For the past four years, The Heartland Institute has graded states on their property and casualty insurance regulatory environment. In assigning grades in its 2011 report, study author and Heartland Institute Vice President of Washington, DC Operations Eli Lehrer looks at how free consumers are to choose the P&C insurance products they want as well as how free insurers are to provide the P&C insurance products consumers say they want.

Lehrer notes in his study that there is a modest, uneven, but nonetheless real trend towards more freedom for consumers and businesses in the homeowners' and automobile insurance realms. He said that lthough state-level insurance bureaucracies make it difficult—sometimes impossible—for insurers to offer consumers the products they need, want, and deserve, burdensome regulation shows signs of easing.

Below and on the following pages are the top 10 states for P&C insurance regulation, including their grade, overall score, and the reasoning behind the state's ranking.

Click here to download Heartland Institute's complete report.

Vermont comes in first on Heartland's report card for the third year out of four. The state has both a very good regulatory environment for insurers (market entry is so easy that almost every national insurer competes there) and an open and competitive market that provides enormous choice to for Vermont consumers.

Long a favorite of many in the insurance industry, Ohio has shot up in the rankings since Heartland began doing the report card largely because of improvements in regulatory clarity under former commissioner Mary Jo Hudson. For a state with so many sizeable domestic carriers (which often tend to dominate in their own back yards) Ohio offers a very competitive insurance environment for consumers.

Illinois' no-file system for most P&C rates makes it a favorite of many in the insurance industry. Because the system does allow for a great deal of freedom, Illinois gets a good grade. But the market dominance of a few large carriers domiciled in the state stop it from topping Heartland's ratings.

Maine ends up with a high grade not so much because it has a great insurance environment but, rather, because it offers a wide range of consumer choice (common in smaller states) and does nothing overtly anti free-market in administering its insurance regulations.

Wisconsin isn't a favorite of many in the insurance industry, and the 2010 passage of a wide range of new auto insurance regulations (since repealed in part) would have hurt the state's grade. Nonetheless, its use-and-file system coupled with an open competitive market for consumers land it near the top half of the rankings.

Arizona's rapid population growth has brought many insurers into the state. A lack of burdensome regulations has kept them there and made sure that residents can get the coverage they need.

For a state with a large land area and a small population, North Dakota has done well in providing an environment where insurers are willing to enter the market and sell consumers the products they want.

Utah, the top-rated state in 2010 has declined a few points largely because of methodological changes. The state's once burdensome regulatory system underwent a partial reform under former Gov. Jon Huntsman which partly explains the state's generall rising score.

Like a lot of other thinly populated states, Idaho manages to maintain a competitive insurance market without many regulations that simply don't make sense.

A little more than a decade ago, South Carolina's enormous residual auto insurance market, ever-growing beach plan, and widespread use of desk-drawer rules made it one of the worst places in the country to buy or sell insurance. Under former Insurance Director Scott Richardson (now a Heartland Institute Policy advisor), South Carolina shrunk its residual markets to virtually nothing and attracted scads of new carriers. If the state stays the course, it could well top the rankings in the near future.

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