Daniel Schwarcz on the Lack of Transparency in Insurance Consumer Pr...

Back in July of 2011, we were fortunately to have Dan Schwarcz guest blog for us. He has another article to report on, entitled Transparently Opaque: Understanding the Lack of Transparency in Insurance Consumer Protection, available here. His core argument is that state insurance regulation systematically rejects transparency-based consumer protection strategies in favor of either no regulation at all, or substantive regulation.  As a result, (i) insurance policies do not come along with summary disclosures; (ii) policy forms are not available online; (iii) consumer claims information is not publicly available; (iv) data on the availability of property insurance for low income or minority communities is not collected or made publicly available; (v) the price of life insurance is not reflected in a summary metric like the APR; (vi) consumers are actively shielded from information about the existence or extent of guarantee fund protection; and (vii) regulatory accounting information is only publicly available for exorbitant fees. 

In all of these cases, he argues, analogous regulatory issues at the federal level -- ranging from consumer credit products to health insurance to retail securities products -- promote robust transparency to both consumers/investors and the market more generally.

This insightful article, which I saw presented this summer, argues that insurance regulation needs to embrace the types of regualtion found in these other arenas,  which promote genuinely transparent consumer markets and which use substantive regulation as a complement to transparency where necessary. Check it out.