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Does the product quality hypothesis hold true? Service quality differences between independent and exclusive insurance agents

  • Trigo Gamarra, Lucinda
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    Insurance products are distributed both by independent and dependent agents, although the use of independent agents is more costly. The product quality hypothesis states that independent agents provide both insurers and customers with higher service quality and therefore, remain on the market. On the contrary, according to the market imperfections hypothesis both intermediary types offer the same quality, and only coexist due to information asymmetries. Having conducted a written survey, we measure service quality differences by multivariate regression analysis. Our analysis shows that the higher level of service quality of independent agents supports the product quality hypothesis. The result is a separating equilibrium on the market.

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    Paper provided by University of Rostock, Institute of Economics in its series Thuenen-Series of Applied Economic Theory with number 76.

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    Date of creation: 2007
    Date of revision:
    Handle: RePEc:zbw:roswps:76
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    1. Berger, Allen N & Cummins, J David & Weiss, Mary A, 1997. "The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance," The Journal of Business, University of Chicago Press, vol. 70(4), pages 515-46, October.
    2. Mayers, David & Smith, Clifford W, Jr, 1981. "Contractual Provisions, Organizational Structure, and Conflict Control in Insurance Markets," The Journal of Business, University of Chicago Press, vol. 54(3), pages 407-34, July.
    3. J. David Cummins & Jack VanDerhei, 1979. "A Note on the Relative Efficiency of Property-Liability Insurance Distribution Systems," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 709-719, Autumn.
    4. Posey, Lisa L. & Tennyson, Sharon, 1998. "The coexistence of distribution systems under price search: Theory and some evidence from insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 95-115, March.
    5. Eckardt, Martina, 2002. "Agent and Broker Intermediaries in Insurance Markets -- An Empirical Analysis of Market Outcomes," Thuenen-Series of Applied Economic Theory 34, University of Rostock, Institute of Economics.
    6. Dahlby, Bev & West, Douglas S, 1986. "Price Dispersion in an Automobile Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 418-38, April.
    7. Paul L. Joskow, 1973. "Cartels, Competition and Regulation in the Property-Liability Insurance Industry," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 375-427, Autumn.
    8. Regan, Laureen & Tennyson, Sharon, 1996. "Agent Discretion and the Choice of Insurance Marketing System," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 637-66, October.
    9. Paul J. M. Klumpes, 2004. "Performance Benchmarking in Financial Services: Evidence from the UK Life Insurance Industry," The Journal of Business, University of Chicago Press, vol. 77(2), pages 257-274, April.
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