| 来源类型 | Article |
| 规范类型 | 评论 |
| You Better Shop Around | |
| Diana Furchtgott-Roth; Andrew Brown | |
| 发表日期 | 2008-04-11 |
| 出版年 | 2008 |
| 语种 | 英语 |
| 摘要 | Among Treasury Secretary Henry Paulson’s recently announced plans to overhaul U.S. financial regulations, there’s one basic change that would provide immediate benefits to consumers: allowing Americans to shop nationwide for their insurance policies. Under the current system, each state regulates its own insurance markets. Therefore, a Pennsylvania company that wants to sell insurance policies in Maryland must register in Maryland and comply with its requirements. Some Pennsylvania companies don’t want to do that, so Maryland residents can’t purchase their services. In this way, the system reduces consumer choice and prevents Americans from buying less expensive policies from insurance companies based in neighboring states. Secretary Paulson would create a federal insurance regulator and give insurers the choice of operating under either federal or state regulation. Under Paulson’s plan, the Pennsylvania firm could switch to a federal charter and make its products available to all Americans—or it could remain under state charter and only sell its products to Pennsylvanians. The creation of a federal charter for insurers, backed by federal legislation, will almost certainly be opposed by some state insurance commissioners. They may argue that such a model would violate the principles of federalism, under which states have the right to regulate what goes on inside their borders. Given the dual federal-state chartering of banks, this is not a persuasive complaint. State regulators’ might also claim that a federal charter would reduce consumer protections. But under the Paulson scheme, consumers would still be able to choose companies that are state-regulated. On balance, a federal charter would help many consumers. Insurance is a risky business because insurers agree to pay out money if a certain event—such as a car accident, in the case of auto insurance—occurs. In exchange, consumers pay a regular premium roughly equal to the “expected value” of that event, which is the amount of money the insurer would pay in the case of an accident multiplied by the likelihood of that accident occurring. Thus, if your $1,000 car has a 1 percent chance of crashing, your annual premium would be $10. In a statistical sense, both you and the insurer are no better off. The problem is that insurance companies don’t care about the math; they care about reality. If your car crashes in the first year, your insurer has to pay you $1,000, after getting only a $10 premium. So what an insurer does is “pool” risk. Your next-door neighbor could also buy car insurance, giving the company another $10 premium. Then, if one of you crashes his car in the first year, the insurer is only out $980. If an insurer sells auto insurance to 100 people, the insurer receives $1,000 in premiums. And if, on average, only one of those people has a car accident each year, the insurer breaks even. Of course, if more than one person crashes their car, the insurer loses money. In short, the more people covered by an insurance company, the more likely the company will stay in business. This is a side-effect of the “law of large numbers,” one of those theories that no one has ever disproved. If it works correctly, an insurer’s annual premiums will always equal its claims. One potential problem is known as “correlation”: if everyone the insurer covers lives in the same small town, then if one person has an accident with another vehicle, the odds are high that the person in the other vehicle is covered by the same company. As a result, the company must pay twice for a single incident. The only way an insurer can compensate for this is to increase its premiums or to insure more people, preferably people who live far away. Home insurance and health insurance are two types of insurance products that suffer from correlation, since natural disasters and diseases tend to affect certain areas more heavily than others. To take a real-world example, Allstate Floridian Insurance offers home insurance to Florida residents. In any given year, a large number of its clients’ homes may be wiped out by a hurricane—or none may be. If one house is destroyed by a hurricane, it’s very likely that other houses will be too, which means that the insurer faces significant uncertainty. The company’s only option is either to increase premiums to build up “reserves” or to insure people in other areas whose homes are less at risk of being destroyed. Many Florida politicians are annoyed that their state’s insurers are increasing premiums, but current state regulations make it difficult for them to expand coverage to out-of-state residents. Secretary Paulson’s new federal insurance regulator would offer a way out of this dilemma. Floridians pay higher hurricane insurance premiums than New Yorkers because premiums are explicitly based on the probability of an event occurring. You pay more for health insurance when you smoke, and you pay more for home insurance when you live in Florida. At the same time, premiums would be lower in the Sunshine State if Florida insurers were allowed to expand their insurance pools and include out-of-state consumers living in less risky areas. Under the current system, federalism is actively inhibiting competition. Not only is it hard for out-of-state insurers to compete with local businesses, local regulations are placing a stranglehold on the entire industry. By restricting the ability of any single entity to cover a larger number of people who face unrelated risk, local standards do consumers a disservice: they increase prices and also increase the likelihood that insurers will not be able to honor their promises. Some states “solve” this problem by requiring insurance companies to contribute to “reinsurance” pools or to pay into state funds used to cover the uninsured. Perversely, state-level regulations increase the need for reinsurance by making it difficult for insurers to sell their products across state lines. A delicate balance must be struck between federal and state power. But in the insurance market, state-level regulation restricts the ability of an insurer to do its job, which ultimately hurts consumers. Far from protecting customers, the current system increases the risk of market failure. The insurance industry—almost by definition—requires the ability to expand its market as broadly as possible. The current system hinders the market and promotes a burdensome web of regulations. Secretary Paulson has recognized that insurers need one law across the country. Congress should pass a simple bill allowing insurers to choose a federal regulator. Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute and a weekly columnist for The New York Sun. Andrew Brown is a research assistant at the Hudson Institute. Image by Corbis. |
| 主题 | Economics ; Public Economics |
| URL | https://www.aei.org/articles/you-better-shop-around/ |
| 来源智库 | American Enterprise Institute (United States) |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/245516 |
| 推荐引用方式 GB/T 7714 | Diana Furchtgott-Roth,Andrew Brown. You Better Shop Around. 2008. |
| 条目包含的文件 | 条目无相关文件。 | |||||
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