You hear the same kinds of arguments about school choice. Let schools compete with each other, and the best ones will survive.
Well, here's a gentle reminder to all of you free market fans: it don't work that way, folks.
Case in point: consider recent developments in the home insurance industry.
--from the 10/16/07 NY Times--
Companies including Allstate, State Farm and Liberty Mutual have “nonrenewed” policies not only in hurricane-battered places like Florida and Louisiana, but in New York and other Northern states that have not seen hurricanes in years. Since last year, those three companies and others have turned down all new homeowners’ insurance business in New Jersey, Connecticut, Rhode Island, Maryland, Massachusetts and the eight downstate counties of New York.
An independent insurance agents’ group puts the Grays among about 50,000 residents of the New York metropolitan area — and about one million homeowners in the Mid-Atlantic and New England states — whose policies have been canceled since 2004. While most homeowners have been able to find coverage with other major insurers, or with smaller companies, in most cases it is at higher rates and with larger deductibles.Translation: it ain't in the interests of for-profit insurance companies to lose money. So what do they do? They simply stop insuring homes that are risky. And what do these homeowners do to protect their homes? Who cares.