State Farm, the state’s largest homeowners insurance company, recently raised its rates; as a result, some policyholders began to shop around for less expensive alternatives. This appears to come as a surprise to advocates of increased regulation of homeowners insurance. It shouldn’t.
Consumers are able to help themselves in a competitive marketplace. In today’s competitive insurance market, where the voluntary nature of markets forces attention to the needs and desires of consumers, consumer-protection laws generally just get in their way.
As Bill Peacock points out in his recent study on consumers, competition, and homeowners insurance, consumer-protection measures generally seek to replace consumer preferences with those of the regulators and other intervening parties. This does not mean there is no place for government intervention, but it does mean intervention should be carefully targeted toward unethical, rather than competitive, behavior.
– Ryan Brannan