The findings of the conference can be summarized very simply. The market for private passenger automobile insurance is intensely competitive. If undisturbed by regulation, competitive market equilibrium will result in auto insurance prices that reflect an unbiased estimate of the expected costs of motor vehicle accidents as well as an appropriate profit for insurers, reflecting the risk they bear. There is no evidence that prices or profits in states that rely on markets to set rates are excessive or that insurers behave collusively. 6 Automobile insurance price regulation tends to be imposed in response to rising automobile insurance premiums, which reflect rising claims costs.
Higher premiums create political pressures to control prices.
Moreover, responding to loss costs by constraining insurance prices is not a rational response, because insurance loss costs are determined by accident rates, the costs of auto repairs and medical care, and legal liability rules, none of which are under the direct control of insurers. Regulation often results in rate-suppression , meaning that the total amount of premiums collected in a state is less than would be collected under competition, resulting in a decline in the market value of insurer equity. Insurers that try to withdraw from markets where rates are suppressed are often required to give up their licenses to conduct all types of property-liability insurance in the state if they leave the automobile insurance market in particular. When this occurs, consumer choice is limited and product quality is reduced. For example, numerous insurers have withdrawn from the heavily regulated markets in Massachusetts and New Jersey.