| Abstract: | A peculiar feature of insurance is its marketing through a variety of channels about whose performance rather little is known. This paper examines two of the more important variants prevailing in Continental Europe, exclusive and independent agencies (the latter typically having contractual relationships with several companies). Two types of contract governing their behavior are examined for their incentives in terms of growth and cost control. Data covering insurance agencies of both types operating in the Swiss market are used to test for differences while holding constant contract provisions operating on the revenue side. The hypothesis that exclusive agents are less concerned about cost control than independent agencies receives a large measure of confirmation, while no evidence of better performance both in terms of growth and loss ratio can be found.Thanks are due to J. A. Blanco (University of Zurich) for a thorough checking of the mathematical derivations. Helpful comments where provided by B. Berliner (Swiss Re), M. Hellwig (University of Basel), and H. Müller (University of Zurich), participants at the 14th Seminar of the European Group of Risk and Insurance Economists, Geneva, September 21–23, 1987, and — last but not least — two anonymous referees. |
