You need a capital base in proportion to the policies you sell in order to pay them out without going bust, to a certain confidence level. The time sequence of premium payments vs when the risk is expected to come due for a payout is factored in.

The 50 states regulate insurance in the US and issue rules about how to do this, some of which affect competition and pricing in heavy handed ways, sometimes it's overtly political.

In general though insurance is an extremely competitive field. Margins for the most part are similar or lower than other industries.

Not sure where the popular impression that it is not competitive comes from. If anything I think the sword cuts both ways, the friction in the process is probably more a symptom of competitiveness more than its absence.

> Not sure where the popular impression that it is not competitive comes from

The fact that it goes up 20-30% every year (no claims, obviously), that I cannot raise my deductibles to significantly lower my premiums, the whole skin-job of "agents" that provide an illusion of choices to confuse the market, and that they've bought a friendly regulatory regime that lets them price discriminate by capping coverage maximums when the whole point of insurance is to cover long-tail risks. Never mind that their chief "innovation" over the past few years has been pushing surveillance devices that track your driving, finding reasons to cancel policies, and whatnot.

I've also bumped into a few different people who shut down their small businesses over untenable commercial rates. The whole industry is a massive drag on our economy. I've no doubt that the accountants/actuaries find places for the money to go that isn't just executives' pockets, but that's of little consolation.