Illinois insurance market is healthy

In his letter on insurance rate regulation, Matthew Caris from the Center for Justice and Democracy praises California's anti free-market insurance rating system and condemns Illinois' free-market system ("Legislate controls on insurance rates," Fence Post, July 22).

California has one of the most highly regulated insurance environments in the country and the lack of variety of insurance products available to consumers is a direct result of the state's stunted insurance environment.

In a study of state insurance regulation and competitiveness conducted by The Heartland Institute, California ranked in the bottom five in encouraging an open and competitive insurance market.

California ranked especially low due to its bans on credit scoring and territorial rating, two risk-determining tools that enable insurers to tailor their premiums appropriately to the risk involved with a policy.

Insurers need to be able to react to risk and charge premiums that allow them to remain solvent.

Government manipulation of premium rates places insurers at a greater risk of failure.

California's "F" grade also reflects its cumbersome regulatory environment.

Heartland found that competitiveness improved the most when the rate-determining mechanisms of a state are market-based and free of government manipulation.

While the intentions of California's regulatory system may be genuine, they are not helping to improve the insurance market by manipulating rates and are in reality hindering the market's growth.

Caris criticizes Illinois as being the "favorite state" of insurers, crudely portraying the variety of insurance products available in Illinois as bad for consumers.

Competition among insurers benefits consumers and improves the market as a whole.

Illinois provides the best market for insurance in the country, providing a wide variety of products to consumers at competitive prices and earning an "A" grade in Heartland's study.

Populist policies, while often politically popular, are not always the best course of action for the people.

Matthew Glans

Legislative Specialist

The Heartland Institute

Chicago