The effect of product diversification strategies on the performance of health insurance conglomerates |
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Authors: | Cassandra R Cole J Bradley Karl |
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Institution: | 1. Department of Risk Management/Insurance, Real Estate &2. Legal Studies, College of Business, Florida State University, Tallahassee, FL, USA;3. Department of Finance, East Carolina University, Greenville, NC, USA |
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Abstract: | The conglomerate organizational structure of health insurers suggests two distinct methods of product diversification – the first is firm-level diversification, or diversification within individual affiliates, and the second is conglomerate-level diversification, or diversification across affiliates of the conglomerate. We hypothesize that using both firm- and conglomerate-level diversification may magnify the costs or benefits of diversification on the financial performance of the conglomerate. Our results confirm this hypothesis and suggest a positive relation between health insurer financial performance and the use of both product line diversification methods. Our results not only contribute to the body of literature related to corporate diversification but are also important to policymakers and all health insurance market participants as portions of the Affordable Care Act continue to be implemented. |
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Keywords: | Diversification firm performance firm strategy insurance companies |
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