EconPapers    
Economics at your fingertips  
 

Paying for expertise: The effect of experience on insurance demand

Vaibhav Anand, James Tyler Leverty and Kenny Wunder

Journal of Risk & Insurance, 2021, vol. 88, issue 3, 727-756

Abstract: This paper investigates whether corporations purchase insurance for the real services that insurers provide. We examine the real‐service efficiency hypothesis in the insurance industry by exploiting within firm‐year variation in reinsurance usage and experience at the line of business level. Our results show that insurers purchase reinsurance to access reinsurers’ expertise and specialized knowledge. We find that, within the same year, the average multi‐line insurer purchases 2.4%–3.3% points more reinsurance for new lines relative to existing lines. The demand for reinsurance declines by 0.55%–0.80% points with each additional year of experience. The size of these effects differs by the line of business, indicating that the development of internal expertise and specialized knowledge varies by line.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/jori.12331

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:88:y:2021:i:3:p:727-756

Ordering information: This journal article can be ordered from
http://www.wiley.com/bw/subs.asp?ref=0022-4367

Access Statistics for this article

Journal of Risk & Insurance is currently edited by Joan T. Schmit

More articles in Journal of Risk & Insurance from The American Risk and Insurance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2022-02-19
Handle: RePEc:bla:jrinsu:v:88:y:2021:i:3:p:727-756