The insurance industry’s limited antitrust exemption has led to an interesting and convoluted relationship among major insurers, the federal government and the states. While the right to provide some regulation for some insurance rates falls to the states, there is still in many states a constant battle over the issue between state policymakers and industry reps.

In California, the insurance industry spends millions on political campaigns against pro-regulation politicians. In Florida, following Katrina and three years of powerful hurricane seasons they have left the property insurance business altogether. In Washington, New York and Oregon insurance companies have encountered lawsuits filed by state officials over consumer abuse.

Many in the insurance industry feel that less regulation will help consumers by encouraging competition. Perhaps, but not many politicians will make the case for an insurance industry with market-driven rates. Even with regulated rates, the industry receives its own underwriting support from the government in a number of areas.

In Florida, because insurers just up and quit the state after three years of destructive hurricane seasons the largest property and casualty insurer in Florida is now Citizens Insurance, which is a state entity running millions of dollars in the red. If an insurer is licensed to sell auto, life and health insurance should they be required to participate in the downside – insuring property in a storm-prone state?

In Florida, the property carriers exited in favor of a massive government bailout. The insurance companies turned flood insurance over to the government years ago. The entire agricultural sector in this country has government backed crop insurance and for years, received massive payments for NOT growing crops in order to provide price supports. Insurers expect the government to be the underwriter of last resort for earthquakes, for hurricanes and for terrorist attacks. That’s hardly a free market at work.