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The effect of product diversification strategies on the performance of health insurance conglomerates

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  • Cassandra R. Cole
  • J. Bradley Karl

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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  • Cassandra R. Cole & J. Bradley Karl, 2016. "The effect of product diversification strategies on the performance of health insurance conglomerates," Applied Economics, Taylor & Francis Journals, vol. 48(3), pages 190-202, January.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:3:p:190-202
    DOI: 10.1080/00036846.2015.1076149
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    Cited by:

    1. Baltuttis, Dennik & Töppel, Jannick & Tränkler, Timm & Wiethe, Christian, 2020. "Managing the risks of energy efficiency insurances in a portfolio context: An actuarial diversification approach," International Review of Financial Analysis, Elsevier, vol. 68(C).
    2. Subrato Banerjee & Basri Savitha, 2021. "Competition reduces profitability: the case of the Indian life microinsurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 383-398, July.

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