Although most experts agree that promoting the affordability and availability of auto insurance are appropriate objectives for regulators, they express strong disagreement with many of the tools commonly used by regulators. Most experts participating in the survey disagreed with statements that premium caps, premium subsidies, and restrictions on territory-based rating and the use of driver characteristics (such as gender and credit scores) are appropriate to promote auto insurance affordability. Respondents were most likely to believe that all or most rating and underwriting restrictions negatively affect the viability of insurance markets and are therefore inappropriate. Consistent with these views, expert opinion strongly favors the idea that auto insurance prices should closely reflect a driver’s accident risk and be determined by competitive market forces.
Forty years ago, regulation of auto insurance rates in the U.S. was nearly universal. Some states required direct involvement of the state in determining the rates to be charged by all insurers, and others required the state’s prior approval of each individual insurer’s rates. Recent decades have seen a trend away from such restrictions. According to the Insurance Information Institute, 37 states and the District of Columbia currently permit insurers to set at least some auto insurance rates without prior approval. Only 13 states continue to enforce prior-approval regulation of auto insurance rates. However, even in states which do not require state prior-approval, there are often regulations that restrict the role of market forces in determining rates.
For more detailed information on the study’s methodology and findings, contact David Corum at (484) 831-9046 or by email at [email protected]. Copies of the study are available for $300 for an electronic version, or $400 for a printed copy. Visit IRC’s website at www.insurance-research.org for more information.
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