IDEAS home Printed from
   My bibliography  Save this paper

Rate Regulation and the Industrial Organization of Automobile Insurance


  • Susan J. Suponcic
  • Sharon Tennyson


This paper analyzes the impact of rate regulation on the structure of insurance markets for private passenger automobile insurance. The paper argues that states' restrictions on automobile insurers' rates of return will distort the structure of the market by distorting insurers' entry and output decisions. Cross-sectional analysis of the numbers of firms and the relative market shares of firms of different organizational characteristics supports this argument, especially for those states which impose the most stringent regulation. The analysis suggests that increased regulatory stringency lowers the total number of firms selling in the market, and lowers the number of low cost and national firms in the market. The market shares of these latter two groups of firms are also significantly lowered by increased regulatory stringency. These findings hold even after controlling for other factors which may influence the relative prevalence of these firms in the market, and are robust to the assumption that regulatory stringency in a state is itself partially determined by the number and market shares of large, low cost producers.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:5275

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. J. David Cummins & Sharon Tennyson, 1992. "Controlling Automobile Insurance Costs," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 95-115, Spring.
    2. Frech, H E, III & Samprone, Joseph C, Jr, 1980. "The Welfare Loss of Excess Nonprice Competition: The Case of Property-Liability Insurance Regulation," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 429-440, October.
    3. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
    4. Ippolito, Richard A, 1979. "The Effects of Price Regulation in the Automobile Insurance Industry," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 55-89, April.
    5. Paul L. Joskow, 1973. "Cartels, Competition and Regulation in the Property-Liability Insurance Industry," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 375-427, Autumn.
    6. Mayers, David & Smith, Clifford W, Jr, 1988. "Ownership Structure across Lines of Property-Casualty Insurance," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 351-378, October.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Tennyson, Sharon, 1997. "Economic institutions and individual ethics: A study of consumer attitudes toward insurance fraud," Journal of Economic Behavior & Organization, Elsevier, vol. 32(2), pages 247-265, February.
    2. Susan J. Suponcic & Sharon Tennyson, 1998. "Rate Regulation and the Industrial Organization of Automobile Insurance," NBER Chapters,in: The Economics of Property-Casualty Insurance, pages 113-138 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5275. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: () or (Joanne Lustig). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.