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Friday, April 17, 2009

Regulate Me! (The Insurance Industry Edition)

While most politicians and most journalists seem to assume that big business generally wants to be left alone by government, the truth of the matter is that most regulation that actually gets passed has the backing of the largest players in the industry being regulated. We have seen this very recently with the toy industry, the food industry, and the tobacco industry.

Big business has many reasons for wanting to be regulated--it disproportionately hurts smaller businesses, keeps out competition, gives an advantage to those with better political connections, insulates against torts, and gives an air of credibility. A NYTimes op-ed today by the Allstate Insurance CEO offers another reason for wanting federal regulation:

Business leaders must work with the government to create a new regulatory structure. All companies that create risk for the financial markets need to be in “the pool” of federal regulation, including companies like Allstate. A good start would be for Congress to eliminate the hodgepodge of state regulatory systems by establishing a federal regulator for national insurance companies.

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