Organizational Form and Insurance Company Performance: Stocks Versus Mutuals
Florida State University - College of Business; Florida State University - College of Law; California State University, Northridge - Department of Finance, Real Estate, & Insurance
William M. Gentry
Williams College - Department of Economics
W. Kip Viscusi
Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics
Richard J. Zeckhauser
Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)
NBER Working Paper No. w5246
One unusual feature of the U.S. property-casualty insurance industry is the coexistence of stock and mutual companies. This paper explores the performance of these forms in the industry through a dynamic assessment of how mutual and stock insurance companies respond to differences in their underwriting environment. Agency theories suggest that the stock company may be more 'opportunistic' and less obligated to their insureds than mutuals. This article assesses the responses by stock and mutual firms to changes in the underwriting environment from 1984 to 1991, using measures of individual firms' performance, by state and by line, in eight different lines of insurance. Stock companies are more likely than mutuals to reduce their business in unprofitable situations, and have higher losses than mutuals for a given amount of premiums.
Number of Pages in PDF File: 54
Date posted: July 19, 2000
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