[merrywhether]

It’s all in the nuance. Currently the insurance companies have too much moral hazard, as they are able to extract profits during the “good” years (like AllState’s recent $3B stock buyback) and then deny or default during disasters. An extractive profit cap could allow companies to take in more than they spent and save it to prepare for major catastrophes. They wouldn’t have to simply disperse these funds back to policy holders or something. I’m sure that idea would need more refinement, but my overall point was that our regulations should directly target the incentives we actually care about. And we have to rely more on regulation in these situations because the market can’t properly price the risk of companies disappearing during major payout events.

I’d really argue that for-profit insurance companies are a bad idea in general, but that’s a higher-level debate. There’s an interesting idea where governments handle all disaster-related insurance handling but are then also able to have a more comprehensive approach to management (though that’d be hard to trust in the current US political climate).