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.