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Source link: http://archive.mises.org/11047/the-regulated-insurance-market/

The Regulated Insurance Market

November 17, 2009 by

Why did a sophisticated, international financial market, but not its insurance equivalent, evolve in the United States? One important reason is the absurdly restrictive US insurance regulation. FULL ARTICLE by Jan Iwanik


David Hillary November 17, 2009 at 1:04 pm

Well here in NZ, we don’t have solvency or price control regulations on insurance. To open an insurance company here requires only the deposit of NZ$500k in securities with the public trust. Only general and disaster insurers are required to have a current claims paying ability rating.

As a result of these policies, insurance business is very competitive, and as with the banking business here, it is dominated by very strong and highly rated institutions.

David Hillary November 17, 2009 at 1:13 pm

In case it is not obvious, there is also no regulation of the content of insurance contracts here in NZ. You can take out medical insurance, with whatever cover and terms the insurer wishes to offer — I understand in the USA this is extensively regulated, e.g. mandating that medical insurance must cover x,y and z. So, for automotive insurance, medical insurance, term life insurance, trauma, income protection, house, contents, marine etc. insurers can offer and you can accept whatever you like under general contract law. New Zealand is therefore probably the most unregulated insurance market in the world (likewise for banking), and the results are very financially strong financial institutions taking the lion’s share of the business. 90% of the banking business is at the AA credit rating, and insurance has a large market share on AA and AAA.

David Hillary November 17, 2009 at 3:18 pm

Can’t you get out of state or offshore insurance coverage to avoid these mandates?

Russ November 17, 2009 at 4:13 pm

Horst Muhlmann wrote:

“In New Jersey, single men are required to have mammogram coverage, since ALL medical insurance policies have to have mammogram coverage there.”

I guess that goes to show that, thanks to government intervention, our insurance sector has gone tits up. Those interventionists – what a bunch of boobs!

htran November 17, 2009 at 5:29 pm

Horst Muhlmann wrote:

“In New Jersey, single men are required to have mammogram coverage, since ALL medical insurance policies have to have mammogram coverage there.”

You are your sister’s keeper, too.

Matt November 18, 2009 at 12:03 am

How about an article that specifically list the regulations insurance companies face. Both financial and health. Many people have been told by leftist that the insurance markets are the almost the last frontier for lazze faire.

D. Saul Weiner November 18, 2009 at 6:53 am

David Hillary,

Does NZ allow health insurance policies to cover whatever types of treatments one would want covered, or must the policy conform to the dictates of the medical mafia?

Blakeney November 18, 2009 at 10:34 am


Good article! I’m very pleased to see (finally!) another actuary around here.


Actually, there is a way around the state-mandated benefits in the US: If your employer sponsors a self-insured health plan, then there’s a federal law here that grants such plans exemption from state mandates. Along with our distortionary tax structure, this exemption is another big reason for the dominance of employer-provided health insurance in the US. It’s almost like they don’t WANT us to have a viable individual policy market.

D. Saul Weiner November 18, 2009 at 7:49 pm

Blakeney, count me as well (FSA)

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