anies, meanwhile, are interested in operating at a profit and ensuring that their pricing structure provides adequate protection for their customers. They are also interested in minimizing the risk that they take on when they issue a policy. From an economic standpoint, insurance companies want to insure those people and properties that have a low risk of ever filing a claim since that increases their profitability.
Because of this, some companies do not write certain types of policies for some areas, while other companies are compelled to provide insurance for large groups of people by the government; California's earthquake insurance regulations include provisions that prevent the selling of policies immediately after a major earthquake (when consumers are likely to be more prone to pressure tactics by insurance companies), but companies cannot turn down consumers simply because they live in a region where earthquakes occur (Whitman 8).
The nature of insurance itself has meant that the government has stepped in to protect consumers. Many states, for example, have insurance departments, and some states, such as California, have passed legislation designed to reform the way insurance companies operate. The reason that government regulation has evolved is that consumers are at risk when dealing with insurance companies. Companies that are not scrupulous can take the consumers' funds and then be unable to pay out for losses if adequate financial plans are not put into place. Other companies may refuse to insure some individuals for reasons that are not legal (such as the person's race). The government also has a stake in the way that the property and casualty industry is regulated since losses from catastrophes can be shifted from insurance companies to the government, particularly when affected individuals do not have private insurance. If a catastrophe is of sufficient magnitude, for example, the various companies involved...