The following is a letter I wrote that has been published in the insurance publication, The Standard, May 1 edition. (Reprinted by permission.) This outlines my feelings on government regulation of all kinds - not just insurance.
To The Editor,
Your April 24th article on the UConn panel of regulators points to the fatal flaw of government regulation. Nowhere was there any mention made of the downside of regulation. The costs are high and many.
First, there is the cost to the taxpayers. Millions and millions of dollars are spent to staff and run the state departments of insurance. These are dollars that could be in taxpayer's pockets.
Next is the cost to industry. Again, huge. These are direct, in the fees charged, and indirect in the expenses of following the regulations while trying to stay in the good grace of the regulators. These costs increase the cost of insurance to the public.
There is also a cost to consumers in that regulation keeps new products and services from entering the marketplace quickly. Further, insurers cannot react promptly to changes in consumer demand for innovative extensions of current products. How much innovation have we seen lately in the most widely regulated insurance product - health insurance?
These costs are overshadowed by the cost of freedom. Capitalism and freedom are like pregnancy. You can not be a little pregnant, a little capitalistic, or a little free.
A free market allows willing buyers and willing sellers to deal together without interference - each to their own self interest. Getting and giving is based on the best value the parties can obtain. The rare dishonest or fraudulent transaction is well handled by a court system responding to facts and evidence.
The article states the arrogant regulatory premise that insurance consumers are too stupid to understand what they are buying. It follows that regulators see the industry as evil in that without regulation the Snidely Whiplashs of the insurance industry will cheat and dupe the public.
Those of us who have been in the industry for any time know the opposite is true. We are an honorable industry that serves the needs of the insurance buying public. Sure, we are out to make a profit. However, we know that profit only comes from providing value. If we don't provide value our clients will leave us in search of others who are eager to provide it.
We also know that our industry is not immune to bad apples. The initiation of force and fraud is always wrong. The courts should be used to take care of such acts. Poor performance in the marketplace is also punished by a bad reputation. In our society of freely available information and empowered consumers a stellar reputation is required for success. Those who perform well will be rewarded by the market. Bad actors will be punished.
Some will comment that the current economic maelstrom is caused by too little regulation. From what I see, regulation caused the current problems with its overly protective processes that lead to a whirlwind of unintended consequences, the cost of which are never born by or recognized by the regulators.
Our industry and our economy is not helped by regulation. Regulation is an unnecessary friction in commerce and a impingement of our freedoms.
Scott Simmonds, CPCU, ARM, CMC
To The Editor,
Your April 24th article on the UConn panel of regulators points to the fatal flaw of government regulation. Nowhere was there any mention made of the downside of regulation. The costs are high and many.
First, there is the cost to the taxpayers. Millions and millions of dollars are spent to staff and run the state departments of insurance. These are dollars that could be in taxpayer's pockets.
Next is the cost to industry. Again, huge. These are direct, in the fees charged, and indirect in the expenses of following the regulations while trying to stay in the good grace of the regulators. These costs increase the cost of insurance to the public.
There is also a cost to consumers in that regulation keeps new products and services from entering the marketplace quickly. Further, insurers cannot react promptly to changes in consumer demand for innovative extensions of current products. How much innovation have we seen lately in the most widely regulated insurance product - health insurance?
These costs are overshadowed by the cost of freedom. Capitalism and freedom are like pregnancy. You can not be a little pregnant, a little capitalistic, or a little free.
A free market allows willing buyers and willing sellers to deal together without interference - each to their own self interest. Getting and giving is based on the best value the parties can obtain. The rare dishonest or fraudulent transaction is well handled by a court system responding to facts and evidence.
The article states the arrogant regulatory premise that insurance consumers are too stupid to understand what they are buying. It follows that regulators see the industry as evil in that without regulation the Snidely Whiplashs of the insurance industry will cheat and dupe the public.
Those of us who have been in the industry for any time know the opposite is true. We are an honorable industry that serves the needs of the insurance buying public. Sure, we are out to make a profit. However, we know that profit only comes from providing value. If we don't provide value our clients will leave us in search of others who are eager to provide it.
We also know that our industry is not immune to bad apples. The initiation of force and fraud is always wrong. The courts should be used to take care of such acts. Poor performance in the marketplace is also punished by a bad reputation. In our society of freely available information and empowered consumers a stellar reputation is required for success. Those who perform well will be rewarded by the market. Bad actors will be punished.
Some will comment that the current economic maelstrom is caused by too little regulation. From what I see, regulation caused the current problems with its overly protective processes that lead to a whirlwind of unintended consequences, the cost of which are never born by or recognized by the regulators.
Our industry and our economy is not helped by regulation. Regulation is an unnecessary friction in commerce and a impingement of our freedoms.
Scott Simmonds, CPCU, ARM, CMC
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