Media attention, insurance regulation, and liability insurance pricing

The goal of this article is to test whether the threat of regulating (or of more stringent regulation of) automobile liability insurance as portrayed in the popular and industry press induces insurers to change the way they price their policies. More to the point, using quarterly state data from 1984 to 1993, the author attempts to determine whether insurance companies reduced premium increases to avoid regulation, a test the article will call the Regulatory Threat Hypothesis. The results suggest that automobile liability insurance premiums increased at a slower pace (or decrease) in the presence of a regulatory threat.