Welcome to the ARIA 2021 Annual Meeting Agenda App. You are seeing this in simple view. Click on any session to see Presenters, Discussants and a Session Description. Click on Presenters to find a single presenter and their sessions. If you find an error, please email gphillips@aria.org. Registrants have been added and will continue to be updated until 7/29/21 when registration closes. Zoom links will be shared directly with all participants two days prior to the conference. Please make notifications@sched.com a "safe sender" in your email system. We will be sending messages throughout the conference through this medium. 
Back To Schedule
Tuesday, August 3 • 10:45am - 12:15pm
4D2 Multimarket Competition, Price, and Product Innovation in the US Homeowners Insurance Market

Sign up or log in to save this to your schedule, view media, leave feedback and see who's attending!

Feedback form is now closed.
Tao Sun, Lingnan University; Mary Weiss, Temple University

Diversified firms often compete in several markets simultaneously leading to so-called multimarket contact (MMC). This study examines the effect of MMC on homeowners insurance price and product innovation in the U.S. from 2000 to 2017. We find that the level of MMC is positively related to upward changes in the homeowners insurance rate and higher homeowners insurance price generally. More importantly, we find that the level of MMC is negatively associated with homeowners insurance product innovation. We also find that the state-level MMC is positively correlated with the average cost of homeowners insurance. These results are consistent with the mutual forbearance hypothesis, i.e., MMC may facilitate tacit collusion and thus weaken market competition. To address the potential endogeneity issue of using MMC measures, we use the instrumental variable regressions. We conduct a variety of robustness tests and find that our main results are robust to potential biases due to measurement problems in homeowners insurance price change, measurement errors in MMC, and the impact of the 2007-2009 Great Financial Crisis. This paper offers the first study of MMC in the U.S. homeowners insurance market showing that insurers’ product overlaps across geographical markets is an important pricing factor and that the level of MMC has a dampening effect on product innovation. Our results have important implications for insurance regulatory policies, most importantly, simple measures of the degree of competition such as the Herfindahl-Hirschman index are not always reliable measures of competition. Keywords: multimarket contact, homeowners insurance price, product innovation, diversification

avatar for Ty Leverty

Ty Leverty

University of Wisconsin-Madison
Tyler Leverty is an Associate Professor in the Department of Risk and Insurance at the University of Wisconsin-Madison. He holds the Gerald D. Stephens CPCU Distinguished Chair in Risk Management and Insurance.  He is a Senior Editor of the Journal of Risk and Insurance, the current... Read More →


Tao Sun

Lingnan University

Tuesday August 3, 2021 10:45am - 12:15pm EDT