An Examination of the Relative Efficiency of Fraternal Insurers

Lih Ru Chen and Michael J. McNamara

Journal of Insurance Issues, 2014, vol. 37, issue 1, 1-31

Abstract: We examine the efficiency of fraternal insurers as compared to mutual and stock insurers in the U.S. life insurance industry. We test the hypothesis of equal efficiency across fraternal, mutual, and stock insurers. We find that mutual and stock insurer technology is dominant for producing the fraternal outputs. Additionally, stock insurers have higher profitability than fraternals. Given the characteristics of the organizational structure, fraternal policyowners may be willing to accept this lower level of efficiency because of attenuated incentives to monitor. Although fraternals are less efficient, policyowner affiliation helps to keep fraternals in business.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:wri:journl:v:37:y:2014:i:1:p:1-31

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