Cartels, Competition and Regulation in the Property-Liability Insurance Industry
AbstractThis paper provides a detailed study of the structure, behavior, and performance of the property and liability insurance industry in the United States. This property insurance industry is shown to possess all of the structural characteristics normally associated with competitive markets. Despite a competitive market structure, however, the property-liability insurance industry has traditionally set prices through cartel-like rating bureaus and has been subjected to pervasive state rate regulation. The study concludes that the combination of state regulation, cartel pricing, and other legal peculiarities has resulted in the use of an inefficient sales technique, supply shortages, and over-capitalization. Free entry, however, tends to drive profits toward the cost of capital. Based on recent experience in states where the competitive market is used to determine insurance rates, the study suggests a movement away from rate regulation and cartel pricing to open competition, as a means of eliminating prevailing performance problems.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 4 (1973)
Issue (Month): 2 (Autumn)
Contact details of provider:
Web page: http://www.rje.org
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Michael Powers & Martin Shubik & Shun Yao, 1998.
"Insurance market games: Scale effects and public policy,"
Journal of Economics,
Springer, vol. 67(2), pages 109-134, June.
- Michael R. Powers & Martin Shubik & Shuntian Yao, 1994. "Insurance Market Games: Scale Effects and Public Policy," Cowles Foundation Discussion Papers 1076, Cowles Foundation for Research in Economics, Yale University.
- Berger, Allen N & Cummins, J David & Weiss, Mary A, 1997.
"The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance,"
The Journal of Business,
University of Chicago Press, vol. 70(4), pages 515-46, October.
- Allen N. Berger & J. David Cummins & Mary A. Weiss, 1995. "The coexistence of multiple distribution systems for financial services: the case of property-liability insurance," Finance and Economics Discussion Series 95-22, Board of Governors of the Federal Reserve System (U.S.).
- Allen N. Berger & J. David Cummins & Mary A. Weiss, 1995. "The Coexistence of Multiple Distributions Systems for Financial Services: The Case of Property-Liability Insurance," Center for Financial Institutions Working Papers 95-13, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Posey, Lisa L. & Tennyson, Sharon, 1998. "The coexistence of distribution systems under price search: Theory and some evidence from insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 95-115, March.
- Susan J. Suponcic & Sharon Tennyson, 1995. "Rate Regulation and the Industrial Organization of Automobile Insurance," NBER Working Papers 5275, National Bureau of Economic Research, Inc.
- Mark Israel, 2005. "Services as Experience Goods: An Empirical Examination of Consumer Learning in Automobile Insurance," American Economic Review, American Economic Association, vol. 95(5), pages 1444-1463, December.
- J. David Cummins & Giuseppe Turchetti, 1996. "Productivity and Technical Efficiency in the Italian Insurance Industry," Center for Financial Institutions Working Papers 96-10, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Vittas, Dimitri & Demirguc-Kunt, Asli & Musalem, Alberto, 1993. "North American free trade agreement : issues on trade in financial services for Mexico," Policy Research Working Paper Series 1153, The World Bank.
- White, Lawrence J., 2008.
"Antitrust Policy and Industrial Policy: A View from the U.S,"
- Lawrence J. White, 2008. "Antitrust Policy and Industrial Policy: A View from the U.S," Working Papers 08-2, New York University, Leonard N. Stern School of Business, Department of Economics.
- Trigo Gamarra, Lucinda, 2007. "Does the product quality hypothesis hold true? Service quality differences between independent and exclusive insurance agents," Thuenen-Series of Applied Economic Theory 76, University of Rostock, Institute of Economics.
- Trigo Gamarra, Lucinda, 2007. "Single- versus multi-channel distribution strategies in the German life insurance market: A cost and profit efficiency analysis," Thuenen-Series of Applied Economic Theory 81, University of Rostock, Institute of Economics.
- Biener, Christian & Eling, Martin & Schmit, Joan T., 2013. "Regulation in Microinsurance Markets: Principles, Practice, and Directions for Future Development," Working Papers on Finance 1305, University of St. Gallen, School of Finance.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.