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Originally Posted by dksuddeth
insurance companies are not operating in a free market environment. They are probably one of the top 5 heavily regulated industries out there.
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Dk is right. All 50 states have a department to regulate insurance companies and agents. The federal government is going to step in to regulate a small part (my part actually), and that's being welcomed with open arms because it will help everyone to transact business in other states. Given what I do, that's absolutely necessary.
On the other hand, once the regulatory guys have leveled the playing field, it is a surprisingly free system within its boundaries. Rekna, to directly answer your question, it is always in the insurance company's favor to deny claims. It is simple math. That said, insurance policies are contracts and have terms and conditions. When a loss meets those terms, the company pays out. Things like the Mississippi flood claims after Katrina, when the state tried to force companies to pay for something that EVERYONE knew wasn't supposed to be, just make everyone look bad, including those who file suit. If you own property in a flood plain, you know it, or at least you should.
To finally get around to the OP, I think that the free market is incredibly good at short-sited science. By that I mean things that can have an impact on the bottom line in the near future. For things that are farther out, ie anti-gravity, and don't have an immediate monetary value, I don't think that the free market does a particularly good job. It is notoriously bad at funding pure science.