Reference no: EM132913109

1) An insurance company with a dominant share of the market may also have a strong influence on market price. But, as more competition is introduced price is driven down to normal profit, provided the products are similar and consumers have freedom of information about their choices. Although it is not as simple as comparing the price of a can of baked beans in different shops.

Discuss the most important factors that may prevent new companies from being set up.

2) In view of the strong competition in the market an insurance company must be capable to predict performance accurately and price competitively, which may involve smaller profit margins than on other business. The underwriter's task is made more difficult because past performance may be a very poor guide to the future.

Discuss the internal and external challenges underwriters may face in this process.