Thursday, August 24, 2006

Markets Work -- Even in New Jersey.

An amazing story out of New Jersey picked up in the New York Times ... it seems that insurance rates are coming down now that regulators are standing aside and letting the market work. In the past, politicians had forced insurers to make up losses in high loss areas such as Newark through increased rates in the suburbs (redistribution at its finest).

Of course, the insurers responded by not picking up the phone when calls came from Newark, so the bad drivers could not buy insurance and the people in the suburbs were gauged, so they bought less. That, of course, meant a smaller insurance pool and the start of a downward spiral.

Things hit bottom three years ago and regulators finally threw in the towel, opening the market and letting insurers set rates by their own formulas.

Miracle of miracles, even the bad drivers in Newark are paying less than they were before in some cases.


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