Economies of Scale in European Life Insurance

Item Type Journal paper
Abstract Purpose – Due to the continuing low interest rate environment as well as the increase in acquisition costs, price transparency, cost transparency and competition with banks, the cost of life insurance becomes increasingly important for customers, insurers and shareholders. Against this background, the purpose of this paper is to study the development of insurers’ economies of scale in regard to administrative costs for four of the largest European life insurance markets. Design/methodology/approach – The analysis on economies of scale is based on a comprehensive set of 477 life insurers in Germany, Italy, Spain and the UK, yearly data between 2000 and 2014, and regression calculations that are based on 4,855 observations. Findings – The results show that economies of scale exist for all considered markets and for most of the considered years. However, the extent of economies of scale varies considerably across countries. Originality/value – Overall, the existing academic literature on costs and corresponding economies of scale in life insurance primarily deals with analyses of total costs instead of administrative costs, a single year or a single market. This paper contributes to the existing literature by conducting an analysis of recent market dynamics and economies of scale in regard to administrative costs for the period from 2000 and 2014 for four of the largest European life insurance markets for which the respective ata were available (Germany, Italy, Spain and the UK) and 477 life insurers in total. This is done by means of log-log transformation of premiums and costs and a fixed effects model based on these transformed figures for 4,855 observations. In addition, for each market, the authors analyze the development of administrative costs for a total of 477 insurers.
Authors Klotzki, Udo; Bohnert, Alexander; Gatzert, Nadine & Vogelgesang, Ulrike
Journal or Publication Title The journal of risk finance : JRF
Language English
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date 2018
Publisher Emerald
Volume 19
Number 2
Page Range 190-207
Number of Pages 18
ISSN 1526-5943
Publisher DOI https://doi.org/10.1108/JRF-03-2017-0055
Depositing User M.A. HSG Jonas Raphael Jahnert
Date Deposited 23 Oct 2018 06:54
Last Modified 20 Jul 2022 17:36
URI: https://www.alexandria.unisg.ch/publications/255447

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Klotzki, Udo; Bohnert, Alexander; Gatzert, Nadine & Vogelgesang, Ulrike (2018) Economies of Scale in European Life Insurance. The journal of risk finance : JRF, 19 (2). 190-207. ISSN 1526-5943

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https://www.alexandria.unisg.ch/id/eprint/255447
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