The premium rollback coalition, from Texas to Maine

This editorial in the Sun Herald says that Mississippi should forge a coalition of states that will set mandatory premium maximums and roll back insurance prices: 

With all due respect to the residents of the Lone Star state who came up with the motto "Don’t Mess With Texas," it is California that you really don’t want to mess with.

With its clout, California has made automobile makers and oil companies adjust their products to suit its environmental concerns. There is little doubt the state will have its way with the insurance industry in the wake of this calamity.

So how is Mississippi to benefit from such an example, when it is so much smaller and less influential?

By joining states from Texas to Maine in a coalition to bring affordable and accessible insurance to its residents. Gov. Haley Barbour should be at the forefront of forging such a coalition.

The nation may have only one California, but even California cannot match the combined population and purchasing power of the states that border the Gulf of Mexico and the Atlantic Ocean.

The idea here is that Mississippi by itself of course has proportionately little leverage with insurers because it is relatively small in population, unlike California, which to some degree can throw elbows Karl Malone-style without being whistled for a foul.  However, the editorial leaves out significant little things like the details.  Why, for example, would Florida, Texas or New York, states with large populations and with correspondingly greater ability to leverage insurance companies, be attracted to a coalition that might not have the same priorities? Considering that the approach to regulating insurance or even the most pressing insurance problems in even those three states are not the same, how is it that those three could agree on a common approach, much less with 16 other states?  Some states, like New Jersey and Massachusetts, have decided they are overregulated, at least in some markets, and have made moves to increase competition — why would a common scheme of regulation support their policies?  How would states like Kansas, Iowa and Michigan react to an interstate compact that would have the effect of subsidizing high risk coastal development at the expense of their residents?  How would non-coastal residents in the compact states react to tactics that would subsidize risk out of their pockets?

You know what is missing from this theory? Any appreciation of the central question: is the risk for which insurers charging real or fake, is it accurate or inaccurate? If the risk is real, premium rollbacks have to come at someone’s expense.  If the risk is not real, someone else will come along and offer a cheaper price and still make a profit.  It’s all right with me if you try to make the case why others should subsidize you, just call it what it is while you’re doing it.


1 Comment

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One Response to The premium rollback coalition, from Texas to Maine

  1. Doug

    OK, I’ll be the first. Seems like a silly editorial opinion. Insurance is covering possible problems. It is best done using market forces within a geographic reason. People who live (and can afford to live) on the coast ought to be able to cough up the premium to live there. I live in a small relatively crime free city in Wisconsin. My should I be forced to subsidize someone like that? The rational approach is to all the insurance market to work like its supposed to, using free market forces and competition.