The Performance of Direct Channel Distribution in the Domestic General Insurance Market

Abstract

The purpose of this paper is to analyse the performance of direct marketing in the domestic general insurance market and to provide useful implications for marketing strategies. We use the data from 2004 to 2008 because the data for the direct marketing is available from 2004. We employ the principal component analysis to produce a single composite performance variable and regress it on the ratio of direct marketing. The results of this study are summarized as follows. The composite performance variable developed in the paper is relevant to representing a mix of technical efficiency, profitability, and financial soundness. The ratio of direct marketing has statistically negative influence on the composite performance variable because many small general insurers use direct marketing and they have lower solvency ratio. We also find that auto and commercial products are appropriate to distribution by direct marketing.