Vermont leads nation in effective insurance regulation, North Carolina least effective, R Street study finds
WASHINGTON (Dec. 1, 2015) – The R Street Institute has released its annual report card on insurance regulation, awarding Vermont and four other states with a grade of “A” and North Carolina a grade of “F.”
The 2015 Insurance Regulation Report Card, R Street’s annual flagship publication, examines which states do the best job of regulating the business of insurance, by assigning scores in 10 different areas, including monitoring solvency, policing fraud, protecting consumers and fostering competitive markets.
“Reviewing the data on insurance in 2015, we see mostly stable trends in consumer and business freedom in state insurance markets,” said R Street Editor-In-Chief and Senior Fellow R.J. Lehmann, the author of the study. “In some states – notably Florida – real efforts were made to scale back, or otherwise place on more sound financial footing, residual insurance markets and state-run insurance entities. Other states, notably North Carolina, appear to be moving in the wrong direction.”
Vermont received consistent scores across almost all areas of the scorecard, specifically in consumer protection, politicization, auto and homeowners insurance environments, rate freedom and clarity and regulatory restrictions. Taken cumulatively, its scores gave it the best rate in the nation. Other states receiving “A” grades were Utah, Iowa, Virginia and Kentucky.
At the other end of the spectrum, North Carolina received a failing grade, in part due to the state’s inflexible rate bureau system and recent growth of the residual market FAIR Plan and Beach Plan. Also scoring near the bottom with “D” grades were Louisiana, New York, Texas, Florida, California, Hawaii and Montana.
The report also noted that states continue to draw far more in regulatory fees and assessments than they spend on insurance regulation. The 50 states, Puerto Rico and the District of Columbia spent $1.33 billion on insurance regulation in 2014 but collected more than double that amount, roughly $3 billion, in regulatory fees and assessments from the insurance industry.
“These surplus regulatory fees and assessments end up in state coffers to patch other holes in state budgets,” Lehmann said. “They serve as a hidden tax on insurance consumers, raising the cost of coverage for everyone.”
If premium taxes, fines and other revenues are included in the tally, only 6 percent of the $21.9 billion states collected from the insurance industry last year was spent on insurance regulation, down from 6.4 percent the prior year and 6.6 percent in 2012.
The full report can be read here.