I'm not saying it's not because of regulations. I'm saying it's not just the regulations on payouts and the regulations on payouts probably aren't even the most important, because all the regulation in the world around ensuring the insurer can't skip out on payouts will do nothing for "Oops we invested badly and have literally no money with which to pay your completely valid claim".
The payouts regulations are still good and necessary because that's way better than requiring people to find out the hard way through shitty claims processes and denials and word-of-mouth reputation, but they're in no way sufficient.
I'm not sure we disagree. We just allocate the benefit of the doubt differently.
> "Oops we invested badly and have literally no money with which to pay your completely valid claim".
It's 100% possible for this to be a genuine mistake. I'm sure that it happened as a genuine mistake more than once! However, it is also possible to do this on purpose: load up a business vehicle with increasing amounts of risk and extract as much of the premiums as one possibly can before it explodes. If this is done intentionally, it is exactly the same hustle as selling policies that one doesn't intend to make good on, it just uses a different mechanism to shirk the obligation.
Every company that does it on purpose will say that it happened by mistake, of course, and just as I am certain that it has happened multiple times as a genuine mistake, I am certain that it has happened multiple times on purpose.
Undercapitalization is the evolved form of the "sell a trash policy" hustle because it provides almost perfect plausible deniability. It makes sense that the greatest legislative effort would be spent heading it off.
The payouts regulations are still good and necessary because that's way better than requiring people to find out the hard way through shitty claims processes and denials and word-of-mouth reputation, but they're in no way sufficient.