Proposal preview

Lessons from Insurance History: Markets, Regulation and Globalization

Insurance has always been a dynamic and changing market, evolving as new risks, technologies, products, and managerial practices have emerged. The growth in insurance markets is historically connected to the emergence of new risks, increasing standards of living and the emergence of new technologies. The insurance industry has experienced increased competition from other financial sector players particularly from the 1980s. In return it has ventured into new and emerging markets. The object of this session is to analyse the long-term patterns of transformation in insurance markets with particular reference to the drivers of change such as technology, regulation and trends in globalization. In parallel, contributions focusing on growth strategies, forms of competition and cooperation between companies and their links to distribution channels are welcomed. Studies on the impact of new products and the role of marketing in the expansion of the insurance industry are also of interest.

Organizer(s)

  • Monica Keneley Deakin University mkeneley@deakin.edu.au Australia
  • Jerònia Pons Pons University of Seville jpons@us.es Spain

Session members

  • Robin Pearson, University of Hull
  • Takau Yoneyama, Tokyo Keizai University
  • Greitjie Verhoef, University of Johannesburg
  • Mikael Lönnborg , Södertörn University
  • Pablo Gutiérrez, Universidad of Seville
  • YingYing Jiang, Chuo University
  • Lars Fredrik Andersson, Umea University
  • Andre Straus, CNRS Paris
  • Frank Caestecker, University of Ghent

Discussant(s)

Papers

Panel abstract

Insurance has always been a dynamic and changing market, evolving as new risks, technologies, products, and managerial practices have emerged. Insurance markets are early adapters of global trends. Understanding how they evolve and respond to new and emerging drivers of change can provide insight into the impact of broader adjustments in modern economies and societies. Along with new technologies, changing approaches to regulation and regulatory environments have witnessed shifts and realignments in finance markets. The insurance industry has experienced increased competition from other financial sector players particularly from the 1980s. In return it has ventured into new and emerging markets. As this has occurred, organizational structures within the industry have metamorphosed into complex and often global holding companies. The objective of this session is to analyze the long-term patterns of transformation in insurance markets with particular reference to the drivers of change such as technology, regulation and trends in globalization.

1st half

Insurance and the market: Regulation in the insurance industry since the 1980s.

Grietjie Verhoef

Specific country contexts have also contributed to growing regulation, leaving the market increasingly constrained. This paper considers the global trends in financial sector regulation and the impact on insurance industry costs structure, efficiency and functional diversification. This paper addresses these issues within the context of the specific South African market, as a case study of the changing regulatory context of the industry in Africa

Specific country contexts have also contributed to growing regulation, leaving the market increasingly constrained. This paper considers the global trends in financial sector regulation and the impact on insurance industry costs structure, efficiency and functional diversification. This paper addresses these issues within the context of the specific South African market, as a case study of the changing regulatory context of the industry in Africa

Was there an adverse selection in mutual life insurance societies?

Lars Fredrik Andersson, Liselotte Eriksson

Mutual and cooperative societies emerged as a major provider of health, accident and life insurance in the late 19th and early twentieth century. One of the major problems facing the insurers was the risk for adverse selection; that unhealthy people had more incentive then healthy to purchase insurance when priced for the average risk. Using a unique set merging administrative and sample records on the selection of life risks we test this hypothesis. By empirically examining if the accumulated hazard risk of mortality was higher/lower for individual society members compared to a matched sample of non-members in Sweden between 1915 and 1935, we seek to identify if the selection into the insurance pool was characterized by an adverse section. We find that a number of non-actuarial measures was applied to mitigate the risk of adverse selection. In turn, the measures to arrive on an actuarial fair pricing of risk was...

Mutual and cooperative societies emerged as a major provider of health, accident and life insurance in the late 19th and early twentieth century. One of the major problems facing the insurers was the risk for adverse selection; that unhealthy people had more incentive then healthy to purchase insurance when priced for the average risk. Using a unique set merging administrative and sample records on the selection of life risks we test this hypothesis. By empirically examining if the accumulated hazard risk of mortality was higher/lower for individual society members compared to a matched sample of non-members in Sweden between 1915 and 1935, we seek to identify if the selection into the insurance pool was characterized by an adverse section. We find that a number of non-actuarial measures was applied to mitigate the risk of adverse selection. In turn, the measures to arrive on an actuarial fair pricing of risk was poor. One of the major motive was the belief that risk differentiation threatened the solidarity between members. We argue that their comparative advantages in reducing adverse selection remained only as long as kinship relation could prevail within society.

Distribution channels and growth strategies in Spanish insurance: from networks of agents to branch offices (1880-1950)

Pablo Gutiérrez,  Jerònia Pons Pons

The aim of this paper is to analyse the nature of the relation among the main insurance companies in Spain and the agents that shaped the nets of insurance distribution in Spain during the first half of the XX century. To achieve this goal, we have gone through documentary sources from the main companies in order to examine the framework of these relations, namely: the design of agency contracts, the negotiation of the commissions or the guidelines for inspections and the supervision of the agents. Moreover, by mean of the private documentary sources from those agents during the first third of the XX century, we have contrasted their conditions with the corporate policies of main insurers. Using the framework of agency theory, this paper aims to enhance our understanding on the conflicts and dynamics that defined the distribution of a complex financial product as insurance in a late development economy.

The aim of this paper is to analyse the nature of the relation among the main insurance companies in Spain and the agents that shaped the nets of insurance distribution in Spain during the first half of the XX century. To achieve this goal, we have gone through documentary sources from the main companies in order to examine the framework of these relations, namely: the design of agency contracts, the negotiation of the commissions or the guidelines for inspections and the supervision of the agents. Moreover, by mean of the private documentary sources from those agents during the first third of the XX century, we have contrasted their conditions with the corporate policies of main insurers. Using the framework of agency theory, this paper aims to enhance our understanding on the conflicts and dynamics that defined the distribution of a complex financial product as insurance in a late development economy.

The insurance market in Belgium in the long 19th century and how German companies had conquered part of the market by 1914.

Frank Caestecker

In this presentation we will provide insight in the Belgian insurance market. Regulation of the market as well as the main companies active on the market will be outlined. Attention will be on life and fire insurance, the latter as well for private housing as industrial risks. We will focus in particular on the manner by which German life insurance companies and also Allianz active in more domains of insurance were successful in conquering part of the Belgian market in the first decade of the 20th century. We will analyze the recruitment of staff and agents, the conditions under which insurance was offered and the competition with mainly Belgian companies.

In this presentation we will provide insight in the Belgian insurance market. Regulation of the market as well as the main companies active on the market will be outlined. Attention will be on life and fire insurance, the latter as well for private housing as industrial risks. We will focus in particular on the manner by which German life insurance companies and also Allianz active in more domains of insurance were successful in conquering part of the Belgian market in the first decade of the 20th century. We will analyze the recruitment of staff and agents, the conditions under which insurance was offered and the competition with mainly Belgian companies.

Newspaper Advertisement by Life Insurers in Pre-WWII Japan: A Content Analysis of the Japan’s Oldest Industry Newspaper

YingYing Jiang

Marketing strategies have so far received little attention in research on the history of Japan’s life insurance industry. This is especially true for newspaper advertisements, which represent a central communication medium for product promotion. The paper provides a comprehensive content analysis of advertisements by life insurers in Japan’s oldest insurance industry newspaper, Hoken Ginkô Jihô from 1898 to 1937. The analysis reveals the relative importance life insurers attached to other product and service elements and to specific aspects of their organization, their financial standing and the reputation of members of the board. The paper contributes to a better understanding the early stages of Japan’s life insurance industry. It shows how companies promoted their product in a newly industrializing economy with a cultural background different from the West and how they tried to differentiate themselves from their competitors.

Marketing strategies have so far received little attention in research on the history of Japan’s life insurance industry. This is especially true for newspaper advertisements, which represent a central communication medium for product promotion. The paper provides a comprehensive content analysis of advertisements by life insurers in Japan’s oldest insurance industry newspaper, Hoken Ginkô Jihô from 1898 to 1937. The analysis reveals the relative importance life insurers attached to other product and service elements and to specific aspects of their organization, their financial standing and the reputation of members of the board. The paper contributes to a better understanding the early stages of Japan’s life insurance industry. It shows how companies promoted their product in a newly industrializing economy with a cultural background different from the West and how they tried to differentiate themselves from their competitors.

2nd half

‘Investing Children in Family Finance: A History of Life assurance for Children in Japan, 1880-1945’.

Takau Yoneyama

After the Meiji Restoration, Japanese people recognized that the modern knowledge and skills were more important for their social promotion than loyalty to their master. In other words, the investment on their children’s education was much more important for a family. However, the large expense of the higher education generally prevented people from entering the upper school for getting more knowledge and skills. Financial products for children’s education had already supplied by small life insurers by 1890. One was a pure endowment insurance for the child, another was conscription insurance. There were points in common between the pure endowment and conscription insurance. The assured was the child, and both insurance products didn’t have death protection. These insurance products begun to be in demand in the 1920s, when big cities grew rapidly. Shedding light on the development of ‘Education Insurance’ and ‘Conscription Insurance’, we examine their impact on Japanese modernization and...

After the Meiji Restoration, Japanese people recognized that the modern knowledge and skills were more important for their social promotion than loyalty to their master. In other words, the investment on their children’s education was much more important for a family. However, the large expense of the higher education generally prevented people from entering the upper school for getting more knowledge and skills. Financial products for children’s education had already supplied by small life insurers by 1890. One was a pure endowment insurance for the child, another was conscription insurance. There were points in common between the pure endowment and conscription insurance. The assured was the child, and both insurance products didn’t have death protection. These insurance products begun to be in demand in the 1920s, when big cities grew rapidly. Shedding light on the development of ‘Education Insurance’ and ‘Conscription Insurance’, we examine their impact on Japanese modernization and industrialization.

Waves of Globalisation. Swedish Insurers on Foreign Markets

Mikael Lönnborg

The diffusion of insurance through internationalisation was closely connected to the emergence of joint stock companies. In the second half of the 19th century also Swedish companies, as well as other insurers from Scandinavia and other smaller countries in Europe, joined this international integration. This paper will revolve around the Swedish insurers on the international market since the 1850s and until the early 21st century, when the last Swedish insurer left the international market and insurers concentrated entirely on the domestic market. The international business of Swedish insurers has changed considerably over time. The amount of international exposure was also of course related to size, and thus, the largest Swedish insurers, the composite companies, engaged more heavily in risks abroad, especially in fire insurance. This paper will discuss and explain the long waves of globalisation of Swedish insurers from the mid-1800s until 2003.

The diffusion of insurance through internationalisation was closely connected to the emergence of joint stock companies. In the second half of the 19th century also Swedish companies, as well as other insurers from Scandinavia and other smaller countries in Europe, joined this international integration. This paper will revolve around the Swedish insurers on the international market since the 1850s and until the early 21st century, when the last Swedish insurer left the international market and insurers concentrated entirely on the domestic market. The international business of Swedish insurers has changed considerably over time. The amount of international exposure was also of course related to size, and thus, the largest Swedish insurers, the composite companies, engaged more heavily in risks abroad, especially in fire insurance. This paper will discuss and explain the long waves of globalisation of Swedish insurers from the mid-1800s until 2003.

Selling insurance in America before the First World War: problem solving by foreign companies

Robin Pearson

Overseas insurers seeking to penetrate the world’s largest insurance market before 1914 faced a range of obstacles: fierce competition from established local and national offices and from wildcat operators, the requirements of state regulators, rising fiscal burdens, hostility from some politicians, courts and sections of the press, the huge distances over which sales networks had to be constructed, the particular characteristics of different regional markets, attitudes of some Americans towards risk and insurance. This paper examines the organisational, marketing and distributional responses of foreign insurers to these problems during the half century before the First World War. Foreign entrants, led by the large British fire insurance offices, found that American methods of selling insurance and the structure of the market in different states were somewhat different from what they experienced elsewhere in the world. The learning curve involved experimentation, flexibility and adaptation, and not just institutional transference westwards across the...

Overseas insurers seeking to penetrate the world’s largest insurance market before 1914 faced a range of obstacles: fierce competition from established local and national offices and from wildcat operators, the requirements of state regulators, rising fiscal burdens, hostility from some politicians, courts and sections of the press, the huge distances over which sales networks had to be constructed, the particular characteristics of different regional markets, attitudes of some Americans towards risk and insurance. This paper examines the organisational, marketing and distributional responses of foreign insurers to these problems during the half century before the First World War. Foreign entrants, led by the large British fire insurance offices, found that American methods of selling insurance and the structure of the market in different states were somewhat different from what they experienced elsewhere in the world. The learning curve involved experimentation, flexibility and adaptation, and not just institutional transference westwards across the Atlantic.

Mergers and Acquisitions in French Insurance Industry: The Setting-up of the International Network of the Union des Assurances de Paris in the 1980s and 1990s

Andre Straus

The main aim of this paper is to try to explain why; despite a fast development in the 1980s and the first half of the 1990 notably by mergers and acquisitions; notably in the European market; l’Union des Assurances de Paris (now UAP), the first French insurance group disappeared in 1995-1996 by a merger-taking over to the benefit of AXA. Little historic literature was devoted to this history and I benefited from the archives deposed by Jacques-Henri Gougenheim , a former General Director of UAP, then president of UAP International and until the end General Controller of the company. I shall try to expose the problems linked with the expansion of UAP and discuss the role it could have had in the disappearance of the company (structures of the different markets, differences in rules of investment between countries, specific problems of governance in an international group).

The main aim of this paper is to try to explain why; despite a fast development in the 1980s and the first half of the 1990 notably by mergers and acquisitions; notably in the European market; l’Union des Assurances de Paris (now UAP), the first French insurance group disappeared in 1995-1996 by a merger-taking over to the benefit of AXA. Little historic literature was devoted to this history and I benefited from the archives deposed by Jacques-Henri Gougenheim , a former General Director of UAP, then president of UAP International and until the end General Controller of the company. I shall try to expose the problems linked with the expansion of UAP and discuss the role it could have had in the disappearance of the company (structures of the different markets, differences in rules of investment between countries, specific problems of governance in an international group).