Reasons for the Coexistence of Different Distribution Channels: An Empirical Test for the German Insurance Market

Private insurance markets in Germany are characterized by the coexistence of different distribution systems. Insurance products are mainly distributed both by independent and dependent agents. Economic theory provides different explanations for the coexistence of distribution channels: the product quality hypothesis states that independent agents provide both insurers and customers with higher service intensity and product quality and, therefore, remain on the market. We sent a written questionnaire to German insurance intermediaries designed to measure service quality. Our analysis shows that a higher level of service quality among independent agents supports the product quality hypothesis. The Geneva Papers (2008) 33, 389–407. doi:10.1057/gpp.2008.16