For the fifth straight year, the R Street Institute, a public policy research organization, has compiled its Insurance Regulation Report Card, the annual examination of which states best regulate the business of insurance.

Fundamental questions

In the 2018 report, author R.J. Lehmann, R Street senior fellow and director of finance, insurance and trade policy, addresses three fundamental questions:

1. How free are consumers to choose the insurance products they want?
2. How free are insurers to provide the insurance products consumers want?
3. How effectively are states discharging their duties to monitor insurer solvency and foster competitive, private insurance markets?

According to Lehmann, "states have done an effective job of encouraging competition and, at least since the broad adoption of risk-based capital requirements in the 1990s, of ensuring solvency. In the vast majority of U.S. states, markets for the common 'personal lines' of home and auto insurance meet common statutory definitions for competitiveness. Insolvencies are relatively rare and, through the runoff process and guaranty fund protections enacted in nearly every state, generally quite manageable."

The report's author goes on to say there are ways in which the state-by-state regulations lead to inefficiencies, noting certain state policies have the effect of discouraging capital formation, stifling competition and concentrating risk.