Tuesday, July 2, 2013

Does Florida have a competitive P/C insurance market?


Healthy competition is much in the eye of the beholder. There are often rules- fair fight tactics.  Generally, there are winners and losers.  For certain though, competition requires more than one player. Depending on the context, different numbers of players are desirable.  For example, most card games can be played between two people but much more interesting and fun when played with four.  

In a market, let's say a Florida P&C market, how many participants is sufficiently competitive?  

Tales from Hurricane Andrew and fierce competition that pushed rates "too low" seem to suggest that too much competition is an equivalent bad to too little.  

Below are graphs comparing the number of domestic P&C companies by state.  The top graph shows number of companies per person adjusted to the average ratio.  The below graph shows number of companies per state adjusted to the average numer of companies. Population and company data reflect the year 2010.  P&C data gathered from the III's Insurance Factbook, 2012.

*Delaware value= 8.49


In the context of state population, Florida is below average, but not the lowest and comparative to many other states.  Yet, when considering number of companies by state, Florida is well above average.

Is it competitive?   It would appear to me that yes, Florida has a competitive insurance market.

Is it as competitive as one may hope? I suppose that is open to interpretation.

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