How States Fail to Regulate Car Insurance Rates

For decades, Americans have accepted the idea that driving is a privilege that comes with responsibility. State governments justify mandatory car insurance laws as a matter of public safety and financial accountability—and rightly so. Drivers should be held responsible for damages they cause to others. However, what’s been lost in this well-intentioned framework is fairness. While states insist on protecting the public through insurance mandates, they have failed miserably at protecting drivers from insurance companies that manipulate these very mandates for profit.

The Justification: Public Safety and Liability

Every state in the U.S., except for a rare few, requires drivers to maintain a minimum level of auto insurance. The reasoning is straightforward: if you cause harm or damage, there should be a mechanism to ensure victims are compensated. This policy serves public safety and ensures liability accountability—a reasonable and responsible expectation in a modern society.

Yet, while the justification for requiring insurance is sound, the regulation of how much insurance companies can charge—and why—has fallen through the cracks. What was meant to be a safeguard for society has become an unchecked marketplace driven by profit rather than fairness.

The Problem: Static Premiums in a Depreciating World

When a driver buys a new car worth $40,000, higher insurance premiums make sense. The insurer’s potential liability is higher if that car is damaged or totaled. But what happens as that car ages? Its value declines—sometimes drastically. Within a few years, that same $40,000 car may only be worth $15,000. Logically, the insurance company’s exposure should decline as well.

However, the reality is starkly different. Insurance premiums rarely adjust downward to reflect a vehicle’s depreciation unless the driver aggressively shops around or switches insurers. States that mandate insurance coverage have done little to enforce fair premium adjustments over time. The result: consumers continue to pay inflated rates for cars that no longer justify such high premiums.

In other words, the only time insurance companies recognize a car’s true market value is when they have to pay a claim—not when they’re collecting monthly premiums.

The Role of the States: Silent Regulators

Car insurance regulation falls squarely within state jurisdiction. Unlike federal health insurance mandates, auto insurance laws are written, enforced, and overseen by the states. This distinction is crucial because it means each state has the power—and the duty—to protect its residents from price gouging and unfair practices.

Unfortunately, most states have abdicated that responsibility. Insurance rate filings often go unchallenged, consumer protections are weak, and oversight agencies are either underfunded or captured by industry influence. The patchwork of state-level regulation means that two drivers with nearly identical risk profiles could pay vastly different rates simply because of where they live, not because of how they drive or the value of their vehicle.

Conditional Rights, Unconditional Costs

Supporters of mandatory insurance often argue that using public roads is a conditional right. The government can regulate it in the interest of public safety—much like requiring seat belts or driver’s licenses. That logic is sound, but the fairness issue arises when citizens are forced by law to purchase a private product—insurance—without sufficient protection from exploitation.

Drivers are compelled to buy insurance as a precondition of exercising their right to travel by motor vehicle. Yet the government that imposes this obligation does little to ensure that pricing reflects genuine market fairness. The result is a system where insurance companies enjoy state-enforced customer bases and guaranteed revenue streams, but consumers shoulder ever-increasing costs for diminishing returns.

A Comparison Worth Dismissing

Some critics have tried comparing modern car insurance mandates to historical rights of travel by horse and carriage. But the comparison doesn’t hold up. Horse-drawn carriages didn’t share highways with thousands of high-speed, multi-ton vehicles capable of causing massive property damage or injury. The context is entirely different—and the stakes are exponentially higher today. That’s why mandatory insurance makes sense as a policy—but only when the pricing and regulation are just as modern, dynamic, and fair as the vehicles themselves.

The Path Forward: Reform Through Real Oversight

If states truly want to uphold the principles of public safety and fairness, they must reform their regulatory frameworks for car insurance. That means:

• Requiring insurers to tie premiums to depreciation so rates automatically decline as vehicles age and lose value.

• Enforcing transparency in rate calculations, allowing consumers to see how their premiums are determined.

• Strengthening state insurance commissions with real authority and independence to review and challenge rate filings.

• Protecting consumer rights by preventing insurers from locking customers into static, overpriced policies.

Mandatory car insurance may be justified as a matter of public safety, but it becomes unjust when the system it creates benefits corporations more than citizens. Until states step up and regulate with fairness, America’s drivers will continue to pay inflated premiums for cars that no longer justify them—held hostage by laws designed to protect, not exploit, the public.