The costs of distribution in the UK life insurance market
The cost of direct and independent distribution in the UK life insurance sector over the period 1990–1997 is examined. This is a novel contribution to the literature that until now has focused almost solely on distribution in the non-life sector. Unlike the non-life sector the distribution of life insurance is complicated by the existence of investor protection policies. Which in the UK are believed to have increased the use of independent agents. Using a pooled data set of 44 companies between 1990 and 1997, this study finds little evidence for such a view. Cost benefits are found for firms focusing in one mode of distribution. From a modelling of the distribution decision this finding maybe attributed to firms choosing distribution systems which match the transactional problems associated with their product mix and/or mode of corporate governance.