The Structure, Conduct, and Regulation of the Property-Liability Insurance Industry

Dissatisfaction with property-liability insurance is widespread and seems to be growing. Insurance availability and affordability have become major issues in election campaigns nationwide, and Congress is threatening to impose new federal regulations. This unusual amount of attention seems to reflect fundamental changes in the nature of insurance and insurance markets. Insurers maintain that they are functioning as efficiently and effectively as possible under difficult circumstances. But a significant proportion of the public, public interest groups, legislators, and regulators believe that insurers themselves are a primary cause of the problems in property-liability markets. This paper presents an analysis of the structure, conduct, and performance of the suppliers of property-liability insurance. The discussion is carried out in the context of the market problems that have plagued the property-liability insurance industry in recent years. The objective is to provide an indication of the relative roles of insurer conduct and external structural factors in creating the turmoil in this important market. The paper begins with an overview of the problems and issues in property-liability insurance markets. Each issue raises important questions about market structure and performance. Subsequent sections of the paper evaluate industry market structure and explore its implications for the solution of the problems confronted by the property-liability insurance industry.