Compensation and Industry Profitability: Evidence from the Property-Casualty Insurance Industry
Posted: 10 Aug 1998
This article provides an empirical investigation of a multiple principal -- multiple agent relationship under changing industry conditions. Using 34 years of biannual data, it investigates the relationship between property-casualty insurers and agents representing multiple insurers. Several facts emerge. Average commission rates and the number of insurers represented are lower when insurers have higher profitability. Agency income is not systematically related to insurer profitability. Competition from alternative distribution systems and technological innovation have reduced commission rates. Larger agencies have lower average commission rates. These facts are interpreted in light of industry history and economic theory and suggest areas for further research.
JEL Classification: G22
Suggested Citation: Suggested Citation