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Price Regulation in US Automobile Insurance A Case Study of Massachusetts Private Passenger Automobile Insurance 1978–1990*

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Abstract

This short note highlights price regulation in the United States Personal Automobile Market by reviewing the results of the most highly-regulated U. S. market, the fix-and-establish system in Massachusetts during 1978 to 1990. Financial outcomes of the state-run market are shown. Effects of pricing policy on the size of the residual market, interclass subsidies and the participation of national property-casualty companies in the Massachusetts market are discussed. Contrasts with the post-proposition 103 California personal auto market are explored. Implications for guaranty funds are derived. Finally, the outlook for the Massachusetts and California personal auto markets is discussed together with implications for the upcoming integration of the EEC insurance markets.

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