The Coexistence of Multiple Distributions Systems for Financial Services: The Case of Property-Liability Insurance

Property-liability insurance is distributed by two different types of firms, those that distribute their product through independent agents, who represent more than one insurer,and direct writing insurers that distribute insurance through exclusive agents, who represent only one insurer. This paper analyzes the reasons for the long term coexistence of the independent agency and direct writing distribution systems. Two primary hypotheses explain the coexistence of independent and exclusive agents. The market imperfections hypothesis suggests that firms that use independent agents survive while providing essentially the same service as firms using exclusive agents because of market imperfections such as price regulation, slow diffusion of information in insurance markets, or search costs that permit inefficient firms to survive alongside efficient firms. Efficient firms are expected to earn super-normal risk-adjusted profits, while inefficient firms will earn risk-adjusted profits closer to normal levels. The product quality hypothesis suggests that higher costs of independent agents represent unobserved differences in product quality or service intensity, such as the providing of additional customer assistance with claims settlement,offering a greater variety of product choice sand reducing policyholder search costs. This hypothesis predicts normal risk-adjusted profits for both independent and exclusive agency firms. Because product quality in insurance is essentially unobserved, researchers have been unable to reach consensus on whether the market imperfections hypothesis or the product quality hypothesis is more consistent with the observed cost data. This lack of consensus leaves open the economic question of whether the market works well in solving the problem of minimizing product distribution costs and leaves unresolved the policy issue of whether marketing costs in property-liability insurance are excessive and perhaps should receive regulatory attention. The authors propose a new methodology for distinguishing between market imperfection sand product quality using frontier efficiency methods. They estimate both profit efficiency and cost efficiency for a sample of independent and exclusive agency insurers. Measuring profit efficiency helps to identify unobserved product quality differences because customers should be willing to pay extra for higher quality. This approach allows for the possibility that some firms may incur additional costs providing superior service and be compensated for these costs through higher revenues. Profit efficiency also implicitly incorporates the qualities floss control and risk management services,since insurers that more effectively control losses and manage risk should have higher average risk-adjusted profits but not necessarily lower costs than less effective insurers. The empirical results confirm that independent agency firms have higher costs on average than do direct writers. The principal finding of the study is that most of the average differential between the two groups of firms disappears in the profit function analysis. This is a robust result that holds both in the authors tables of averages and in the regression analysis and applies to both the standard and non-standard profit functions. Based on averages, the profit efficiency differential is at most one-third as large as the profit efficiency differential.Based on the regression analysis, the profit inefficiency differential is at most one-fourth as large as the cost inefficiency differential,and the profit inefficiency differential is not statistically significant in the more fully specified models that control for size,organizational form and business mix. The results provide strong support for the product quality hypothesis and do not support the market imperfections hypothesis. The higher costs of independent agents appear to be due almost entirely to the provision of higher quality services, which are compensated for by additional revenues. A significant public policy implication is that regulatory decisions should not be based on costs alone. The authors findings imply that marketing cost differentials among insurers are mostly attributable to service differentials rather than to inefficiency and therefore do not represent social costs. The profit inefficiency results show that there is room for improvement in both the independent and direct writing segments of the industry. However, facilitating competition is likely to be a more effective approach to increasing efficiency than restrictive price regulation.

Conglomeration Versus Strategic Focus: Evidence from the Insurance Industry

We provide evidence on the validity of the conglomeration hypothesis versus the strategic focus hypothesis for financial institutions using data on U.S. insurance companies. We distinguish between the hypotheses using profit scope economies, which measures the relative efficiency of joint versus specialized production, taking both costs and revenues into account. The results suggest that the conglomeration hypothesis dominates for some types of financial service providers and the strategic focus hypothesis dominates for other types. This may explain the empirical puzzle of why joint producers and specialists both appear to be competitively viable in the long run.

Generating-function method for fusion rules

This is the second of two articles devoted to an exposition of the generating-function method for computing fusion rules in affine Lie algebras. The present paper focuses on fusion rules, using the machinery developed for tensor products in the companion article. Although the Kac-Walton algorithm provides a method for constructing a fusion generating function from the corresponding tensor-product generating function, we describe a more powerful approach which starts by first defining the set of fusion elementary couplings from a natural extension of the set of tensor-product elementary couplings. A set of inequalities involving the level are derived from this set using Farkas' lemma. These inequalities, taken in conjunction with the inequalities defining the tensor products, define what we call the fusion basis. Given this basis, the machinery of our previous paper may be applied to construct the fusion generating function. New generating functions for sp(4) and su(4), together with a closed form expression for their threshold levels are presented.Comment: Harvmac (b mode : 47 p) and Pictex; to appear in J. Math. Phy

Berenstein-Zelevinsky triangles, elementary couplings and fusion rules

We present a general scheme for describing su(N)_k fusion rules in terms of elementary couplings, using Berenstein-Zelevinsky triangles. A fusion coupling is characterized by its corresponding tensor product coupling (i.e. its Berenstein-Zelevinsky triangle) and the threshold level at which it first appears. We show that a closed expression for this threshold level is encoded in the Berenstein-Zelevinsky triangle and an explicit method to calculate it is presented. In this way a complete solution of su(4)_k fusion rules is obtained.Comment: 14 page

Genetic risk of obesity as a modifier of associations between neighbourhood environment and body mass index. An observational study of 335 046 UK Biobank participants

Background There is growing recognition that recent global increases in obesity are the product of a complex interplay between genetic and environmental factors. However, in gene-environment studies of obesity, ‘environment’ usually refers to individual behavioural factors that influence energy balance, whereas more upstream environmental factors are overlooked. We examined gene-environment interactions between genetic risk of obesity and two neighbourhood characteristics likely to be associated with obesity (proximity to takeaway/ fast-food outlets and availability of physical activity facilities). Methods We used data from 335 046 adults aged 40–70 in the UK Biobank cohort to conduct a populationbased cross-sectional study of interactions between neighbourhood characteristics and genetic risk of obesity, in relation to body mass index (BMI). Proximity to a fast-food outlet was defined as distance from home address to nearest takeaway/fast-food outlet, and availability of physical activity facilities as the number of formal physical activity facilities within 1 km of home address. Genetic risk of obesity was operationalised by weighted Genetic Risk Scores of 91 or 69 single nucleotide polymorphisms (SNP), and by six individual SNPs considered separately. Multivariable, mixed-effects models with product terms for the gene-environment interactions were estimated. Results After accounting for likely confounding, the association between proximity to takeaway/fast-food outlets and BMI was stronger among those at increased genetic risk of obesity, with evidence of an interaction with polygenic risk scores (p=0.018 and p=0.028 for 69- SNP and 91-SNP scores, respectively) and in particular with a SNP linked to MC4R (p=0.009), a gene known to regulate food intake. We found very little evidence of geneenvironment interaction for the availability of physical activity facilities. Conclusions Individuals at an increased genetic risk of obesity may be more sensitive to exposure to the local fast-food environment. Ensuring that neighbourhood residential environments are designed to promote a healthy weight may be particularly important for those with greater genetic susceptibility to obesity

Volunteering and well-being : do self-esteem, optimism, and perceived control mediate the relationship?

Volunteers play a vital role in modern societies by boosting the labor force within both the public and private sectors. While the factors that may lead people to volunteer have been investigated in a number of studies, the means by which volunteering contributes to the well-being of such volunteers is poorly understood. It has been suggested through studies that focus on the absence of depression in volunteers that self-esteem and sense of control may be major determinants of the increased well-being reported by volunteers. This is consistent with the homeostatic model of subjective well-being, which proposes that self-esteem, optimism, and perceived control act as buffers that mediate the relationship between environmental experience and subjective well-being (SWB). Using personal well-being as a more positive measure of well-being than absence of depression, this study further explored the possible mediating role of self-esteem, optimism, and perceived control in the relationship between volunteer status and well-being. Participants (N = 1,219) completed a 97-item survey as part of the Australian Unity Wellbeing project. Variables measured included personal well-being, self-esteem, optimism, and a number of personality and psychological adjustment factors. Analyses revealed that perceived control and optimism, but not self-esteem, mediated the relationship between volunteer status and personal well-being.<br /

Laboratory and Field Studies of Resistance of Crab Apple Clones to Rhagoletis pomonella (Diptera: Tephritidae)

Oviposition and larval survival of Rhagoletis pomonella (Walsh) varied significantly among fruit from 25 crab apple speciesand clones evaluated in field and laboratory studies. In general, the relative oviposition preference and larval survival was similar in fruit infested naturally in the field and fruit tested in the laboratory. Flies oviposited more in clones with larger fruit, although this relationship was more pronounced in laboratory tests when fruit was infested by laboratory-reared flies than in fruit infested in the field by wild flies. ‘Aldenhamensis,' ‘Fuji,' ‘Vilmorin,' Malus zumi calocarpa Rehd., and M. hupehensis (Pamp) Rehd. fruit was not infested in the field, but flies oviposited in fruit of all 25 species and clones in choice tests in the laboratory. Eggs hatched but larvae did not survive in fruit of ‘Henry F. DuPont,' ‘Frettingham,' ‘Fuji,' ‘Sparkler,' M. hupehensis, and M. zumi calocarpa. Larval mortality was very high in fruit from ‘Vilmorin,' ‘Sparkler,' ‘NA 40298,' ‘Henrietta Crosby,' ‘Golden Gem,' ‘Almey,' M. baccata L. (Borkh.), and M. sikktmensis (Hook.) Koehn

Towards robust paralinguistic assessment for real-world mobile health (mHealth) monitoring: an initial study of reverberation effects on speech

Speech is promising as an objective, convenient tool to monitor health remotely over time using mobile devices. Numerous paralinguistic features have been demonstrated to contain salient information related to an individual's health. However, mobile device specification and acoustic environments vary widely, risking the reliability of the extracted features. In an initial step towards quantifying these effects, we report the variability of 13 exemplar paralinguistic features commonly reported in the speech-health literature and extracted from the speech of 42 healthy volunteers recorded consecutively in rooms with low and high reverberation with one budget and two higher-end smartphones, and a condenser microphone. Our results show reverberation has a clear effect on several features, in particular voice quality markers. They point to new research directions investigating how best to record and process in-the-wild speech for reliable longitudinal health state assessment

Raman Spectroscopy of the Human Nail: A Potential Tool for Evaluating Bone Health?

Dual X-ray absorptiometry (DEXA) is the current gold standard for the diagnosis of osteoporosis. However, patients can suffer osteoporotic fractures despite normal bone mineral density, partly because of unmeasured influences of both the protein and mineral phases of bone that are affected in osteoporosis. There is currently no clinically applicable method of evaluating the health of the protein phase. The proteins in human nail (keratin) and bone (collagen) require sulphation and disulphide bond (S-S) formation for structural integrity and disorders of either sulphur metabolism or cystathione beta-synthase can lead to structural abnormalities in these tissues. Raman protein spectra provide a method of non-invasive measurement of the degree of sulphation of structurally related proteins that may be indicative of bone health. Raman spectroscopy was used to evaluate the disulphide (S-S) content of fingernails. The nail samples came from from 169 women (84 pre- and 85 post-menopausal), of which 39 had a history of osteoporotic fracture. BMD was measured by DXA at the spine. Analyses included parametric and non-parametric tests, dependent on the distribution of the test variable. Mean disulphide content of the nail reduced with age and was slightly higher in pre-, compared to post-menopausal women (P = 0.187). Significantly lower disulphide content was observed in nails obtained from subjects with a history of fracture (P = 0.025). When either disulphide content or BMD was used as a predictor, the odds ratio of these two measures were found to be comparable predictors for fracture status. This suggests that measurements of change in the protein phase of structural proteins such as keratin in the human nail may be correlated with clinically relevant changes in bone proteins that are important in fracture risk. © 2007 Springer Science+Business Media, LLC