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On the Choice of Insurance Distribution Systems

Author

Listed:
  • Joong, K.W.
  • mayers, D.
  • Smith, C.V.

Abstract

We examine insurers' choice between independent and exclusive agents. We assume that alternative distribution systems are efficient mechanisms for controlling contracting problems among policyholders, insurers, and agents. Because the use of independent agents helps control potential expropriative behavior by the insurer, the independent agency system should be more valuable for ownership structures where such problems are more severe. Thus, ownership structures and distribution systems are strategic compliments. We test this theory by analyzing the association between distribution-system choice and the firm's ownership structure, lines of insurance, advertising policy, size, geographic concentration, and cost structure among property-casualty insurers.

Suggested Citation

  • Joong, K.W. & mayers, D. & Smith, C.V., 1996. "On the Choice of Insurance Distribution Systems," The A. Gary Anderson Graduate School of Management 96-15, The A. Gary Anderson Graduate School of Management. University of California Riverside.
    • Handle: RePEc:fth:caland:96-15
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    Citations

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    Cited by:

    1. 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.
    2. Thomas R. Berry-Stölzle & David L. Eckles, 2019. "It’s about building a book of business: incentives of insurance salespersons from future renewals," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(4), pages 702-731, October.
    3. Lee, Soon-Jae & Mayers, David & Smith Jr., Clifford W., 1997. "Guaranty funds and risk-taking Evidence from the insurance industry," Journal of Financial Economics, Elsevier, vol. 44(1), pages 3-24, April.
    4. Michael Sonnenholzner & Achim Wambach, 2009. "On the Role of Patience in an Insurance Market With Asymmetric Information," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(2), pages 323-341, June.
    5. Parente, Ronaldo & Choi, Byeongyong Paul & Slangen, Arjen H.L. & Ketkar, Sonia, 2010. "Distribution system choice in a service industry: An analysis of international insurance firms operating in the United States," Journal of International Management, Elsevier, vol. 16(3), pages 275-287, September.
    6. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    7. 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.
    8. Lucia Spotorno & Ornella Moro, 2020. "Do bank-affiliated P&C insurers perform better? An empirical investigation," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(2), pages 225-255, April.
    9. Ramesh Darbha & Abhilash Ponnam & Rik Paul & S. Sreejesh, 2022. "Discerning the antecedents determining empowerment of life insurance agents: an empirical examination," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(4), pages 279-290, December.
    10. 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.
    11. Patricia Born & M. Martin Boyer, 2011. "Claims‐Made and Reported Policies and Insurer Profitability in Medical Malpractice," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 78(1), pages 139-162, March.
    12. 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.
    13. 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.
    14. Damian Ward & Igor Filatotchev, 2010. "Principal-principal-agency relationships and the role of external governance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 249-261.
    15. Strauss, Jason, 2007. "Price Regulation, Market Exit, and Financial Leverage of Canadian Property-Liability Insurers," MPRA Paper 11212, University Library of Munich, Germany, revised 28 Oct 2008.
    16. Pang-Ru Chang & Jin-Lung Peng & Chiang Ku Fan, 2011. "A Comparison of Bancassurance and Traditional Insurer Sales Channels," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 36(1), pages 76-93, January.
    17. Dionne, Georges & Desjardins, Denise, 2017. "Reinsurance Demand and Liquidity Creation," Working Papers 17-3, HEC Montreal, Canada Research Chair in Risk Management.
    18. Collins, Julie H. & Geisler, Greg G. & Shackelford, Douglas A., 1997. "The effects of taxes, regulation, earnings, and organizational form on life insurers' investment portfolio realizations," Journal of Accounting and Economics, Elsevier, vol. 24(3), pages 337-361, December.
    19. Sass, Tim R., 2005. "The competitive effects of exclusive dealing: Evidence from the U.S. beer industry," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 203-225, April.
    20. L. Lee Colquitt & David W. Sommer, 2003. "An Exploratory Analysis of Insurer Groups," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 6(2), pages 83-96, September.

    More about this item

    Keywords

    INSURANCE ; CONTRACTS;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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