Organizational Form and Insurance Company Performance: Stocks versus Mutuals

Patricia Born, William Gentry, W Viscusi and Richard Zeckhauser

No 5246, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: One unusual feature of the U.S. property-casualty insurance industry is the coexistence of stock and mutual companies. This paper explores the performance of these forms in the industry through a dynamic assessment of how mutual and stock insurance companies respond to differences in their underwriting environment. Agency theories suggest that the stock company may be more 'opportunistic' and less obligated to their insureds than mutuals. This article assesses the responses by stock and mutual firms to changes in the underwriting environment from 1984 to 1991, using measures of individual firms' performance, by state and by line, in eight different lines of insurance. Stock companies are more likely than mutuals to reduce their business in unprofitable situations, and have higher losses than mutuals for a given amount of premiums.

Date: 1995-09
Note: CF IO
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Published as Born, Patricia; William M. Gentry, W. Kip Viscusi, Richard J. Zeckhauser."Organizational Form and Insurance Company Performance: Stocks versus Mutuals". The Economics of Property-Casualty Insurance. Edited by David F. Bradford, Chicago: The University of Chicago Press, 1998,pp. 167-192
Published as Organizational Form and Insurance Company Performance: Stocks versus Mutuals , Patricia Born, William M. Gentry, W. Kip Viscusi, Richard J. Zeckhauser. in The Economics of Property-Casualty Insurance , Bradford. 1998

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