The Single-License Solution

Abstract

State regulation of insurance companies has long been criticized for increasing costs and limiting product innovation and rate competition as insurers attempt to conform to different states' codes. In response, it has been suggested that insurance regulation be federalized. This article proposes, instead, that insurers be allowed to operate nationally so long as they are licensed in one state. Doing this would provide 50 new licensing options for multi-state insurers. The single-license solution has the potential for triggering competition and innovation on insurance products and rates while preserving a role for meaningful state regulation.

Keywords: single-license solution, regulation, insurance, state-based regulation, jurisdictional competition, optional federal chartering, guaranty funds, consumer protection, insurance regulation, interstate commerce, antitrust, NAIC, exit, National Insurance Act, race-to-the-bottom

JEL Classification: G2, G20, G22, G28, K2, K21, K22, K23, L4, H7, H70, H77, H1, H10