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FreedomWorks Praises Federal Efforts to Reform Insurance Markets
Outdated regulations harm consumers by limiting competition.
By Adam Brandon on October 16, 2006
FreedomWorks, a grassroots organization with more than 800,000 members nationwide that promotes market-based solutions to public policy problems, applauded efforts by Rep. Ed Royce (R-Calif.) to create a more competitive and open market for insurance. The National Insurance Act of 2006 creates an optional federal charter that would address rising state regulatory burdens that restrict choice and provide little or no consumer benefit.
The insurance sector has reached a critical juncture. Excessive litigation and archaic state regulatory regimes that ignore the current marketplace and emerging technologies have made it difficult to provide consumers with cost-effective insurance coverage. Many carriers are abandoning entire states rather than operate under existing regulations. Not only insurance providers, but even many regulators, admit that reform is necessary.
FreedomWorks Chairman Dick Armey stated, “Economists and academics have demonstrated that the insurance market is, in fact, competitive and that many of the current regulations limit choice and raise prices for consumers. Addressing these unnecessary regulatory barriers and price controls is critical to any reform proposal. Illinois provides an example of the benefits of a more light-handed approach to regulation, and recent efforts in South Carolina and New Jersey are beginning to show benefits of reducing burdensome regulations. A new optional federal charter would offer an alternative to excessive state regulations while providing incentives for meaningful reform at the state level.”
FreedomWorks President Matt Kibbe added, “A properly functioning insurance market allows consumers and businesses to manage risk more efficiently. However, burdensome state regulations have made it difficult, if not impossible, for insurance companies to price their insurance coverage based on the underlying risks.”
As a consumer group that promotes the benefits of competition, FreedomWorks believes that open competition in insurance markets holds great promise for consumers. When producers are forced to compete in the marketplace, consumers have enjoyed falling prices and greater choice. By establishing an optional federal charter, the National Insurance Act of 2006, creates strong incentives for competition.