Competition is dandy

There’s nothing like competition for the consumer. I found that out recently when I had to have a window of my car replaced after it was broken into while parked near Baltimore’s (railroad) Penn Station. (Although I had a small amount of money in coins, a flashlight, and a few other things in plain sight in the car that might have been attractive to a thief, all he/she took was a handicap hanger, obtained a few years ago by my wife because of her arthritis. Apparently these hangers can be sold to inner-city residents who have a very limited number of places to park near their homes.)

Because I have a $500 deductible on my auto insurance policy, I knew I would have to pay for the replacement myself. However, I thought it would be a good idea to call the insurance company to get a referral to a repair shop that the company knew. I was given the name of one company that, I was told, the insurer knew well and would probably give me a good price if I told them that I had that insurer for my auto policy.

Ah yes, for me the price for replacement would be $175; two or three other companies that I called quoted $165 to $180. But another one quoted $155, so I took the car there and the job was done in an hour, as I waited, (the others said 1 ½ hours) in a thoroughly professional job (with all the small bits of glass from the break-in removed).

Anyone who has "Angie’s List" in his geographic area in the USA should take advantage of it. It is a website on which one can seek info about all kinds of service providers (good and bad); one can also post info from his own experience (good or bad) with any of these providers on the website–I intend to add a positive one about the company that did the work on my car.

Another case of the benefit of competition in the Baltimore area is the advent in April 2006 of the new newspaper The Baltimore Examiner. It is owned by a Denver publishing company which has similar papers in San Francisco and Washington, D.C.; it is a tabloid published Monday through Saturday and delivered free-of-charge to homes in certain sections of the Baltimore area.

When I first heard of the paper’s planned inception, I assumed that it would be like many small tabloids that specialize in local stuff–and are good at what they do–but have limited appeal to a reader. Not so with the Examiner: it gives the Baltimore Sun (the only daily newspaper in the Baltimore area for many years prior to this interloper) a run for its money. (One advertising industry trade publication, Adrants, commented the paper "is so much better than your average newspaper.")

I have seen several news items and commentary in the Examiner that the Sun either missed altogether or trailed the Examiner in reporting. One such incident was the arrest of a young (white) couple from Virginia who got lost trying to find their way out of Baltimore after attending an Orioles game–they inadvertently drove their car into a high crime area of the city and then stopped to ask a Baltimore police officer for directions. Instead of being helpful, the officer arrested them and their car was impounded. The Sun missed the original incident altogether and, a day or so later, came out with a follow-up.

I also remember an example of the benefit of competition some twenty years ago, when I was working as a financial analyst in the assessment of the financial strength of insurance companies. Up until about 1986, A.M. Best, a company headquartered in New Jersey, was the only game in town for the rating of insurance companies; it had been around since the 1890's. It published its manuals around July of each year–the manuals contained info and ratings for just about every insurance company in the USA, using a rating system ranging (at the time) from "A+" for the best on down. It rarely revised its ratings during the interim between one July and the next, so people in the insurance industry awaited the new ratings anxiously. Much of the info on a company was basic stuff about its operations, with data from the company’s financial statements provided, but very little explanation was provided as to the reason for its rating. I recall asking a Best executive in a phone conversation about the rationale for the rating of a particular insurance company and was told, "We don’t gild the lily; what you see is what you get."

But all of that changed when Standard & Poor’s and Moody’s in the mid-1980's got into the game of rating insurance companies. Those two companies had been around for many years as recognized providers of credit ratings for all kinds of companies, but the ratings of insurance companies which they began to publish–and which Best had done for years–were claims-paying ability ratings–that is, the assessment of their solvency, something different from a credit rating.

This competition from the old-line S&P and Moody’s (and two other lesser-known rivals that cropped up about the same time) put Best’s feet to the fire. They began to publish rating changes at any time (along with the rationale for the ratings) in their periodical news bulletins; furthermore, one could phone Best and discuss with one of their analysts their ratings for individual insurance companies.

Certainly, there can be exceptions where competition can be harmful. It is debatable as to whether deregulation of the airline industry during the Carter presidency in the 1970's, driving many airlines into bankruptcy from the cut-throat competition, has been beneficial or disadvantageous to the flying public. Likewise, deregulation of the electric utility industry may turn out to have been not in the best interest of consumers. But these cases involved a swing, over a short period of time, from heavily-regulated industies to sudden deregulation.

Yes indeed, whether it comes from Adam Smith’s "invisible hand" or from some other human striving, competition is usually just dandy.