How Deregulation Shapes Market Structure and Industry Efficiency: The Case of the Italian Motor Insurance Industry

The This paper provides new empirical evidence on the effects of deregulation in financial services markets by analysing the Italian Automobile Insurance Industry. It gives a contribution to the debate, at governmental and European level, on market liberalization, by using a large and detailed database on the whole Italian insurance sector over the period 1982-2000. The data available span the introduction of the European Union’s Third Generation Directives aimed at deregulating the EU insurance market and offer the opportunity to test several effects of government measures on market structure and efficiency along with their dynamics over time. Until 1994 the Italian insurance market had been highly regulated. Since 1994, insurance firms operating in the motor vehicle business have been free to calculate their tariffs and to formulate their contracts. We analyse the period 1982-2000 and we provide evidence on the dynamics of Italian insurers, the rate of growth of insurance activity and the efficiency of a sample of Italian insurers active in the auto liability line.