Dynamic Pricing Regulation and Welfare in Insurance Markets

Naoki Aizawa and Ami Ko

No 30952, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: While the traditional role of insurers is to provide protection against individuals’ idiosyncratic risks, insurers themselves face substantial uncertainties due to aggregate shocks. To prevent insurers from passing these aggregate risks onto consumers, governments have increasingly adopted dynamic pricing regulations, which limit insurers’ ability to change premiums over time. We evaluate dynamic pricing regulation using an equilibrium model of the U.S. long-term care insurance market, featuring insurers’ lack of commitment and endogenous market structures. We find that stricter dynamic pricing regulation has a limited impact on improving consumer welfare, while it reduces insurer profits and increases market concentration.

JEL-codes: D14 G22 I13 L11 L51 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-com, nep-hea, nep-ind and nep-reg
Note: AG EH IO PE
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