State insurance programs flawed
Re “Insurance assurance,” editorial, April 9
The Times argues that the federal government should provide a “backstop” for state insurance funds like the California Earthquake Authority. The Times is wrong. States like Florida that have experimented with backstops have found that they don’t work.
Private reinsurance markets spread risk all over the world, while government-run backstops, even national backstops, concentrate risk in the same place. This violates sound insurance practices. To break even, such backstops have to charge more than the private sector.
Rather than charging rates that are really sufficient, however, existing government-run insurance programs under-price coverage and leave taxpayers with enormous unfunded liabilities. Below-market insurance rates, in turn, encourage unnecessary, environmentally destructive development.
A federal insurance backstop is a terrible idea.
Eli Lehrer
Washington
The writer runs the insurance project at the Competitive Enterprise Institute, a nonprofit dedicated to free enterprise and limited government.
Start your day right
Sign up for Essential California for news, features and recommendations from the L.A. Times and beyond in your inbox six days a week.
You may occasionally receive promotional content from the Los Angeles Times.
