Can State Legislation Make Insurance Affordable?

By Author: Norris Rios
Total Articles: 572
Comment this article

State to state, insurance is regulated differently across the United States. While regulation is only one factor in the price consumers pay to insure their homes - the others being wealth, climate, weather, geological dangers, and competition - it is the factor most easily influenced by humans. Insurance regulation is deeply tied up in state politics, so it becomes a hot subject.

The latest spat of statistics has been released across the country and show that Texans pay the most on average to insure their homes. This has led to some backlash from consumers and a push for state legislatures to do something about it. However, many doubt that state regulation is the issue. How true is that?

Texas state has the least amount of insurance regulation in the country

This is the tag-line used to blame government for high insurance prices. Indeed, Texas has very little regulation. Insurance providers need only to submit their rates to the government before they begin writing policies at that level - they do not even need government approval. A new bill pushes for a necessary approval from an insurance commissioner ...
... before insurers can change rates.
However, could the other factors be to blame?

Climate and Natural Disasters

The hot, dry climate over a lot of Texas can cause damage to homes. At the same time, weather is rather unpredictable in Texas, so when violent storms do hit, people tend not to be ready. It leaves them vulnerable to drought and fire, which damage land as well as homes. Furthermore, Texas is vulnerable to a long list of natural disasters, including hurricanes and tornadoes. Industry experts say that this is a contributing factor is Texas's high insurance rates, but that this alone does not justify the $1,460 per year average.

Competition

Politicians and industry lobbyists arguing against new legislation regulating insurance in Texas claim that competition should be sufficient enough to lower prices for consumers. They say that deregulating will make it possible for more insurance companies to compete for business.

Proponents of further regulation point out that Texas already has nearly 100 insurance providers competing for businesses - more than most states - so competition is not the problem.

Well Regulated States have Lowest Prices

To put this into perspective, Ohioans, who have the 7th lowest rates in the country, pay $565 per year on average for home insurance. The national yearly average Americans pay to insure their homes is $791.
While Ohio does not have the same natural hazards as Texas, they do have an insurance industry that must work under strong government regulation.

Florida has the second highest prices in the country - $1,390 per year on average. Florida also has very little government regulation.

The 5 states with the lowest prices in the country?

1. Delaware
2. Wisconsin
3. Washington
4. Oregon
5. Utah

Of those states, Utah - which has severe fire damage problems - is the only one traditionally weak on insurance regulation. However, they are very strict about licensing home insurance agents and have passed new laws in recent years.

Regulation does not automatically make home insurance cheaper, but smart regulation can be effective for protecting American consumers from high prices.

***Data taken from National Association of Insurance Commissioners (NAIC).