TITLE
"The Distribution of Property/Liability Insurance in Canada:
Costs and Market Structure," Journal
of Insurance Issues, Mary Kelly and Anne Kleffner,
Spring 2006, Vol. 29, No. 1, pp. 51-70. Full-text articles soon
will be available through ABI/INFORM and EBSCO; click
here for article PDF.
ABSTRACT
Studies in the U.S. show that insurers that operate as exclusive
writers have
lower expense ratios than agency writers. In addition, exclusive
and commodity
writers dominate personal lines of insurance and agency writers
dominate commercial
lines. In contrast, Canadian agency writers dominate both personal
and commercial
lines. Furthermore, in Canada, a firms distribution method
does not affect its relative
expenses. We conjecture that the higher fixed costs faced by exclusive
and commodity
writers in Canada counterbalance the lower variable costs faced
by these firms. The
lack of dominance in personal lines by Canadian exclusive writers
is a rational response
to the smaller market size in Canada and the higher level of government
intervention.
Key words: Distribution methods and costs, Canada and United
States, property/
liability insurance.
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