Administrative Browbeating and Insurance Markets

Some state insurance regulators have been using their regulatory muscle to coerce insurers into furthering their political ends. They have protected favored but harmful commercial activity and have strangled legal but disfavored individual conduct. In the process, those regulators have disabled the benefits that a properly functioning insurance market can provide. They have hampered individuals’ ability to engage in desirable activities, like home ownership, that would otherwise be too risky given their incomes; they have made socially desirable but not risk-free activities, like responsible firearm ownership, less safe; and they have deprived the market of data on safety and risks. Such use of government power to abuse an “outgroup” for the benefit of the “ingroup” can also have devastating effects on social stability. This Article analyzes the situation through two case studies and suggests solutions that preserve near-plenary state control over insurance under the McCarran-Ferguson Act while limiting state regulators’ ability to abuse this special federal-state arrangement.