A November 2013 study by the Consumer Federation of America analyzed insurance trends in the 21 years from 1989 to 2010. This study found that states that had strong insurance regulation had greater success in keeping insurance expenditure lower. Connecticut is a case in point, and here’s why.
If you lived in Connecticut back in 1989, you could expect to pay, on average, $740.02 annually for auto insurance. As of 2010, that number had increased to $965.22 representing a rise of 30.4 percent. To put that in perspective, the countrywide average went up by 43.3 percent to $791.22 in the same 21 year period. This means that the premiums in Connecticut rose at a slower rate than they did in the rest of the country. In fact, Connecticut went from being the 4th most expensive state to buy auto insurance to the 8th most expensive, a significant achievement.
Connecticut’s Prior Approval (PA) system has played a big part in keeping rates relatively low. The PA system compels insurers to file any changes in the premium rate so that they can be approved by the state. The new rate can only be applied after approval. Many states use less stringent measures of rate control and some, none at all. The study found the states using a PA system like Connecticut had the most success in the keeping rates low.
Furthermore, Connecticut is a highly competitive auto insurance market. It earned a Herfindahl–Hirschman Index (HHI) score of 702 (any score under 1000 is considered competitive) in the National Association of Insurance Commissioners report of 2012. In fact, Maine and Vermont were the only states to receive a better score. All of this means that conditions are ripe in Connecticut for stronger insurance legislation to be put in place. Pioneering insurance regulation in California has seen rates go down (by 0.3%) over the 21 years. California is the only state to achieve a decrease in insurance expenditure and it has done so with the aid of strong regulation.