Changes in the Life Insurance Industry: Efficiency, Technology and Risk Management

1. Front Matter

   Pages i-xiii

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2. Life Insurance: The State of the Industry

   • Anthony M. Santomero

   Pages 1-18

3. The Industry Speaks: Results of the WFIC Insurance Survey

   • James F. Moore, Anthony M. Santomero

   Pages 19-74

4. Efficiency in the U.S. Life Insurance Industry: Are Insurers Minimizing Costs and Maximizing Revenues?

   • J. David Cummins

   Pages 75-115

5. Efficiency and Competitiveness in the U.S. Life Insurance Industry: Corporate, Product, and Distribution Strategies

   • Roderick M. Carr, J. David Cummins, Laureen Regan

   Pages 117-157

6. Life Insurance Mergers and Acquisitions

   • J. David Cummins, Sharon Tennyson, Mary A. Weiss

   Pages 159-185

7. Strategy, Human Resource Management, and the Performance of Life Insurance Firms

   • Clint Chadwick, Peter Cappelli

   Pages 187-210

8. The Impact of Information Technology Management Practices on the Performance of Life Insurance Companies

   • Lorin M. Hitt

   Pages 211-243

9. Toward a Unified Valuation Model for Life Insurers

   • David F. Babbel, Craig Merrill

   Pages 245-278

10. An Analysis of the Financial Risk Management Process Used By Life Insurers

    • David F. Babbel, Anthony M. Santomero

    Pages 279-326

11. Challenges and Issues for Growth in the Life Industry

    • Michael R. Tuohy

    Pages 327-358

12. Back Matter

    Pages 359-369

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Major challenges for life insurance companies have been posed by an unprecedented wave of mergers and acquisitions in the insurance industry and the emergence of non-traditional competitors such as banks, mutual fund companies and investment advisory firms. This is the first book to analyze the determinants of firm performance in the life insurance industry by identifying the `best practices' employed by leading insurers to succeed in this dynamic business environment. The book draws upon data from insurer financial statements as well as upon an extensive survey of life insurer management practices and strategic choices in distribution systems, information technology, mergers and acquisitions, human resources and financial strategies. Generic strategies such as cost leadership, customer focus, and product differentiation are analyzed as well as strategic practices specific to the insurance industry. Best practices are identified by measuring the economic efficiency of insurers and by comparing firms across the industry. Both cost and revenue efficiency are measured relative to best practice efficient frontiers consisting of the industry's dominant life insurance firms. Economies of scale and the effects of mergers and acquisitions on efficiency are also analyzed. Financial strategies are examined with specific reference to pricing policy, valuation of assets and liabilities, and the current state of firm-level risk management systems. The benchmarks established are the result of extensive fieldwork that identifies key financial risks and methodologies to both measure and manage them at the firm level.
The results discussed in the book indicate that firm performance is significantly correlated with management practices and strategic choices. Thus, life insurers can improve profitability by adopting optimal combinations of strategies. The book contains important new material on the effects of strategic choices in product distributionsystems, information technology, mergers and acquisitions, human resources, and financial risk management policies. In the area of efficiency, the methodology provides a new approach for identifying peer groups of insurers and measuring the performance of individual insurers relative to their peer group. On the topics of risk and pricing, new insights are offered relative to current methodologies and in regard to areas where improvement is clearly warranted. The book concludes with an analysis of the future opportunities and challenges in the life insurance industry facing managers, and the strategic options available to them to cope with these changes.

• Distribution
• Financial Risk Management
• Financial Risks
• Investment
• Risk Management
• efficiency
• human resource management
• insurance
• leadership
• management
• merger
• mergers
• pricing
• technology management
• valuation

• Department of Insurance and Risk Management The Wharton School, The University of Pennsylvania, USA

  J. David Cummins

• Department of Finance The Wharton School, The University of Pennsylvania, USA

  Anthony M. Santomero

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