Transparently opaque: Understanding the lack of transparency in insurance consumer protection

Consumer protection in most domains of financial regulation centers on transparency. Broadly construed, transparency involves making relevant information available to consumers as well as others who might act on their behalf, such as academics, journalists, newspapers, consumer organizations, or other market watchdogs. By contrast, command-and-control regulation that affirmatively limits financial firms' products or pricing is relatively uncommon. This Article describes an anomalous inversion of this pattern: While state insurance regulation frequently employs aggressive command-and-control consumer protection regulation, it typically does little or nothing to promote transparent markets. Rather, state lawmakers routinely either completely ignore transparency-oriented reforms or implement them in a flawed manner. While acknowledging the limits of transparency-oriented consumer protection regulation, this Article argues that the lack of transparent insurance markets reflects a pervasive and unappreciated flaw in state insurance regulation. Despite their limitations, transparency-oriented regulatory strategies are an important complement to other more aggressive regulatory tools because they can promote consumer choice, harness market discipline, and ensure regulatory accountability in ways that more aggressive regulatory tools often cannot. In order to promote more transparent insurance markets, the Article argues that the jurisdiction of the Consumer Financial Protection Bureau should be expanded to encompass consumer protection in insurance.