TY  - JOUR
AU  - Suponcic, Susan J
AU  - Tennyson, Sharon
TI  - Rate Regulation and the Industrial Organization of Automobile Insurance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5275
PY  - 1995
Y2  - September 1995
DO  - 10.3386/w5275
UR  - http://www.nber.org/papers/w5275
L1  - http://www.nber.org/papers/w5275.pdf
N1  - Author contact info:
Susan J. Suponcic
E-Mail: ssuponc2@its.jnj.com

Sharon Tennyson
Cornell University
E-Mail: sharon.tennyson@cornell.edu
M1  - published as Susan J. Suponcic, Sharon Tennyson. "Rate Regulation and the Industrial Organization of Automobile Insurance," in David F. Bradford, editor, "The Economics of Property-Casualty Insurance" University of Chicago Press (1998)

AB  - 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.
ER  -