From regulation to free market: the experience of the European motor insurance market

Domenico Scalera and Alberto Zazzaro ()

No 205, Working Papers from Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali

Abstract: Increasing premiums, increasing claims and decreasing profits are three striking facts associated in some European countries to motor insurance liberalization of 1990's. In this paper, we argue that these phenomena may be considered not a consequence of collusion or other misapplications of deregulation but rather an effect of the impact of liberalization on the companies’ optimal choices. In particular, by extending the Salop-Economides model, we show that price deregulation involves decreasing investments in monitoring and increasing compensation costs. Therefore, the transition from regulation to competition can yield prices and profits moving in either direction and possibly opposite directions.

Keywords: motor insurance; regulation; spatial models (search for similar items in EconPapers)
JEL-codes: G22 L11 L50 (search for similar items in EconPapers)
Pages: 35
Date: 2004-03
New Economics Papers: this item is included in nep-com, nep-fin, nep-ias and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:anc:wpaper:205

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