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The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance

Allen Berger (), John Cummins () and Mary Weiss

The Journal of Business, 1997, vol. 70, issue 4, 515-46

Abstract: Property-liability insurance is distributed through a direct-writer system, where agents represent one insurer, and an independent-agency system, where agents represent several insurers. Independent-agency insurers have higher costs than direct writers. The market-imperfections hypothesis attributes the coexistence of the two types of insurers to impediments to competition, while the product-quality hypothesis holds that independent-agency insurers provide higher-quality services. The authors measure cost efficiency and profit efficiency for property-liability insurers and find strong support for the product-quality hypothesis, implying that independent-agency insurers produce higher-quality outputs and are compensated by higher revenues. Copyright 1997 by University of Chicago Press.

Date: 1997
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Related works:
Working Paper: The coexistence of multiple distribution systems for financial services: the case of property-liability insurance (1995)
Working Paper: The Coexistence of Multiple Distributions Systems for Financial Services: The Case of Property-Liability Insurance (1995) Downloads
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