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Institutional Affiliation: Santa Clara University
Information about this author at RePEc
NBER Working Papers and Publications
|January 1998||The Causes and Consequences of Rate Regulation in the Auto Insurance Industry|
in The Economics of Property-Casualty Insurance, David F. Bradford, editor
|September 1995||The Causes and Consequences of Rate Regulation in the Auto Insurance Industry|
with : w5245
This paper examines various explanations for the increase in the degree of regulation of the auto industry in the last ten years. Using cross section data for the State of California, the paper confirms earlier findings for the State of Massachusetts that the demand for auto insurance is highly price elastic. This implies that regulation induced price rollbacks (such as those mandated by California's popular initiative Proposition 103) have significant welfare effects. We explain the increase in regulation in two ways: a) As an attempt to lower rates to deal with the problem of the uninsured motorist. b) More fundamentally as a response to the perceived lack of fairness of the sharp increase in premiums in the 1980s. This perception of lack of fairness arises because, although auto insur...
Published: Jaffe, Dwight and Thomas Russell. "The Causes and Consequences of Rate Regualtion in the Auto Insurance Industry". The Economics of Property-Casualty Insurance. Edited by David F. Bradford, Chicago: The University of Chicago Press, 1998, pp.81-112.