On the Choice of Insurance Distribution Systems

J. OF RISK AND INSURANCE, Vol. 63 No. 2, June 1996

Posted: 19 May 1998

See all articles by Won Joong Kim

Won Joong Kim

Sungkyunkwan University

Clifford W. Smith

Simon Graduate School of Business, University of Rochester

David Mayers

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Abstract

This article examines 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 complements. 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-liabi lity insurers.

JEL Classification: G32, G22

Suggested Citation

Kim, Won Joong and Smith, Clifford W. and Mayers, David, On the Choice of Insurance Distribution Systems. J. OF RISK AND INSURANCE, Vol. 63 No. 2, June 1996. Available at SSRN: https://ssrn.com/abstract=7558

Won Joong Kim

Sungkyunkwan University

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

Clifford W. Smith

Simon Graduate School of Business, University of Rochester ( email )

Carol Simon Hall 3-202C
Rochester, NY 14627
United States
585-275-3217 (Phone)
585-442-6323 (Fax)

David Mayers (Contact Author)

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States
909-787-3443 (Phone)
909-787-2933 (Fax)

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