Consumer utility and fair profit margins in insurance

Observed competitive market profit margins in property and casualty insurance have typically been higher than the capital assets pricing model adjustment for risky loss cashflows would suggest. Explanations for this difference include frictions from operating an insurance business and capital risks that are not adequately recognised and rewarded by the theory. It is proposed that the difference may instead be related to the consumption of insurance services and claim fulfilment with an additional fair profit margin evaluated using marginal utility pricing principles.