The exemption of the insurance industry from federal antitrust law has generated some controversy, particularly in light of the well-publicized price and availability crises in certain lines of insurance. Antitrust restrictions in the United States are generally based on the assumption that high levels of concentration in an industry will make it more likely that firms will collude to raise prices and restrict supply, resulting in higher prices for consumers. This study examines the relationship between profitability and market structure in automobile insurance and tests for the existence of a positive relationship between concentration and performance. The results of the analysis show a significant positive impact of concentration on profitability for combined liability and physical damage lines in private passenger automobile insurance for the period 1984 through 1992. Differences in rate regulation across states are not found to impact profitability.
In a well‐designed enterprise risk management (ERM) program, the firm integrates risk management into the strategic planning process, addressing strategic, financial, operational, and hazard risks under a single overarching process. This is particularly important to large financial firms, such as property and casualty (P&C) insurers, which face a diverse set of risks. Using a sample of P&C insurers with S&P ERM quality ratings from 2006 to 2013, we find that the quality of a firm's ERM is a significant determinant of P&C insurer performance and that, for firms with high‐quality ERM programs, product line diversification has a significant positive effect on performance.
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