Risky Business: Insurance Markets and Regulation

by Lawrence S. Powell (Editor)

Overview

Today’s insurance regulation in the United States is at a crossroads: while some segments of the insurance industry are moving away from a state-based approach toward regulation, others favor a greater role for the federal government—despite the opposition from other stakeholders. Written by leading scholars in risk management, this book addresses some of the most important questions facing the future of state and federal regulation of the insurance industry. Examining not only the impetus behind various reform proposals, but also the historical development of insurance regulation in the United States, it discusses alternative regulatory frameworks used in the United States and in the European Union and, thereby, increases the options that reformers may wish to consider.

Product Details

ISBN-13:	9781598131178
Publisher:	Independent Institute, The
Publication date:	02/01/2013
Series:	Independent Studies in Political Economy
Pages:	320
Product dimensions:	6.00(w) x 9.00(h) x 0.79(d)

About the Author

Lawrence S. Powell is a research fellow at the Independent Institute and an associate professor and the Whitbeck-Beyer Chair of Insurance and Financial Services at the University of Arkansas–Little Rock (UALR). He is the recipient of the Excellence in Research Award from the UALR College of Business and the coauthor of Pricing and Reserving Practices in Medical Malpractice Insurance, Profitability in Medical Professional Liability Insurance, and Tort Reform and Commercial Automobile Insurance Costs. He lives in Little Rock, Arkansas.

Table of Contents

1 Introduction Lawrence S. Powell 1

2 The Economics and Politics of Insurance Arnold Kling 9

3 Insurance Markets and Regulation: Case Studies in Failure Martin F. Grace 29

4 The Effects of Credit-Based Insurance Scoring on Insurance Markets Lawrence S. Powell 67

5 Catastrophes and Performance in Property-Insurance Markets: A Comparison of Personal and Commercial Lines Patricia H. Born Barbara Klimaszewski-Blettner 81

6 "Watery Marauders": How the Federal Government Retarded the Development of Private Flood Insurance Eli Lehrer 115

7 Alternative Frameworks for Insurance Regulation in the United States Martin F. Grace Robert W. Klein 145

8 A Comparison of Insurance Regulation in the United States and the European Union Martin Eling Robert W. Klein Joan T. Schmit 183

9 Estimating Efficiency Effects of Uniform Regulation in Property and Casualty Insurance David L. Eckles Lawrence S. Powell 227

10 Performance of Risk Retention Groups: Drawing Inferences from a Prototype of Competitive Federalism J. Tyler Leverty 245

Notes 266

Index 295

About the Contributors 308

What People are Saying About This

From the Publisher

“Lawrence Powell has brought together a wonderful group of leading insurance and risk scholars to produce the most insightful book on property and casualty insurance industry in many years. Risky Business explains why market-based insurance should be celebrated for its innovation and competitiveness. . . . The book critically examines the continual call for ever-more regulation that harms the public by driving up the cost of insurance and limiting competition and innovation.”  —Roger E. Meiners, Goolsby Distinguished Professor of Economics and Law, University of Texas–Arlington

“Risky Business is a very timely and important book. Each of its well-crafted chapters examines a distinct aspect of the insurance regulatory debate currently taking place, but all lead to the same conclusion: insurance regulation should not be used to distort a well-functioning private insurance market. . . . This book should be read by anyone seriously looking at how to effectively benefit and protect insurance consumers.”  —Lawrence Mirel, former commissioner of insurance, securities and banking, District of Columbia; partner, Wiley Rein LLP

“This superb book traces the serious problems facing consumers in insuring properties against fire, flood, earthquakes, and other hazards under the Byzantine and politicized regulatory regimes in which insurance companies operate. Risky Business documents the many problems created by today’s regulations, offers and evaluates market-based alternatives, and points the way to reform. It is must reading for anyone interested in the economics and politics of government regulation.”  —William F. Shughart II, J. Fish Smith Professor in Public Choice, Utah State University

“The insightful book Risky Business shows that health insurance is hardly unique—government intervention imposes costs and inefficiencies on property and casualty insurance (particularly important in areas of storm, flood, fire, and other risks). Insurance can seem complex and confusing, leading to misguided calls for regulation, and politicians have been all too eager to respond. Risky Business now charts an essential new course for market-based reform.”  —Paul H. Rubin, Samuel Candler Dobbs Professor of Economics, Emory University

Editorial Reviews

Lawrence Powell has brought together a wonderful group of leading insurance and risk scholars to produce the most insightful book on property and casualty insurance industry in many years. Risky Business explains why market-based insurance should be celebrated for its innovation and competitiveness. . . . The book critically examines the continual call for ever-more regulation that harms the public by driving up the cost of insurance and limiting competition and innovation.”  —Roger E. Meiners, Goolsby Distinguished Professor of Economics and Law, University of Texas–Arlington

“Risky Business is a very timely and important book. Each of its well-crafted chapters examines a distinct aspect of the insurance regulatory debate currently taking place, but all lead to the same conclusion: insurance regulation should not be used to distort a well-functioning private insurance market. . . . This book should be read by anyone seriously looking at how to effectively benefit and protect insurance consumers.”  —Lawrence Mirel, former commissioner of insurance, securities and banking, District of Columbia; partner, Wiley Rein LLP

“This superb book traces the serious problems facing consumers in insuring properties against fire, flood, earthquakes, and other hazards under the Byzantine and politicized regulatory regimes in which insurance companies operate. Risky Business documents the many problems created by today’s regulations, offers and evaluates market-based alternatives, and points the way to reform. It is must reading for anyone interested in the economics and politics of government regulation.”  —William F. Shughart II, J. Fish Smith Professor in Public Choice, Utah State University

“The insightful book Risky Business shows that health insurance is hardly unique—government intervention imposes costs and inefficiencies on property and casualty insurance (particularly important in areas of storm, flood, fire, and other risks). Insurance can seem complex and confusing, leading to misguided calls for regulation, and politicians have been all too eager to respond. Risky Business now charts an essential new course for market-based reform.”  —Paul H. Rubin, Samuel Candler Dobbs Professor of Economics, Emory University

From the Publisher