Broker monitoring of premium adequacy: the role of contingent commissions

Browne, Mark J.; Ju, Lan; Tu, Zhiyong

doi:10.1080/00036846.2014.902020

Cited by 5 publications

(4 citation statements)

References 27 publications

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“…One potential explanation for this observation is that adding value by optimizing risk exposures (e.g., by saving money) is not easily quantified compared to adding value by lowering search and transaction costs with a focus on executing the insurance deal. In fact, insurance intermediary compensation is often based on the latter, and the considerable body of literature centering on different forms and impacts of compensation schemes (e.g., Browne et al 2014;Focht et al 2013;Latorre Guillem 2020;Ma et al 2014aMa et al , 2014bPuelz 2016;Strümpel et al 2015) supports our assumption. In addition, aggregating roles have also received little attention.…”

Section: Discussionsupporting

confidence: 56%

The Future of Insurance Intermediation in the Age of the Digital Platform Economy

Stricker,

Wagner,

Zeier Röschmann

2023

JRFM

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Today most insurance is sold by over a million brokers and independent agents acting as intermediaries between the insurance companies and their customers. Digitalization and changing customer behavior have fostered the development of insurtech businesses, and, more recently, multi-sided platforms are emerging as new market forms for insurance intermediation. This paper aims to provide a better understanding of how the emergence of the platform economy, with a market dominated by multi-sided platforms, will potentially impact insurance intermediation in the future. Using inductive content analysis on the results of a systematic literature review of the body of research on insurance intermediation, we identify the key functional roles fulfilled by insurance intermediaries. Applying these roles to a literature review on multi-sided platforms allows us to compare how different market forms and players embody the functional roles of intermediaries. Our findings suggest that multi-sided platforms are better able to perform certain roles in terms of agility, scale and scope, and we discuss the future role of platforms in insurance intermediation.

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Section: Discussionsupporting

confidence: 56%

The Future of Insurance Intermediation in the Age of the Digital Platform Economy

Stricker,

Wagner,

Zeier Röschmann

2023

JRFM

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“…4. Soft market has lower premiums, broader coverage, easier underwriting, more policies and increased competition among insurers, while in the hard market; the premiums are higher with more strict underwriting criteria, fewer written policies and less competition as well (Sephton and Mann, 2015;Browne et al, 2014).…”

Section: Discussionmentioning

confidence: 99%

Corporate governance and performance in the UK insurance industry pre, during and post the global financial crisis

Abdoush

Hussainey²,

Albitar³

2022

IJAIM

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Purpose Due to stakeholders’ concerns on the contribution of corporate governance in monitoring insurance companies during financial crisis, this study aims to investigate whether and how various corporate governance practices would have affected firm performance of listed and non-listed insurance firms in the UK during financial crisis. Design/methodology/approach This study uses a unique manually collected data set from listed and non-listed insurance firms in the UK and applies different regressions models to test the hypotheses and to address the endogeneity problem. Findings The findings show that board non-duality and the presence of a majority shareholder improve firm performance in insurance companies. Furthermore, the findings for the sub-samples indicate a stronger positive association between board of directors and firm performance in listed insurance companies after the financial crisis, while a positive impact has been found between large shareholders and external audit firms in non-listed insurance companies before and during the crisis. Practical implications The results offer important practical implications for the government, management, shareholders and policymakers. For example, regulators and policymakers should benefit from these results to revise the recommendations for corporate governance mechanisms that prove to be effective on firm performance, as well as those mechanisms that have different or unexpected effects among listed or non-listed firms and/or during the turbulent periods. Investors should be aware of those specific corporate governance mechanisms that would have higher effect on performance of UK insurance firms in which they are considering to invest in. Originality/value This study contributes to the current literature by exploring the effect of corporate governance on financial performance by comparing between listed and non-listed insurance companies during financial crisis. Further, to the best of the authors’ knowledge, this is the first study to use two new insurance-related performance measures, the revenue growth ratio and the adjusted combined ratio, as performance proxies to explore whether these new variables create any insights.

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“…A major finding is that the reinsurance price index tends to be highly cyclical with a calculated cycle length of approximately nine years, having a significant influence on the primary market's loss ratios. Browne et al (2014) use data from the U.S. property and casualty insurance industry to show that insurers who pay contingent commissions-that is, payments to their brokers based on the volume and profitability of business placed-experience fewer price fluctuations over the underwriting cycle than insurers who do not pay contingent commissions. Lei and Browne (2017) show that (i) product concentration, (ii) geographic concentration, and (iii) focus on states with caps on general damages display trends that run opposite of the combined ratio in medical malpractice insurance.…”

Section: Previous Researchmentioning

confidence: 99%

“…At the end of the day, there is little consensus with respect to which hypothesis best explains the pricing patterns and "no single hypothesis can explain thoroughly the insurance cycle" (Browne et al 2014(Browne et al , p. 2378. The usual approach to study underwriting cycles in the insurance literature is the autoregressive (AR) model.…”

Section: Previous Researchmentioning

confidence: 99%

Underwriting Cycles in Property-Casualty Insurance: The Impact of Catastrophic Events

Hofmann

Sattarhoff

2023

Risks

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This paper challenges the question of existence and predictability of underwriting cycles in the U.S. property and casualty insurance industry. Using an approach in the frequency domain, we demonstrate the existence of a hidden periodic component in annual aggregated loss ratios. The data support an underwriting cycle length of 8–9 years. Going beyond previous research and studying almost 30 years of quarterly underwriting data, we can improve forecasting performance by (dis)connecting cycles and catastrophic events. Superior out-of-sample forecast results from models with intervention variables flagging the time point of catastrophic outbreaks is achieved in terms of mean squared/absolute forecast errors. We evaluate model confidence sets containing the most accurate model with a certain confidence level. The analysis suggests that reliable forecasts can be achieved net of the irregular major peaks in loss distributions that arise from natural catastrophes as well as unusual “black swan” events.

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Broker monitoring of premium adequacy: the role of contingent commissions

Cited by 5 publications

References 27 publications

The Future of Insurance Intermediation in the Age of the Digital Platform Economy

The Future of Insurance Intermediation in the Age of the Digital Platform Economy

Corporate governance and performance in the UK insurance industry pre, during and post the global financial crisis

Underwriting Cycles in Property-Casualty Insurance: The Impact of Catastrophic Events

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