Daniel Schwarcz on the Lack of Transparency in Insurance Consumer Protection

Daniel Schwarcz of Minnesota has written Transparently Opaque: Understanding the Lack of Transparency in Insurance Consumer Protection.  Here's the abstract:

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 in financial regulation. 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. This pattern represents a deep and unappreciated flaw in state insurance regulation. Although substantive rules may be necessary in many insurance markets, such regulation must be coupled with strong transparency-oriented strategies in order to promote consumer choice, harness market discipline, and ensure regulatory accountability.

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