prices low led to producers refusing to produce at below-market rates.

Basic Economics

Elementary economic theory and common sense explain why price controls—especially price ceilings—do not work: They suppress or distort market signals, leading to stubborn shortages and inferior quality.

Failure to recognize what history has taught us about the evils of price controls inevitably leads to unnecessary economic turmoil. While price controls may catalyze short-term economic benefit, they ultimately increase costs, suppress innovation, and hurt the folks they are intended to help.

A better solution? Let the free market do its thing.