Transparently Opaque: Understanding the Lack of Transparency in Insurance Consumer Protection

69 Pages Posted: 17 Aug 2012 Last revised: 21 Mar 2014

See all articles by Daniel Schwarcz

Daniel Schwarcz

University of Minnesota Law School

Date Written: February 18, 2013


Consumer protection in most domains of financial regulation centers on transparency. Broadly construed, transparency involves making relevant information available to consumers as well as others who might act on their behalf, such as academics, journalists, newspapers, consumer organizations or other market watchdogs. By contrast, command and control regulation that affirmatively limits financial firms’ products or pricing is relatively uncommon. This Article describes a remarkable inversion of this pattern: while state insurance regulation frequently employs aggressive command and control consumer protection regulation, it typically does little or nothing to promote transparent markets. Rather, state lawmakers routinely either completely ignore transparency-oriented reforms or implement them in a self-evidently flawed manner. While acknowledging the limits of transparency-oriented consumer protection regulation, this Article argues that the lack of transparent insurance markets reflects a pervasive and unappreciated flaw in state insurance regulation. Despite their limitations, transparency-oriented regulatory strategies are an important complement to other more aggressive regulatory tools, as they can promote consumer choice, harness market discipline, and ensure regulatory accountability in ways that more aggressive regulatory tools often cannot. In order to promote more transparent insurance markets, the Article argues that the jurisdiction of the Consumer Financial Protection Bureau should be expanded to encompass consumer protection in insurance.

Keywords: Insurance, Consumer Protection, Transparency, Financial Regulation

Suggested Citation

Schwarcz, Daniel, Transparently Opaque: Understanding the Lack of Transparency in Insurance Consumer Protection (February 18, 2013). 61 UCLA Law Review 394 (2014), Minnesota Legal Studies Research Paper No. 12-35, Available at SSRN:

Daniel Schwarcz (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States


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