Agency Theory and Life Insurer Ownership Structure

Journal of Risk and Insurance, Vol. 64 No. 3, September 1997

Posted: 18 Mar 1998

See all articles by Steven W. Pottier

Steven W. Pottier

University of Georgia - Department of Insurance, Legal Studies, Real Estate

David W. Sommer

St. Mary's University; University of Georgia - Department of Insurance, Legal Studies, Real Estate

Abstract

This article uses the insights of agency theory to analyze ownership structures in the life-health insurance industry. We examine operational, financial, and institutional determinants of ownership structure. We simultaneously test hypotheses regarding the owner-manager incentive conflict and the owner-policyholder incentive conflict. Our results demonstrate systematic differences between the activity choices of stock life insurers and mutual life insurers, consistent with the managerial discretion hypothesis. We also find that mutuals are more likely to be licensed in New York, stock firms are more likely to be organized as groups, mutuals are more likely to have high A. M. Best ratings, and older insurers are more likely to be mutuals.

JEL Classification: G22

Suggested Citation

Pottier, Steven W. and Sommer, David W., Agency Theory and Life Insurer Ownership Structure. Journal of Risk and Insurance, Vol. 64 No. 3, September 1997. Available at SSRN: https://ssrn.com/abstract=52532

Steven W. Pottier

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
706-542-3786 (Phone)
706-542-4295 (Fax)

HOME PAGE: http://www.terry.uga.edu/insurance/pottier.html

David W. Sommer (Contact Author)

St. Mary's University ( email )

1 Camino Santa Maria
San Antonio, TX 78023
United States
210-431-8055 (Phone)

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
706-542-5160 (Phone)
706-542-4295 (Fax)

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