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Market Deregulation and Insurer Pricing Strategies: The Japanese Experience

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  • Nat Pope

    (Bradley University, USA.)

  • Yu-Luen Ma

    (Illinois State University, IL, USA)

Abstract

In 1998, rate regulation in the Japanese auto insurance industry shifted from a tightly controlled tariff regime to that of a less regulated (theoretically) prior approval system. While actual rate regulation is generally not directly observable, Danzon (1983) contends that the “true” character of regulation is indirectly observable in the pricing strategies of insurers. This paper applies Danzon's hypothesis to the Japanese auto insurance market. The empirical analysis employs a two-way random-effects panel data methodology that includes data from the domestic competitors in the Japanese auto insurance market over the 1991–2000 period. Even though an increased dispersion of pricing strategies corresponding to insurer size is observed after deregulation, our analysis reveals that the Japanese auto insurance market still operates much like a cartel. The implication is that despite formal deregulation, Japan's regulatory body still maintains significant control. The Geneva Papers (2005) 30, 312–326. doi:10.1057/palgrave.gpp.2510028

Suggested Citation

  • Nat Pope & Yu-Luen Ma, 2005. "Market Deregulation and Insurer Pricing Strategies: The Japanese Experience," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 30(2), pages 312-326, April.
    • Handle: RePEc:pal:gpprii:v:30:y:2005:i:2:p:312-326
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    Cited by:

    1. YASUDA, Yukihiro & 安田, 行宏, 2016. "Impacts of Deregulation on Property and Casualty Insurers' Pricing and Risk Taking: Empirical Evidence in Japan," Working Paper Series G-1-10, Hitotsubashi University Center for Financial Research.
    2. Wei Zheng & Yi Yao & Peng Shi & Yinglu Deng & Hao Zheng, 2022. "Deregulation, competition, and consumer choice of insurer: Evidence from liberalization reform in China’s automobile insurance market," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 47(1), pages 158-200, March.

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