“The price controls of a long obsolete, anticompetitive marketplace are antithetical both to the needs of todays consumers and to American public policy,” former Illinois Insurance Director Nathaniel S. Shapo said.

Mr. Shapo, now an attorney in the Chicago office of Sonnenschein, Nash & Rosenthal, cited Illinois free market rating system, which does not empower the insurance commissioner to review and challenge prices for auto and homeowners insurance, as a model for the nation. The Illinois model, he said, produces abundant supply and empowers consumers to effectively shop for the coverage they need at prices they can afford.

Ernst Csiszar, the insurance director for South Carolina, added that the experience in his state reflects this as well. With a competitive rating law taking effect there in 1999, the number of insurers has increased to 165 (from 78 in 1996). The states residual market decreased from over 600,000 policies in 1999 to about 340, he added.

Moreover, he said, no insurance company has more than 25 percent of the market.

Rep. Richard Baker, R-La., who chairs the Financial Services Committees Subcommittee on Capital Markets and Insurance, said that the regulatory system in a given state affects the availability and affordability of insurance.

“There is a literal maze of regulatory structures out there, and we want to find out which ones actually give consumers the most choices and help make it easier for them to find the best product, with the best service, at the best possible price,” Rep. Baker said.

Rep. Mike Oxley, R-Ohio, who chairs the full Financial Services Committee, agreed. “When wrong-headed regulation drives out competition and leaves consumers unprotected, it is time to examine whether the means is achieving an appropriate end,” he said.

The Financial Services Committee is expected to hold a series of hearings this year on different aspects of insurance regulation, but it is unclear whether it will take a regulatory reform initiative.

Reproduced from National Underwriter Edition, April 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.