The latest Insurance Regulation Report Card showed that Vermont has the best regulatory system for insurance, while North Carolina has the worst.

Vermont has been graded as having the best insurance regulatory environment for the third straight year, being the only state to receive A+ score.

The grades were based on a matrix of variables that affects a state's insurance regulation. The key areas the report examined were the freedom of the consumers to choose the insurance products they want, the freedom of insurers to provide the insurance products consumers want, and the effectiveness of the states in discharging their duties in monitoring insurer solvency and fostering competitive insurance markets.

"We believe states should regulate only those market activities where government is best-positioned to act; that they should do so competently and with measurable results; and that their activities should lay the minimum possible financial burden on policyholders, companies and, ultimately, taxpayers," Senior Fellow R.J. Lehmann said in a statement.

The report stated that the insurance market is the largest and most significant portion of the financial services industry to be regulated almost entirely at the state level. The Congress has reserved the duty of overseeing the business insurance to the states as part of 1945's McCarran-Ferguson Act.

The report also believes that states have been effective in encouraging competition and ensuring solvency. Other states like Arizona, Idaho, Illinois, Kentucky, Maine, New Hampshire, Utah and Wisconsin received either an A or A-.

North Carolina, however, received a failing grade for three straight years, attributing it to the shrinking residual market entity.

States that ranked D include Alaska, Massachusetts, California, Hawaii, Louisiana, Mississippi, Delaware, Montana, North Dakota and New York.

"Not coincidentally, when R Street issued its first regulation report card in 2012, Florida ranked dead last and North Carolina was somewhere in the middle. This year, North Carolina is dead last and Florida is somewhere in the middle," stated Lehmann.