Economies of Scale in the Auto Insurance Industry

Open Access
Author:
Eastman, Evan Mark
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Ron Gebhardtsbauer, Thesis Supervisor
  • James R. Tybout, Honors Advisor
Keywords:
  • Economies
  • Scale
  • Insurance
  • Auto
  • Economics
Abstract:
This thesis explores economies of scale for insurance firms. It begins with a discussion on the theory economies of scale and firm efficiency. There is also a literature review concerning previous studies on economies of scale in various insurance industries. To conclude, a sample of auto insurance firms chartered in New York over a period from 2006 to 2009 is analyzed for evidence of economies of scale. This was achieved using data from AM Best Insurance Ratings Guide. Ordinary Least Square and Fixed Effect regressions are run and provide similar results that suggest economies of scale exist for the sample of insurance firms.