IDEAS home Printed from https://ideas.repec.org/a/bpj/apjrin/v4y2010i2n1.html
   My bibliography  Save this article

A Reexamination of the Relationship between Organizational Forms and Distribution Channels in the U.S. Property Liability Insurance Industry

Author

Listed:
  • Chang Vincent Y.

    (Chaoyang University of Technology)

  • Wang Jennifer L.

    (National Cheng-Chi University)

  • Tzeng Larry Y.

    (National Taiwan University)

Abstract

How do property liability insurance companies choose their organizational forms and distribution channels? Prior studies have not yet provided a consistent conclusion. In this paper, we propose a reduced form approach to reexamine the relationship between organizational forms and distribution channels in the insurance industry, using cross-sectional data pertaining to U.S. property liability insurance companies in 2004. We adopt a conditional dependence test, which can overcome the sensitivity problem of the structural form setting. The results show that after we control for all explanatory variables, the relationship between organizational forms and distribution channels is conditionally uncorrelated. The result is consistent with Regan and Tzeng (1999), but contradicts the findings of Baranoff and Sager (2003) and Kim et al. (1996).

Suggested Citation

  • Chang Vincent Y. & Wang Jennifer L. & Tzeng Larry Y., 2010. "A Reexamination of the Relationship between Organizational Forms and Distribution Channels in the U.S. Property Liability Insurance Industry," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 4(2), pages 1-26, July.
    • Handle: RePEc:bpj:apjrin:v:4:y:2010:i:2:n:1
    DOI: 10.2202/2153-3792.1074
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/2153-3792.1074
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/2153-3792.1074?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Brockett, Patrick L. & Cooper, William W. & Golden, Linda L. & Rousseau, John J. & Wang, Yuying, 2004. "Evaluating solvency versus efficiency performance and different forms of organization and marketing in US property--liability insurance companies," European Journal of Operational Research, Elsevier, vol. 154(2), pages 492-514, April.
    2. Ari Hyytinen & Mika Pajarinen, 2005. "External Finance, Firm Growth and the Benefits of Information Disclosure: Evidence from Finland," European Journal of Law and Economics, Springer, vol. 19(1), pages 69-93, January.
    3. Patrick L. Brockett & William W. Cooper & Linda L. Golden & John J. Rousseau & Yuying Wang, 2005. "Financial Intermediary Versus Production Approach to Efficiency of Marketing Distribution Systems and Organizational Structure of Insurance Companies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 393-412, September.
    4. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
    5. Berger, Allen N & Cummins, J David & Weiss, Mary A, 1997. "The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance," The Journal of Business, University of Chicago Press, vol. 70(4), pages 515-546, October.
    6. Lucinda Trigo-Gamarra, 2008. "Reasons for the Coexistence of Different Distribution Channels: An Empirical Test for the German Insurance Market," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(3), pages 389-407, July.
    7. J. David Cummins & Jack VanDerhei, 1979. "A Note on the Relative Efficiency of Property-Liability Insurance Distribution Systems," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 709-719, Autumn.
    8. Seog S. Hun, 2005. "Distribution Systems and Operating Leverage," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 1(1), pages 1-18, June.
    9. Laureen Regan, 1999. "Expense Ratios Across Insurance Distribution Systems: An Analysis By Line Of Business," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 2(2), pages 44-59, January.
    10. Mayers, David & Smith, Clifford W, Jr, 1990. "On the Corporate Demand for Insurance: Evidence from the Reinsurance Market," The Journal of Business, University of Chicago Press, vol. 63(1), pages 19-40, January.
    11. Regan, Laureen & Tennyson, Sharon, 1996. "Agent Discretion and the Choice of Insurance Marketing System," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 637-666, October.
    12. Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
    13. Mayers, David & Smith, Clifford W, Jr, 1981. "Contractual Provisions, Organizational Structure, and Conflict Control in Insurance Markets," The Journal of Business, University of Chicago Press, vol. 54(3), pages 407-434, July.
    14. YiLin Wu & Lee Cheng-Few, 2008. "Specification analysis of corporate equity financing decision: a conditional residual approach," Review of Quantitative Finance and Accounting, Springer, vol. 31(4), pages 395-423, November.
    15. Sass, Tim R & Gisser, Micha, 1989. "Agency Cost, Firm Size, and Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 381-400, October.
    16. Etti Baranoff & Thomas Sager, 2003. "The Relations among Organizational and Distribution Forms and Capital and Asset Risk Structures in the Life Insurance Industry," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 375-400, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    2. Martina Eckardt & Solvig Räthke‐Döppner, 2010. "The Quality of Insurance Intermediary Services—Empirical Evidence for Germany," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(3), pages 667-701, September.
    3. Venezia, Itzhak & Galai, Dan & Shapira, Zur, 1999. "Exclusive vs. independent agents: a separating equilibrium approach," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 443-456, December.
    4. Vincent Y. Chang, 2019. "Does reinsurance purchasing enhance insurers’ competitiveness? Evidence from the U.S. property–liability insurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(4), pages 595-623, October.
    5. Tsai-Jyh Chen, 0. "The role of distribution channels in market discipline for the life insurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 0, pages 1-23.
    6. Trigo Gamarra, Lucinda, 2007. "Single- versus multi-channel distribution strategies in the German life insurance market: A cost and profit efficiency analysis," Thuenen-Series of Applied Economic Theory 81, University of Rostock, Institute of Economics.
    7. Tsai-Jyh Chen, 2021. "The role of distribution channels in market discipline for the life insurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(1), pages 107-129, January.
    8. Udo Klotzki & Nadine Gatzert & Bjoern Muenstermann, 2017. "The Cost of Life Distribution in Europe," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(2), pages 296-322, April.
    9. Dionne, Georges & Gagné, Robert & Nouira, Abdelhakim, 2007. "Determinants of insurers’ performance in risk pooling, risk management, and financial intermediation activities," Working Papers 07-4, HEC Montreal, Canada Research Chair in Risk Management.
    10. Saowaros Yaisawarng & Preecha Asavadachanukorn & Suthathip Yaisawarng, 2014. "Efficiency and productivity in the Thai non-life insurance industry," Journal of Productivity Analysis, Springer, vol. 41(2), pages 291-306, April.
    11. Leverty, J. Tyler & Grace, Martin F., 2010. "The robustness of output measures in property-liability insurance efficiency studies," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1510-1524, July.
    12. Annette Hofmann & Julia K. Neumann & David Pooser, 2018. "Plea for Uniform Regulation and Challenges of Implementing the New Insurance Distribution Directive," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(4), pages 740-769, October.
    13. Laureen Regan, 1999. "Expense Ratios Across Insurance Distribution Systems: An Analysis By Line Of Business," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 2(2), pages 44-59, January.
    14. Berger, Allen N & Cummins, J David & Weiss, Mary A, 1997. "The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance," The Journal of Business, University of Chicago Press, vol. 70(4), pages 515-546, October.
    15. Trigo Gamarra, Lucinda, 2007. "Does the product quality hypothesis hold true? Service quality differences between independent and exclusive insurance agents," Thuenen-Series of Applied Economic Theory 76, University of Rostock, Institute of Economics.
    16. Posey, Lisa L. & Tennyson, Sharon, 1998. "The coexistence of distribution systems under price search: Theory and some evidence from insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 95-115, March.
    17. Yu‐Luen Ma & Nat Pope & Xiaoying Xie, 2014. "Contingent Commissions, Insurance Intermediaries, and Insurer Performance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 17(1), pages 61-81, March.
    18. Hecht, Jason, 1999. "Modeling market shares of the leading personal automobile insurance companies," Journal of Economics and Business, Elsevier, vol. 51(3), pages 279-296, May.
    19. B. Elango & Yu‐Luen Ma & Nat Pope, 2008. "An Investigation Into the Diversification–Performance Relationship in the U.S. Property–Liability Insurance Industry," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 567-591, September.
    20. Martin Eling & Ruo Jia & Yi Yao, 2017. "Between-Group Adverse Selection: Evidence From Group Critical Illness Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(2), pages 771-809, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:apjrin:v:4:y:2010:i:2:n:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.