Uncle Sam wants to know if you are paying too much for car insurance. The Wall Street Journal reported that a new U.S. Treasury Department agency called the Federal Insurance Office is checking to see if auto insurance premiums for the poor and minorities are too high.
The office is also looking into allegations that access to insurance is blocked for some groups. It is not clear what the office will actually do beyond determining whether auto insurance is affordable or not.
Surprisingly enough, the agency hasn’t even defined affordability, according to The Journal. Instead, it is asking state insurance commissioners, academics, and insurance companies to help it define affordability. One has to wonder how an agency that cannot even define something as basic affordability could regulate anything.
It is not clear exactly what this agency will do or what it even can do. Historically, insurance and auto insurance are regulated by the states. Insurance is regulated by the states because auto insurance requirements aren’t the same in different states.
Why Uncle Sam Won’t be Able to Lower Your Car Insurance Premium
It is likely that the Federal Insurance Office will not be able to do anything to affect the affordability of auto insurance. Car insurance rates are determined by a wide variety of factors over which the federal government has little or no control.
These factors include:
- Insurance requirements, which vary widely from state to state. At least one state, New Hampshire, does not even require auto insurance.
- The different kinds of insurance required in different states. Some states require so-called no-fault auto insurance, which pushes up rates for example.
- Lawsuit liability, which drives up the rates in states such as Louisiana.
- The intense competition in the insurance industry, which pushes down rates, but can shut out some consumers.
Nor does the federal government’s track record on insurance affordability inspire much confidence. Instead of lowering health insurance costs, Obamacare raised health insurance premiums for many Americans.
The Samurai has to wonder what exactly this new layer of regulation is designed to accomplish. Hopefully, it will not increase insurance costs by requiring more bureaucracy, lawyers, and lobbying. Those are costs that insurers will pass onto consumers.
One thing is clear though: Americans who want to lower their car insurance premiums would be more likely to accomplish that goal by going online and shopping for insurance, rather than waiting for the federal government to control costs. The likelihood of the federal government actually being able to lower insurance costs is nil.