IDEAS home Printed from
   My bibliography  Save this paper

Banks as Insurance Referral Agents? The Convergence of Financial Services: Evidence from the Title Insurance Industry


  • M. Martin Boyer
  • Charles M. Nyce


The purpose of this paper is to offer a glimpse into the potential industrial organization of the property casualty insurance (P&C) market if banks continue to penetrate it at current rates. To do so, we study an insurance market where banks are already integral in distribution: Title insurance. We draw some broad comparisons between the distribution channels used to sell title insurance and the channel used by banks entering the P&C market. The title insurance industry is characterized by two major entry barriers: Controlled business arrangements and title plants. Although title insurance has not generated much academic interest compared to other insurance products, title insurance is an insurance product wherein the distribution process banks have traditionally been heavily involved. In this paper, we test different industrial organization growth models with barriers to entry. Our empirical analysis suggests that the current title insurance industry structure fits the Salop circular-city model. Our contention is that if banks continue their current trend of market penetration in property casualty markets, the results presented herein could potentially offer an insight into the future structure of the P&C market. Le but de cet article est de donner un aperçu de la structure éventuelle du marché de l'assurance IARD aux États-Unis si les banques continuent de pénétrer le marché de l'assurance IARD au même rythme qu'actuellement. À cette fin, nous étudions un marché de l'assurance où les banques ont déjà un rôle prépondérant, soit l'assurance titre de propriété. Nous comparons les canaux de distribution utilisés pour vendre l'assurance titre et les canaux utilisés par les banques pour entrer dans le marché de l'assurance IARD. Le marché de l'assurance titre est caractérisé par deux importantes barrières à l'entrée: les alliances stratégiques et les banques de transactions immobilières. Dans cet article, nous testons différents modèles de croissance développés en organisation industrielle où il existe des barrières à l'entrée. Nos tests empiriques semblent supporter le modèle de croissance basé sur le modèle circulaire de Salop. Ainsi, nous concluons que si les banques pénètrent de manière significative le marché de l'assurance IARD, nos résultats offrent un aperçu de la structure future de ce marché.

Suggested Citation

  • M. Martin Boyer & Charles M. Nyce, 2002. "Banks as Insurance Referral Agents? The Convergence of Financial Services: Evidence from the Title Insurance Industry," CIRANO Working Papers 2002s-78, CIRANO.
  • Handle: RePEc:cir:cirwor:2002s-78

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Baik, Kyung Hwan & Lee, Sanghack, 2000. "Two-Stage Rent-Seeking Contests with Carryovers," Public Choice, Springer, vol. 103(3-4), pages 285-296, June.
    2. Allen, Franklin & Santomero, Anthony M., 2001. "What do financial intermediaries do?," Journal of Banking & Finance, Elsevier, vol. 25(2), pages 271-294, February.
    3. Carow, Kenneth A., 2001. "Citicorp-Travelers Group merger: Challenging barriers between banking and insurance," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1553-1571, August.
    4. Kang, Jae Hyeong & Lee, Sanghack, 2001. "The social cost of entry contest in Cournot-Nash oligopoly," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 139-152.
    5. Finn E. Kydland & Edward C. Prescott, 1996. "The Computational Experiment: An Econometric Tool," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 69-85, Winter.
    6. Chakravarty, Sugato & Scott, James S, 1999. "Relationships and Rationing in Consumer Loans," The Journal of Business, University of Chicago Press, vol. 72(4), pages 523-544, October.
    7. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-381, July.
    8. Nyce, C. & Boyer, M.M., 1998. "An Analysis of the Title Insurance Industry," Ecole des Hautes Etudes Commerciales de Montreal- 98-14, Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques..
    9. Saunders, Anthony, 1999. "Consolidation and universal banking," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 693-695, February.
    10. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    11. Pryor, Frederic L, 1972. "An International Comparison of Concentration Ratios," The Review of Economics and Statistics, MIT Press, vol. 54(2), pages 130-140, May.
    12. Berger, Allen N. & Humphrey, David B. & Pulley, Lawrence B., 1996. "Do consumers pay for one-stop banking? Evidence from an alternative revenue function," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1601-1621, November.
    13. Katz, Eliakim & Tokatlidu, Julia, 1996. "Group competition for rents," European Journal of Political Economy, Elsevier, vol. 12(4), pages 599-607, December.
    14. Werden, Gregory J & Froeb, Luke M, 1998. "The Entry-Inducing Effects of Horizontal Mergers: An Exploratory Analysis," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 525-543, December.
    15. Milbourn, Todd T. & Boot, Arnoud W. A. & Thakor, Anjan V., 1999. "Megamergers and expanded scope: Theories of bank size and activity diversity," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 195-214, February.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Neale Faith R. & Drake Pamela Peterson & Clark Steven P., 2010. "Diversification in the Financial Services Industry: The Effect of the Financial Modernization Act," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-30, March.

    More about this item


    Bank Insurance; Title Insurance; Entry Barriers; Affiliated Agencies; Bancassurance; Assurance titre de propriété; Barrières à l'entrée; Alliances stratégiques;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2002s-78. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.