Why is the government in the business of disapproving prices in the first place?
The reason they did this is so that if you hit someone and cause physical injury to them or to their property, it's possible to pay them for the damage you did to them.
The government has decided that it is a good idea to make sure that people generally have a way of getting money from people that have caused accidents. We've also decided that it's in our collective best interest to allow people that don't have hundreds of thousands of dollars of cash on hand to be able to drive to the supermarket. However, because of these two conflicting goals, we need a third party that can pay in these cases.
Since it's a legal requirement to give money to a third-party when someone wants to drive, state governments have also determined that it's in our collective best interest to not allow for bad behavior by insurers in overcharging drivers for things not directly related to risk.
The reason for this is that making car insurance generally unaffordable to classes of people tends to exacerbate divisions in society, at least in the United States.
Further, members of minority communities do vote in elections, and will generally not support candidates whose position on insurance companies engaging in price gouging is "the free market will figure it out, sorry you can't afford insurance."
Finally, it cannot be taken for granted that companies always discriminate fairly when there are no laws to prevent them from not doing so. The example we see here is evidence of this. If Allstate is making pricing decisions not based on risk but based on willingness to shop, then that means that people are being unfairly overcharged; it just so happens that it's not as immediately offensive to our morals when it's "willingness to shop" vs. "being a member of a historically discriminated group of people".
2. "state governments have also determined that it's in our collective best interest to not allow for bad behavior by insurers in overcharging drivers for things not directly related to risk." This doesn't follow. You need to argue for a market failure of some sort to justify regulation. Seatbelts are mandatory, but it doesn't follow from there that the government must regulate the pricing structure of seatbelt manufacturers.
3. "The reason for this is that making car insurance generally unaffordable to classes of people tends to exacerbate divisions in society, at least in the United States." This is properly handled with subsidies, not mandates, as I already mentioned in other comments.
4. "Finally, it cannot be taken for granted that companies always discriminate fairly when there are no laws to prevent them from not doing so."
We don't need to take that for granted. The only relevant question is whether there is competition. If there's a monopoly, perhaps created by onerous government regulations, then there might not be sufficient competition. Again, you need to argue for a market failure, which you have not.
Here is the literal word for word question that I replied to:
"Why is the government in the business of disapproving prices in the first place?"
My answer was long winded and did not directly answer that question, but requires a person to come to the point themselves. Here's my answer: The government is in the business of disapproving prices because it requires people to purchase a product in order to engage in behavior that we feel is valuable, and the "government" (effectively, all of us) have decided that prices should be correlated with risk, and not discriminate on historically discriminated groups of people.
Are you seriously suggesting that the only answers to a rhetorical question should be arguing in favor of a position rather than explaining the logic behind a position?
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I do not believe it is a valuable use of my time to write, nor is it a valuable use of your time to read an argument in favor of the concept of a representative democracy, which is ultimately what an answer to "Why is the government in the business of disapproving prices in the first place?" would entail. The morals in play are these: 1. Do we consider the supposed "right" of a corporation to discriminate on the basis of race in pricing to supersede the right of a driver to affordable insurance?
2. Does a government have the right to require people to buy insurance?
3. Is the action of the "free market" in correcting unfair price discrimination so robust that government intervention is not only unnecessary, but counter-productive?
4. Is collectively subsidizing bad risks something that should be done explicitly (through government subsidies taken from taxation) or implicitly (through pricing that forces the cheapest insureds to pay a little more and the most expensive insureds to pay a little less)?
Answering these questions is an enormous waste of time if you're a libertarian or an anarchist. Asking a rhetorical question and expecting to get a moral justification for why "a government does a thing" is arguing in bad faith if you don't straight up say "Why is the government in the business of rejecting prices? Also, I don't think the government should reject prices because the free market will figure it out. I am not going to change my mind on this."
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My reply:
1. Entirely irrelevant. Corporations have no rights. Neither does anyone have a right to cheap services. It may be a good public policy goal for certain services to be more affordable than the market clearing price - I believe this should be addressed via subsidies absent a strong market failure argument.
2. I already agreed with this. Although I wouldn't frame any of this as a "right", the question is if it's a good idea for the government to do so. The government has a "right" to pay people to dig ditches and then refill them, but it would be a bad idea.
3. The burden of proof should be on the person arguing for additional regulations. I reject the attempt to shift the burden of proof. I'm asking for the case for regulation; "you can't conclusively prove that it's harmful" is not a positive case for regulation.
4. This is a legitimate question. You've made no arguments on this question so far, but I will reply to any arguments you may make on this issue in good faith. My prior is that explicit subsidies are likelier to be more efficient.
I'm not a libertarian or an anarchist. I'm just skeptical of government action and expect strong justifications for regulations. It's clear that many regulations are harmful and that some are beneficial, and it's also clear that many lawmakers or regulators have not thought all that deeply about what the best system of regulation is. Being skeptical and expecting justification before something like price controls is hardly bad faith.
Finally, "I think this particular thing the government does is harmful" is a very different claim than "I don't believe in representative democracy". Let's stipulate that representative democracy is better than any realistic alternative. That still doesn't tell us whether any particular action is good.
P.S. I tend to favor regulations that involve higher transparency, as opposed to banning actions completely, as there are strong economic benefits to information. I also like pigovian taxes on negative externalities. Don't assume that everyone you meet is the most extreme strawman that shares those views.
At the same time, most of what you said was still relevant and true, and my disagreement does amount to an objection to your logical jumps, so it's probably an unfairly high bar I'm setting here.
With that said, I think, to address the core confusion, and contribute to the discussion, you'd need to answer "why insurance specifically"?
Yes, people insuring dangerous things is good. Yes, everyone (with a few caveats) needs to buy insurance. Yes, non-discrimination is good.
None of that gets you to "therefore, we obviously need a commission to set rates", which I think prompted the question.
As (I think) the questioner notes, everyone needs to buy food. Where's the commission that approves increases in tomato prices? I'm sure some stores would like to overcharge minority groups, but competition, and the threat of lawsuits, tends to take care of that.
A responsive (not necessarily correct) answer would look more like:
"There can't be meaningful competition in this arena, and cost of coverage is easy enough to estimate, so we've gone with a model of fixed prices."
Competition in the insurance market is pretty intense, though, so that wouldn't be a satisfying explanation.
I wouldn’t even shop around if only buying the liability insurance because it costs like 2 tanks of gas anyway.
What makes it cheaper than in the US (I assume) is that loss of income, healthcare costs is assumed to be taken care of by other (public) insurance, so that's not my liability if I crash into you. Put another way: car insurers can rely on the fact that everyone has other expensive insurance already. I already paid for the other partys ambulance through my taxes - I don't need to do it on my car insurance.
To take an extreme example: if I enter that I want a BMW M3 and I'm 22, the cost would likely be north of $700 per year, but it could be +/- 50% depending on whether it's in a city or rural area.
But for me (40+) the cost would be maybe up or down 10% from a couple of of hundred (say) so I wouldn't really be interested in shopping around. The reason is I shop around for my other insurance, where I have my nice call fully insured. That's a lot more expensive (Say $1000-$1500 per year and varies wildly). I'm likely to just insure my crap car with minimum insurance at a couple of hundred bucks at the same insurance company that gave the best quote for the expensive insurance of the other car. So I do shop around for insurance. Just not when I need only the minimum one. It's not worth the effort to save under $100/year to have multiple insurance companies.
That's not alleged here at all. "People have a very hard time figuring out how much they would be paying" no, what's being said is people are having a hard time reading the documents submitted to the regulator. If you want to know how much you'll pay, just get a quote from the insurer directly.
You realize that, say, age is a protected class and yet an obvious risk factor, right? Do you think all ages should have the same rates for car insurance?
Mandating everyone pay the same price when their risks are different distorts incentives and makes us all worse off on average. Some may benefit in the short term by being subsidized by others, sure. Even if subsidies were socially desirable, price regulation is one of the least efficient ways to implement such subsidies. If the concern is that some people can't afford insurance because they're higher risk, then you can have subsidies targeted to them that pay for their insurance. That's far better than forcing an insurance company to take a loss on them.