Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 14

ANALYZING MANAGERIAL DECISIONS: Insurance Industry Distribution Systems
Insurance companies contract with independent agents to sell policies and provide ongoing services to customers. Ongoing client services tend to be more important in auto insurance companies than life insurance companies. In some insurance companies, the agents "own" the client list. If they stop representing the firm, they can take the clients with them to a new company. In other cases, the insurance company owns the list. The agent is not allowed to take clients to another company. (There is a formal contract with this provision.) Do you think life insurance companies or auto insurance companies are more likely to employ independent agents who own their client lists Explain.