Regulation is often about protecting incumbent businesses from competition that drives down profit margins. Insurance agents who sell the federal government’s flood insurance provided us with a great example of such regulatory robbery.
National Flood Insurance is a uniform product, and so the private-sector agents selling it on behalf of the federal government can’t really compete on quality. In Florida, at least, they can compete on price, by rebating to their customer part of the commission that the federal government pays the agents. But FEMA, who administers the program, has ruled that rebating is not allowed in the flood-insurance program.
Ray Lehmann at “Out of the Storm” explains.
This sort of thing happens all over the economy:
- Mattel, the world’s largest toymaker, supported strict new federal toy-safety regulations
- Philip Morris, the world’s largest tobacco company, supported strict new federal tobacco regulation.
- Wal-Mart, the nation’s largest non-government employer, supported a higher minimum wage and an employer-mandate in health insurance.
- GE supported strict efficiency standards on light-bulbs.
- Nike supported climate-change rules that crush its smaller competitors who actually make things in the U.S.
- H&R Block supported new IRS regulations on tax preparers.
- Big food producers supported new food-safety regulations.
- The financial planning industry group called for more federal regulation of financial planning.
- Hedge-fund giant Jim Chanos advocated federal registration of hedge funds.
- The American Bankers Association applauded new federal credit-card regulations.
- Portland cabbies pushed for cab regulations.
- The big trucking companies supported new trucking regulations
