When Regulation Hammers Those It is Supposed to Benefit -- A Real Example in California

Regulation can be sortof kindof tolerable in stable, predictable, and unchanging markets.  But what markets act like that?  In the labor regulation world, for example, regulatory authorities are doing everything they can to kill a wave of innovation in labor markets.  As I tell everyone I discuss this with -- regulators picture workers as punching a time clock in a Pittsburg mill with their supervisor right there and present every moment, with an on-site HR department, and a cafeteria with huge walls for posting acres of labor posters.  Try to have any other relationship with your employees, and it will be like pounding a round peg into a square regulatory hole.  Even something as staggeringly beneficial to worker agency like letting remote workers schedule themselves tends to run afoul of the shift scheduling laws that are sweeping through progressive jurisdictions.

Here is a great example of the cost of regulation to consumers that our company is experiencing in the insurance market.  Last year after all the fires in California, the property insurance market was left in disarray.  My landlord, in many cases the US government, requires that I insured the assets I am leasing from them against wildfire (leave aside the question of why the Federal government which is supposed to be self-insured is paying for such insurance in the form of lower rents from me).

Suddenly, wildfire insurance on wilderness assets like the ones we operate became unobtainable.  After a LOT of education, we convinced the US Forest Service to allow a temporary moratorium on the wildfire insurance requirement in our agreements.  Good news, right?   Now we can just go out and get a property insurance policy that covers all damage but excludes wildfire.

Not so fast!  It turns out every single microscopic variation in insurance rates in California have to be approved by the state insurance commissioner in a time-consuming process that begins long before the policy year.  Well, it turns out most insurance companies don't actually have an approved rate that excludes wildfire coverage.  They won't sell us a policy with the coverage (too risky) and they can't sell the policy without the coverage (not approved).

Regulation can always be costly but can be particularly so when markets need to react quickly to changing conditions.