How Do Alabama's Insurance Regulations Rate?

Date: February 02, 2016

R Street Institute releases annual insurance regulation report card.

How Do Alabama’s Insurance Regulations Rate?

Alabama earned a “C” grade and 31st nationwide ranking for insurance regulation, according to the 2015 report card released by the R Street Institute.

R Street, a nonprofit dedicated to free market solutions, seeks to answer three fundamental questions with this annual report:

  1. How free are consumers to choose the insurance products they want?
  2. How free are insurers to provide the insurance products consumers want?
  3. How effectively are states discharging their duties to monitor insurer solvency, police fraud and consumer abuse and foster competitive, private insurance markets?

Two key factors leading to Alabama’s mediocre rating were its excessive rate regulations and underwriting restrictions. The report noted that Alabama was penalized in these two categories for low flexibility and the use of “desk drawer rules.” “Desk drawer rules” are an industry term for a lack of clarity created by regulators’ interpretation of ambiguities in the code or inconsistent application of the code.

Alabama did score well with workers’ compensation insurance market competitiveness and low levels of politicization, however. “Insurance regulation is a technical matter and, by and large, should be insulated from the political process and prevailing political concerns…the introduction of political pressure to the process of insurance regulation inevitably leads to negative consequences,” the report said.

The full report can be found here.

Related Content: Small Business News | Alabama | Insurance

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