Bad Idea #3 in 2006: Ben Harbin Wants Insurance Companies To Be Able To Raise Auto Insurance Rates At-Will
by Bill Simon
Last week State Rep. Ben Harbin (R) introduced the subject of “de-regulation” of the auto insurance industry in Georgia so that the insurance behemoths wouldn’t have to apply to the Insurance Commissioner’s office for approval on rate hikes. Harbin thinks that if you “de-regulate” something like auto insurance policies, prices will come down and everyone will be happy.
I am surprised at Ben for not knowing the difference between a “competitive marketplace” and a “marketplace of necessities.” But, since he actually makes his living writing insurance policies, perhaps he’s just overlooking these differences because it is convenient.
A “competitive marketplace” is one in which both buyers and suppliers act freely among many choices. It is one in which the buyers must be able to choose to enter the market and purchase something on their own. Auto insurance in this state is not a “free choice” thing for people to choose to buy. It is a state law that you buy and carry auto insurance.
Therefore, the auto insurance market in Georgia is a “marketplace of necessities” in that people are required to buy insurance if they wish to own and drive a car.
So, if you remove the regulation of a required market, then what’s to stop the auto insurance companies from jacking-up their rates to astronomical levels across the board? Answer: NOTHING.
I hope the legislature does not fall for the belief that all “regulation is bad” and de-regulation is the answer to everything. It’s not in this case.
February 23rd, 2006 at 10:34 am
Bill: you missed the next step . . .
The insurance market SHOULD be de-regulated. Totally. That means that there should be NO government intervention at all. If I choose to not insure my car, my home, or my life, that should be my prerogative based upon my own personal risk assessment.
As you’ve pointed out, when the state mandates coverage, there cannot be an open market. But why should the state mandate coverage? The dictionary definition of fascism is “a political theory advocating an authoritarian hierarchical governmentâ€. When the state tells me that I must buy insurance, it moves from being a bad socialist government taking my money to give to others, to a bad fascist government telling me exactly what I must buy.
What would happen without mandated insurance? Perhaps lawsuits and awards would go down since no longer are the defendants seen as large insurance companies, but rather unfortunate participants in an accident. Perhaps those who extend credit to purchase a car would mandate coverage to cover their risk. Perhaps prices would fall in line with free market macroeconomic theories of supply and demand.
Yes, there will be those who “lose everything†because they were uninsured or underinsured. But never has it been a due province of government to protect us from our own idiocy.
I agree with you that only half de-regulation is an unwise move. We should go all the way.
February 23rd, 2006 at 10:58 am
Okay, Jim. But, in the same bill you would write to repeal all insurance-carrying laws by automobile owners, make sure you repeal all ceilings on lawsuits. None of this $350,000 crap for anyone.
If we are to return to the Wild-Wild-West of no regulation on insuarance rates, then we should have no limits of liability for fault.
February 23rd, 2006 at 11:19 am
Agreed.
But “Wild-Wild-West” is not quite apt. It would be a return to increased appreciation for true accidents — where there are multiple victims and not a victim and a perpetrator. It would be a return to increased personal responsibility — where there is no one assuming that as long as it is covered, there will not be a problem.
Mandated insurance has been the bane of the health industry. Mandated auto insurance has helped precious few aside from those litigators who advertise during Oprah and Montel. Government subsidized flood insurance is the worst kind of socialism – taking from the poor (and the rest of us) and giving disproportionately to the rich. Mandated retirement insurance (Social Security) is a so untenable as to be laughable (not to mention ludicrously socialist).
History and only a brief honest look makes obvious the fact that anytime the government gets involved in insurance it is a very, very, bad thing.