Thousands of people—if not hundreds of thousands—received their automobile insurance bills today. Many probably wondered if their policies would ever cost less. Many might also have asked the same about their homeowners' coverage or life insurance premiums. The answer is insurance could cost less if the insurance regulatory system didn't cost so much.
Insurance regulation in the U.S. is a complex web of more than 50 separate state-based regulatory systems, each with unique procedures, regulations, and legal definitions established by individual state legislatures and insurance commissioners. That means a company doing business in 40 states must comply with 40 different sets of insurance regulations.
To fully appreciate the complexity, consider the fact that insurers must get approval from multiple state insurance departments every time they change prices (including lowering rates), bring a new product to market, or even make a simple change to a policy form. Similarly, insurance companies must have their agents licensed and appointed in every state where that agent sells insurance.
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