Journal of Economic Perspectives: Vol. 6 No. 2 (Spring 1992)


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Controlling Automobile Insurance Costs

Article Citation

Cummins, J. David, and Sharon Tennyson. 1992. "Controlling Automobile Insurance Costs." Journal of Economic Perspectives, 6(2): 95-115.

DOI: 10.1257/jep.6.2.95


We begin by providing an overview of the auto insurance system and the structure of the auto insurance market. We then turn to an analysis of the factors underlying the auto insurance price increases experienced in recent years. We find that the auto insurance inflation of the 1980s was caused primarily by increases in cost factors, especially inflation in the severity of personal injury claims. There is no persuasive evidence that increasing profit rates or expense loadings contributed to inflation in premiums. The paper concludes with recommendations for bringing costs under control.

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Cummins, J. David (U PA)
Tennyson, Sharon (U PA)

JEL Classifications

G22: Insurance; Insurance Companies


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