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The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property‐Liability Insurance*
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Abstract(back to top)
Property‐liability insurance is distributed through a direct‐writer system, where agents represent one insurer, and an independent‐agency system, where agents represent several insurers. Independent‐agency insurers have higher costs than direct writers. The market‐imperfections hypothesis attributes the coexistence of the two types of insurers to impediments to competition, while the product‐quality hypothesis holds that independent‐agency insurers provide higher‐quality services. We measure cost efficiency and profit efficiency for property‐liability insurers and find strong support for the product‐quality hypothesis, implying that independent‐agency insurers produce higher‐quality outputs and are compensated by higher revenues.
Bibliographic Information(back to top)
- The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property‐Liability Insurance
- Allen N. Berger, J. David Cummins and Mary A. Weiss
- The Journal of Business
- Vol. 70, No. 4 (October 1997) (pp. 515-546)
Notes and References(back to top)
This item contains 1 note(s).
Notes
* The opinions expressed do not necessarily reflect those of the Board of Governors or its staff. The authors thank the anonymous referee, the editor (Doug Diamond), Dwight Jaffee, and the participants in the National Bureau of Economic Research Property‐Liability Insurance Seminar for helpful comments. The authors acknowledge the capable research assistance of Jalal Akhavein and Joe Scalise.
Items Citing this Item (back to top)
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