Insurance Regulation Chapter 8

Cycle example

1980-steepest decline in insurance pricing reversed itself. Commercial rates increased by 100% or more in one period. Many insurers withdrew from the markets. Regulators were under pressure to protect commercial insureds. Consumers thought rating was greedy. Experts saw the need to correct years of inadequate rates and restore health of industry.

Antitrust issues

Antitrust laws applicable to other industries do not govern insurance rate setting and market conduct regarding rate plan development.

Casualty Actuarial Society (CAS)

Codes principles in Statement of Principles Governing Property and Casualty Ratemaking 1) Rate is estimate of expected value of future costs 2) Rate provides for costs associated with transfer of risk 3) Rate provides for costs associated with individual risk transfer 4) rate is reasonable and not excessive inadequate or unfair if it is sound estimate of expected value of future costs associated with individual risk transfer. These principles especially 4 reflected in many state statutes that prohibit inadequate excessive and unfair rates. Principles are difficult to uphold. Hearings and testimony is necessary to sort out opposing opinions to make sound estimate of cost. There's always drama over unfair discrimination and their class systems.

Loss Trending

Forecasting trend in losses from middle of experience period (time covered by actual loss statistics) to middle of policy period being rated.

Loss Based Rate Evaluation

Insurers use actuarial ways to set rates by projecting losses into the rated policy period. added are admin expenses based on ratios of expenses to premium and a fixed profit and contingency %. % is based on tradition rather than real criteria. Profit is treated as part of expense load.

Current Evaluation of Rates

Justify rates - regulators ask 1) are rates based on realistic and factual estimates of cost 2) is level of profit associated with the rate reasonable. Historically - regulators looked at which losses and admin expenses could be expected for policy period being rated. Today, more concern if insurers profits are reasonable.

Rate filing requirements vary considerably

Many states require their own transmittal forms, special certifications or compliance checklists or have other unique filing requirements. Some states require an officer of filing insurer to certify the insurer has complied with state laws. Bulk of documentation required by regulators consists of loss experience underlying rates or rates of class systems. Larger states may require evidence of insurers loss experience for specific line of insurance. Through NAIC regulators have developed standardization and electronic rates/forms including standard transmittal forms and acceptance acknowledgments from regulators.

NCR and CR

Noncompetitive rating laws - require prior approval of rates beyond set standards (flex rating) and state or board promulgated rates as NCR laws. File and Use rating laws and use and file rating laws are CR laws.

Return to Supervision

Policymakers justify restrictions on behavior to counter excesses of open market competition. Less competition and more coordination and intervention in industry decision making. Today rate regulation is likely defensible that unfair competition can create availability/affordability problems for protected classes. Prior approval of rates protects consumers from excessive pricing.

Rate

Price per exposure unit for insurance coverage

Effects of Rate elements

Rate has lesser effect on consumers than other elements. How insurers classify businesses causes friction. Businesses that want to capitalize on lower rate classes do not like hazard and loss differentiations that insurer may consider. Experience factors for commercial can cause swings of 20% in premiums from year to year even though rate and exposures have not changed. Some insurers have rate rules relating to special discounts. (i.e. auto student good student discount; people who buy both auto and home).

Political theory of regulation

Rate regulatory system that attention can be greater for issues that attract voter interest and easy for policymakers to understand.

Regulatory practices

after rating bureaus South Eastern Underwriters decision had big influence on regulatory practices. Later unrestrained insurer competitive rating practices complicated the rating process leading regulators to monitor more closely. Current rate evaluation focuses on loss based rating and investment return.

Rating techniques

another aspect of ratemaking mechanics. Insurers set rates based on average policyholders loss experience. They use other factors such as experience, schedule, retrospective rating to adjust the average.

NAIC

approved model rate regulation act 1947 now prior approval of wide class of rates and setting specific criteria for states to use and approve rates. After McCarran Ferguson, every state passed form of rate regulation statute. to Preempt antitrust law, explicit state regulatory policy was needed. States specified extent insurers could cooperate in data gathering and form filing. States with single rate, ceiling rate, or limits how insurers could compete, the law relied on policy objecting for noncompetitive pricing.

Underwriting cycle

cyclical pattern of insurance pricing in which a soft market (low rates, relaxed underwriting, losses) is followed by hard market (high rates, restrictive underwriting and underwriting gains) and the pattern repeats.

Loss Development

increase or decrease of incurred losses over time which assists in estimating the ultimate liability for loss payments for policies written in any given time

Regulators discover violations

of rate regulation as a result of complaint investigations or market conduct exams. Violations such as deficient premium notices or deviations from rating plans. market conduct exams may also reveal violations.

National Association of Insurance Commissioners (NAIC)

offer guidelines on rate filing content but each state can define their own preferred method.

Fast Track Monitoring System

provides industry loss and premium information for use as warning to possible rate trends in auto, home and General Liability.

Statistical Agent concept

unique; no other industry collects cost data from members and shares data with them for price setting purposes. Businesses other than insurers - price coordination would violate Sherman Antitrust Act. McCarran Ferguson Act exempts insurers from this part.

Regulators search to end ratings swings

1) requiring insurers to maintain accurate financial statements; 2) imposing realistic and accurate capital and surplus requirements on insurers that engage in risky underwriting practices; 3) Reducing the lag time in rate approval process - lags in rate approval. Underwriting cycle has strong and undesirable effects on rate filings. Regulators have not been able to anticipate cyclical behavior, they restrict rate increases at the top of the cycle, especially when consumers face unanticipated and sharp rate hikes.

Rate Advisory Organizations

Property/Casualty industry relies on stat agents and rating bureaus to assist with ratemaking.

Regulating rates is attempt to control what insurers charge

i.e. of conflicts regulation must balance 1)Rural Drivers with no loss experience don't want their rates the same has those drivers with greater losses. 2) Small business with higher losses and policy expenses want to pay same rates as larger businesses. Allowing them to have lower rates, the larger businesses rates would increase. This is main argument in state/federal health ins reform. 3)Workers comp, employers in high loss industries want pooled with employers with few claims which would increase rates for lower risk employers and decrease rates for higher risk employers.

Rate regulation - active and prescriptive for one insurance line and passive for others

i.e. one state has strict title insurance rates, relaxed rate review policy for workers comp and request insurers file information within a period of time for a new rate for other property liability insurance lines

Two part test

Determine insurers rates and regulation apply to McCarran Ferg 1) state insurer is doing business must have a clear law regarding coordinated pricing and marketing 2) state must supervise the conduct of insurers that it allows to coordinate their own business.

Experience rating

Ratemaking technique that adjusts the insured's premium for the next policy period based on insured's experience for the current period. Allows insurer to adjust rates for risks that are not average. In business insurance, experience rating is based on loss experience. Business risks involve more exposure units, this business rating is more reliable than rating for personal insurance risks. Personal insurance makes limited use of experience rating.

Controversial rules examples that some jurisdictions found illegal

1) This product is not available to circus performers or clergy 2) minimum value for homeowners policy is $100,000 3) Binders cannot be issued for auto applicants over 75 without medical exams.

Competitive Rating

1960s Regulators questioned effectiveness of rate reviews. Burden too high for state regulators to review rates to pay for consumer protection. Because regulatory review did not appear to change rates or loss ratios relative to competitive rates (rates through other insurers). Open competition became preferred approach to rate regulation. NAIC Property and Casualty Model Rating Las (File and Use) supported competition as a means to control excessive rates. In absence of competition, regulators seeked justification for insurer rate change requests. Some states embraced open competition while others were more tentative. One state-prior approval of property liability rates in absence of competition (commissioners prior approval necessary.)

Effects of rate regulation on insurers

Any insurer who does business in one or more states knows that rating law compliance is demanding.

Class systems restricted or banned by regulators

Auto - health condition - no restrictions if applicant holds drivers license - WI; Auto Territories - No Use of zip code (CA) - no territories smaller than a city (MI) - Chicago cannot be subdivided (IL); Auto - gender - Gender not to be used for rating purposes (MT); Health - Blindness - Cannot be used without actuarial justification (NAIC model); Homeowners - age of construction - Outlawed without clear reason (NAIC); All lines - race, religion, ethnicity - Absolute ban ( all in US)

Phila Contributionship

Ben Franklin organized 1752 - first fire insurer. Set rates using limited statistical data on losses. More fire insurers formed, competition started and problems resulted from lack of approach to ratemaking. Excessive competition leads to low rates, followed by many insurers, and then returned to higher rates. Decades occurred with boom and bust fire insurance cycles. Lack of stability and confidence led to government leaders to call for more coordination.

Emergence Rate Bureaus

Bureaus formed to protect coordinated rating with governmental imprimatur. Made to stabilize the insurance industry and promote solvency. Original functions: develop rates forms for regulatory filings. Rating bureaus organized by insurers enforced pricing consensus of specific lines of insurance - fire, crop-hail, surety, fidelity, title insurance. Rating bureaus were concerned with fire and allied lines (not marine, life, surety).

History Rate Regulation

Each market has experienced own market and regulatory development. Ocean Marine (oldest) has been unchanged. Gen/Prof Liability experienced turmoil - competition, rate bureaus, SEUA decision, competitive rating practices, regulatory supervision.

Statistical plan

Formal set of directions for recording and reporting losses and sometimes expenses to a statistical agent. NAIC and states defined statistical requirements for periodic reports. NAIC defined new statistic elements for auto and home by rating territory due to minorities.

Safe Harbors

Industry has safe harbors of immunity for certain conduct (ie collection of loss statistics and sharing statistical/actuarial data for ratemaking. concession to needs of smaller insurers who want to survive without some indication of losses)

Statistical agent range of services

Ins Svc Office (ISO) - auto, home fire and general liability, inland marine, e & O, boiler and machinery, farm crime; National Council on Compensation Insurance (NCCI) - workers comp; National Association of Independent Insurers (NAII) - auto and home; American Association of Insurance Services (AAIS) - Auto, home, Commercial; Surety & Fidelity Assoc of America - Surety Fidelity -- services include statistical agent, prospective loss filings, policy form filings, actuarial

NAIC Rating law Guidelines model (5)

Insurers utilizing services of advisory organization must provide their rate filing at the request of commissioner, description of rationale for use including its own info and method of utilization of the advisory organizations info.

State rate supervision

State must have program to review rates for compliance with public policy objectives. State rate supervision is important. Insurers have run afoul of federal and state antitrust laws for collaboration in anticompetitive activities in various aspects of rating. Federal courts has applied antitrust laws when state oversight has been minimal.

Indication

amount that loss experience suggests that insurer is to charge to cover costs. Often the actuarial memo for rate filing will state the company is not taking the indication because of competitive or market conditions implying insurer is charging less than its fully allocated costs for the class of policyholders. It implies insurer should charge other classes of customers for rate to recover more overall costs.

Regulatory scrutiny

differs per line of insurance. some have never been regulated and others have close government involvement.

Rate Rules appear

in agency and insurer manuals and not known to buying public. But Regulators may discover unfair discrimination rules in the course of rate reviews or market conduct exams and may even take disciplinary action against insured based on rules. Some lines property/liability have distinct rating methods. Surety bonds can use what appear to be subjective, judgmental methods for determining manual rates.

Rate Filing

must include new rate which should be set high enough to cover expected losses and expenses for particular exposure. Expenses include allowance for profit and contingencies. Filings should provide actuarial indication of both losses and expenses and narrative.

Actuary

person who uses math methods to analyze loss data and develop insurance rates. Specializes in calculating premiums, reserves, dividends and insurance rates. They agree on principles that govern rate setting.

Retrospective rating

ratemaking technique that adjust premium for current policy period based on insureds loss experience during current period. Paid or incurred losses may be used to determine loss experience. Previous loss experience is reviewed and after policy year ends, premium is adjusted based on loss experience. Some plans provide maximum cost and others guarantee premium will not exceed standard premiums applicable.

Ratemaking

setting of insurance prices or rates.

Effective ratemaking

vital to insurers financial stability. For recovery of operations and covered losses. Rates and underwriting practices are core in competition for markets. Insurers meet their corporate goals and counters competitors threats setting correct rates.

Statistical agents or advisory organizations

organization that collects and reports loss experience (differ from rate bureaus).

Rate bureaus

organization that prepares all parts of rate filings and submits them to regulators on behalf of members. Anti-trust concern - Bureaus have faced scrutiny for their rate setting practices. In 1990's ISO began to phase out practicing filing final rates. Agents and bureaus now provide statistical info to regulators.

NAIC Rating law Guidelines model (2)

2) Every insurer shall file or incorporate by reference to material which has been filed with an approved by the commissioner at the same time as the filing of the rate all supplementary rating and supporting info to be used in support or in conjunction with a rate. Information furnished in support of filing may include or consist of a reference to 1) experience or judgment of insurer or information filed by advisory organization on behalf of insurer. 2) its interpretation of any statistical data it relies on. 3( experience of other insurers or advisory organizations 4)any other relevant factors. A filing and supporting info will be open for public inspection upon receipt of filing.

Rate review process

Affects availability of insurance products and number of insurers willing to serve in a market. Insurers are reluctant to enter markets which lengthy review processes for rate and form filings. Insurers offering products in some states withhold products from another state which they are licensed because of burdensome filing requirements. Insurers may leave or decrease business in a state altogether. Insurers are likely to avoid smaller states with unduly stringent regulations. Regulators must balance availability and competition as well as protect consumers from unfair rates. Publicized problems may prompt federal scrutiny.

Experience Rating

Any rating that is too sensitive to loss experience can generate complaints from insureds whose rates have been increased because of losses. They may consider rate increase an unfair penalty because purpose of insurance is to protect insureds against adverse financial consequences of fortuitous events. Insurers may respond that experience rating promotes loss control and equity for insureds with different expected losses because insured risks with good loss experience are charged lower rates. Insureds with good loss experience object to being included with insureds with bad loss experience because it makes good risks rates higher and bad risks rates lower than they would be if grouped separately.

Rate Filings

Rate proposals insurers submit to regulators. Filings establish all data underlying rate proposals. Different styles are used to develop rates and propose them to regulators (i.e. simple memo declaring intentions to detailed justifications; Large Personal Lines insurers use ratemaking principles found in actuarial literature; some use unique methods; filings can contain excessive loss and expense data or lack numbers totally. Filings may use rate filing for competitive conditions not actuarial analysis to justify rate increase. (i.e. insurer does not rely on own experience but considers other rates from other insurers)

Schedule rating

Rating technique subject to regulation. Providing flexibility by adjusting loss/expense components of an insured risk's premium to reflect characteristics of the risk deemed to be not adequately reflected in either prior or current rates. This rating awards debits and credits based on specific categories (i.e. care and condition of the premises or training of selection of employees). Technique can be incorporated within approved experience rating plan. Insurers may elect to file own schedule rating plans subject to constraints directly with DOI.

National Liability Crisis

State regulators have failed to control rating excesses at both ends of the underwriting cycle. In soft market rates can be too high to cover losses. In a hard market, DOIs may allow insurers to raise rates sufficiently to compensate for previous years of inadequate pricing.

Southeastern Underwriters Association decision and aftermath

Supreme court held insurance was interstate commerce subject to federal regulation. Antitrust provisions of Sherman, Clayton Robinson Patman Acts applied to Insurance. Prohibited rating that associations were conducting unless rating was supervised by states. This decision caused insurers and regulators to lobby Congress to protect the system of state regulation. McCarran Ferguson did that shielding insurance industry from Federal Antitrust laws. States then regulated conduct of insurers.

Relativities

estimates of losses in one classification relative to losses in a base classification. Base class - generates large premium volume.

McCarran Ferguson

exempts insurers from pricing and marketing standards set for other businesses (by Sherman Act, Clayton Act, Federal Trade Commission Act - these acts prohibit pricing and marketing activities among competitive businesses.)

Variations of filings

exist. i.e. open competition might apply if insurer meets tests. Insurers that fail would be subject to prior approval or another regulatory review. Distinctions on filing approaches differ. Some require prior approval of rates of different types of insurance but exercise little scrutiny over rates. Others may challenge rate increases but take an active role in protecting assigned risk pool rates.

Loss costs

expected losses for insuring a given exposure. Insurers use loss cost information adding their own expense costs to set their own rates.

The Courts

have strictly enforced price setting standards in many industries. They define boundaries between Antitrust laws under McCarran and insurers activities still subject to antitrust law.

Classification systems detail

in theory, Classifications should be detailed so that each member of each class presents the same expected loss. This type of system would be ineffective because insurers cannot predict loss accurately and costs to administer the system would be astronomical. An economically efficient classification system balances actuarial and economic gains against the incremental cost of collecting and processing rate information. Regulators have restricted classes based on age, sex marital status and location.

Rate Rules or Rate Guidelines

include pages of rules that govern the application of rates to real world risks and conditions. They are procedures reflecting an insurer's underwriting approach to a line of insurance. Rate rules may create problems (i.e. discriminatory rules that limit who can be insured by profession or age or that place high minimum values on property policies.)

Rate regulation purpose

insurer financial stability with result of consumer protection. Primary concern of regulators is pricing. Premiums cost insureds. when they complain of fairness, equity or affordability policy makes look for remedies through regulation.

Insurers must

knowledge or rules, regulations, statutes, access to other state agencies and orgs, industrial accident board (workers Comp), rating bureaus, risk pools, taxing authorities. With large insurers, staff specialize by state, line of insurance, advertising. Some insurers have legal depts. that monitor environment with staff. Knowing DOIs unwritten law and culture is essential.

State regulatory approach

may change suddenly. Every state publishes nonemergency laws before their effective dates. most states issue notices informing insurers of imminent changes in law. Because of frequency of changes and multiple agencies to deal with, insurer can be out of compliance with 1+ state regulations.

Regulatory response

partly based on belief that certain classification systems do not reflect verifiable loss experience. insurers admit the classes and rates are based on guesswork. Even when actuarial data supports a class system regulators may oppose the system because it imposes a socially undesirable outcome.

Without insurance individuals and businesses are

restrictive in economic pursuits and suffer hardships from predictable or unpredictable losses. For this the Supreme Court applies the principle "State governments have created special regulatory powers to protect consumers from improper insurance rates"

States active review

review of every aspect of rate setting can protect insurers from possible antitrust actions. With this shift, insurers have changed their use of statistical agents and developed policy forms and information systems about marketing plans. Insurers may seek regulatory review of decisions to shield them from expensive suits by antitrust regulators.

Prior approval rate regulation

scrutiny to administer these laws can affect regulators admin costs greatly. Some states focus on select areas (i.e. allowable profit margin or return on investment) Social and political trends (i.e. territory rate differences inner city/suburbs/gender rate differences focus attention to problems.

CA Proposition 103 (1988)

sharply contrasts forms of rate regulation in state. Property/casualty rate regulation veered sharply from open competition toward government controls. Before law, CA regulatory philosophy relied heavily on open competition. Exception was workers comp - prior approval requirements applied. New Prop required prior approval of new rates also 20% rollback in existing rates. in 1989 CA began transition to open competition for regulating work comp rates and plans.

insurers collecting price data and setting prices

single insurers do not have sufficient data to project loss and set a reliable price for coverage. Aggregate industry loss data provides statistics for estimates of probability of loss faced by individual insurer. No guesswork. Because prices might not cover losses and costs, they would have to bill consumers extra costs and discontinue products. Insolvency may occur.

Rating Bureaus

statistic agents collect data. Perform actuarial analyses for future loss insight. Rate bureaus in the past developed rate manuals for producers. Now they are limited to: 1)loss development 2) loss trending.

Congress/NAIC/some states

wary of shielding insurance industry against federal antitrust laws. Support to change that would open conduct to more antitrust scrutiny. Large national insurers favor open competition to govern rate setting and abolition of special antitrust protection.

NAIC Rating law Guidelines model

1) Every insurer must file with commissioner (except inland marine which are not written according to manual rates or rating plans) every manual, minimum premium, class rate, rating schedule, rating plan other rating rules, every modification of any foregoing it proposes to use. An insurer may file rates by filing final rates or filing a multiplier and an expense constant adjustment to be applied to perspective loss costs that have been filed by an advisory organization on behalf of the insurer. Filing shall sate effective date and indicate character and extent of the coverage contemplated.

Methods to achieve goals in rate regulation are unique in that

1) Insurers set rates before they can determine costs. Cost of insurance can take years because of claims 2)State legislatures choose different rate regulatory environments for insurers to operate. Some states allow flexibility to set rates, others must meet requirements in order to sell products. 3) Industry has information sharing and joint product development tools that would raise antitrust issues if practiced by other industries.

Degrees of Regulation

1) Ocean Marine - very little - high individual risks, no stats to justify rates - knowledgeable buyers and sellers 2)Inland Marine - only pro forma filings - high risks, no stats - diverse coverage and classifications 3)Surety - rate manuals developed and filed - little regulation review - less statistical plan and ratemaking data - subjective risk evaluation - less credible experience 4) Title - similar to surety 5) General liability - general regulation except tight markets - sophisticated buyers 6) private passenger auto - review overall rates and details of rating plan - legally required or desirable to purchase - uninformed consumers - uniform stats - complex rates and class system 7) workers comp - close regulation including prior approval of rates and class system - legally required by most employers - costly widespread - complex rating and class sysem

Advisory Organizations other services

1) making filings to DOIs 2) developing policy forms 3) producing statistical reports that regulators require. NAIC has relied on advisory organizations to perform special studies for regulatory purposes. Statistical agents have performed study for NAIC to assess probable effect of various tort reform proposals. NAIC encourages statistical agents to work with industry to provide industry-wide state reports.

NCR and CR Studies

1) researchers are divided on whether NCR and CR states have lower loss ratios for any given line of insurance. 2) there is little evidence to suggest that excessive pricing occurs in the absence of an NCR law 3) stronger evidence suggests that NCR laws tend to narrow the range of prices at least for personal lines. Prior approval requirements can delay rate relief. Big delays provoke court challenges by insurers leading to longer delays in rate relief.

Insurance rate regulation uses

1)Prior approval - regulators approve rates and supporting rules before insurer can use them in the state. There is law if insurer has not heard from regulator within 30-90 days, it is approved. 2) File and Use - insurer must file rates and rules within 30-90 days. Regulators have minimal time to uncover violations of law. 3)Use and File - Insurer can use any rate it wants. Insurer must file rate within 30-60 days after implementation. Regulators then have time to review the rate or request a hearing to disapprove. 4) No-File (open competition) - insurers can develop and use rates without having approval or file with file regulators. Open competition is the regulatory practice in handful of states and limited lines of insurance. 5) State Mandated rates - Some states set rates insurers use. If insurers do not use, they cannot do business. 6)Flex Rating - state law requiring prior approval only if the new rates exceed a certain percentage above (or maybe below) the rates previously filed.

NAIC Rating law Guidelines model (4)

After review, commissioner may require the insurers rates be based upon insurers own loss, special assessment and expense info. If the insurers loss or loss adjustment expense info is not actually credible, as determined by commissioner, insurer may use its experience with info filed with commissioner by an advisory organization.

Investment Return

Regulators reject fixed percentage of premium to determine profit. they use models to ensure insurer earns an adequate, not excessive profit or return on investment (ROI). These models consider losses and admin expenses but also determine rate of return on equity in a rate proposal. Insurers and regulators agree on return investment being high enough to maintain insurer's financial strength in the long run but disagree on level of profit. Regulators apply models responding to consumer complaints about rates. Investment models compare an insurers return on equity with that of similar industries risks. If insurer applies models correctly gets neither more nor less return than necessary to keep adequate insurance capacity in market. Catastrophic losses could exceed entire net worth of insurers writing in a state. Insurers must carry extra surplus or reinsurance to charge enough to pay for these things.

Classification Systems

Systems developed for rating purposes to group similar loss exposures into homogeneous classes to avoid adverse selection.They are part of the mechanics of ratemaking because they help group similar loss exposures into homogeneous classes. By charging member of a group of insureds their share of the group's expected losses and administrative expenses, classification avoids subsidization of one class by another. Matching rates to expected losses gives group members incentive to invest in loss control and safety.

NAIC Rating law Guidelines model (3)

When filing is not accompanied by info which the insurer supports such filing, commissioner may require such insurer to furnish the info upon which it supports such filing and in that event the waiting period shall commence as of the date such info is furnished. Until requested info is provided the filing shall not be complete or filed nor available for use by insurer. If requested info is not provided in reasonable time, the filing may be returned to insurer as not filed or available for use.

Actuarial and regulatory principles

demand that data support the indicated rate. Rate filings include: 1)One+ years of loss data for the state and if state data is too minimal to be statistically credible regional or countrywide data. 2) Incurred losses for each experience year developed to ultimate costs when all claims for that year have been closed 3) Projection of loss patterns over historic experience years into the policy year rated 4)Historic accounting of costs and expectations for future changes in the insurer's expenses for issuing and administering the policy and paying claims.

SEUA and rating bureaus

in 1940 had 200 insurers (90%) of fire/allied sold by stock insurers in 6 states. Assoc set premiums and commissions and enforced terms with member and non member insurers. If not SEUA member had no opportunity to reinsure their business and criticized if they rebelled against pricing. Regulators approved these tactics with goal of improving financial and rate stability. Potential for higher insurance prices lesser threat than insolvent insurers and unstable prices. Insurer failure numbers decreased with bureaus being formed but decline came as rating orgs coordinated pricing to create monopolies. Insurers in associations similar to SEUA policed each other's agreed upon prices. insurers wanted to increase profits by selling more at higher prices.Because prices set by monopolies were above members production costs, insurers had incentive to discount prices below agreed upon industry prices to attract more market share. Undercut association prices led to coercive tactics by insurers who enlisted regulators support for cartel price enforcement.