Mississippi traps State Farm

The state of Mississippi reacted rather badly to the announcement that State Farm Insurance was going to stop issuing new home and business policies in that state. Dan Melson tries to point out the economic issues at issue:

Mississippi to State Farm: You Can't Win, You Can't Break Even, and We're Not Going To Let You Leave The Game

So the Mississippi Attorney general wants to make it tougher and more expensive to buy auto insurance as well as homeowner's insurance? [. . .]

But when you make them pay for things which were explicitly not insured, don't you think they're entitled to second thoughts about whether to do business in that state? State Farm is not a charitable organization. They are entitled to charge enough to make a profit — otherwise there is no reason to be in business. If they decide they cannot do that within the environment in a given state, they are entitled to decide to leave. If they can't do it at all, the correct decision is to go out of business.

Add hefty punitive fines for not wanting to pay out claims for things which weren't insured, and it's a miracle that anyone is willing to issue homeowner's insurance in Mississippi.

Insurance is supposed to be a private safety net for individuals and businesses who encounter unforeseen and unpredictable loss. When the government steps in to try to force an insurer to provide coverage for a loss which can be predicted, it is undermining the whole basis of the insurance industry. In much of the southern United States, the government has been meddling in the insurance field for so long that it's difficult to figure out just what any rational company would do in that area (and it would take a very brave and/or foolhardy company to start doing new business in that region).

At the basic level, when you take out an insurance policy, you're making a bet. You're betting that you will need to be compensated for damage and the insurance company is betting that you won't. If the odds look bad to the insurance company, they'll demand a much higher premium (the odds) to offset the increased chance of having to pay out on their side of the bet. Government mandates on who must be given insurance and at what rates is exactly like a third-party muscling in on your private betting to say that the insurance company must give you better odds — in spite of the chances being against their best interests. After that, you may find that there are many fewer choices for you (and everyone else in your area) when you need to place another "bet".