Multidimensional Barriers to Entry in the Insurance Industry

Du Sabrina () and Ellis Cameron M. ()
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Du Sabrina: 2833 The Donald J. Schneider School of Business and Economics, Saint Norbert College , De Pere, USA
Ellis Cameron M.: Tippie College of Business, University of Iowa, Iowa City, USA

Asia-Pacific Journal of Risk and Insurance, 2024, vol. 18, issue 1, 21-53

Abstract: In this paper, we introduce and employ a multi-agent model of entry to analyze barriers to entry in the U.S. property casualty insurance industry. Our estimations are conducted at the market-year level, enabling a detailed exploration of the relative importance of barriers across three dimensions: geography, product, and time. Our findings reveal that entry barriers are both prevalent and significant in the U.S. property casualty insurance industry, with de novo entrants encountering the most challenges from product barriers across all markets. We observe that expanding across product lines is more costly than expanding across states. Particularly, New York and California exhibit the strongest state barriers. Among various product lines, our research identifies that insurance expertise in mortgage guaranty and medical professional liability insurance presents the most substantial barriers to entry. This study contributes valuable insights into the dynamics of entry barriers in the U.S. property casualty insurance industry, highlighting the importance of considering geographic and product-specific knowledge, as well as temporal factors, in the context of market entry. Through analyses across these dimensions, we enhance the understanding of the challenges faced by new entrants and shed light on the specific market conditions shaping entry barriers.

Keywords: market entry; barriers to entry; entry costs; P&C insurance (search for similar items in EconPapers)
JEL-codes: G22 L10 L13 L22 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/apjri-2023-0026

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