Stupid Regulatory Games

The US Government has various rules on insurance companies that include a notification requirement if they are not going to renew a policy.  However, apparently this requirement is for a date earlier than most insurance companies have made their annual underwriting decisions (in my case often because I have not gotten them all the information they need).  So every year, like clockwork, I get notices on all my business insurance policies that they are not going to renew, and then like clockwork they (mostly) all renew.  Insurance companies comply by sending, it appears, everyone a non-renewal notice.  That way, they can't get in trouble for not informing you in time on the off-chance it actually does not renew.  So in practice, the regulatory requirement is both expensive and worthless.

Actually, it is worse than worthless, as the two times I was non-renewed for a policy it was impossible to differentiate their actual warnings that I might have an underwriting problem from these pro forma ones.  By forcing insurance companies to cry "wolf" constantly, I missed the real dangers.


  1. Maximum Liberty:


    Think of it as a reminder notice that your policy is expiring.

    Though it is really annoying when a due diligence request asks you to list every notice you have ever received that your policy will not be renewed. "Uh, we have one for every policy for every year. Wouldn't you just like to know the times we actually got non-renewed?"


  2. ErikTheRed:

    My quite wonderful insurance agent deals with all of this crap for me. If yours doesn't, perhaps a change is in order? You're probably a very difficult customer because of your myriad requirements, but you're probably also a profitable customer so that should make up for it.

  3. Kurt:

    I've never understood why the government is so heavily involved in regulating the insurance business. It's a bet; you bet you might need it, the insurance company bets that you won't. The money they make by investing the stake money makes it profitable for them.
    I guess it's the same principle as ants at a picnic, they smell food. The Pol's smell the money.

  4. TruthisaPeskyThing:

    It is a case of lopsided information. There is no way that the typical customer can determine whether the insurance company can make good on its coverage. And with 20 or 30 year life policies, it is not possible for a customer to rely on how the insurance company has treated other customers in the first few years. Therefore, regulations are there so that the customer needs not do his or her own investigations; the government will see to it that the insurance company can come through when needed.

  5. mx:

    Here's an incredibly profitable business model: convince people to buy your insurance policies, collect premiums, leave town as quickly as possible. Almost as good is this variant: sell policies, collect premiums, spend them on whatever you want, declare bankruptcy when the claims roll in.

    There's a reason states started to get involved in regulating insurers all the way back in the 1850s when they weren't regulating all that much: there was a ton of fraud going on. Fake car insurance is still occasionally a thing now:

    To put it another way, insurance is regulated tightly because it is, in fact, a bet, and gambling is also heavily regulated. Some of the individual regulations may certainly be nonsensical, counterproductive, or just plain stupid, but the broad concept is based on centuries worth of experience with what can go wrong in the insurance market.

  6. Kurt:

    Kind of why I wrote 'heavily involved'. Bureaucratic nitpicking on every aspect and detailed rules mandating insurance for almost all businesses, culminating in the mandate of individual medical insurance at levels and prices set by a Federal bureaucracy (again).
    I seem to remember a push by the Feds to force insurance company investments to drop any investment in (evil) coal or petroleum companies. That's getting too heavily involved.