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Valuation and Value Creation of Insurance Intermediaries

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Claudia Max

The book offers a comprehensive analysis of insurance intermediaries from a capital markets perspective. It presents an up-to-date market perspective, drawing the attention to the important trends and developments in the industry and recommends strategies to secure future growth. Further, it offers a detailed description of a valuation approach specifically tailored to small and mid-sized brokers. Research on insurance intermediary M&A reveals that positive abnormal returns are achieved for acquirers. The author points out which factors lead to value creation and investigates performance drivers in the tied agent channel.
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2 Agents and Brokers in the Insurance Industry: an Intriguing Area for further Research

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The following chapter builds the foundation for the three subsequent sections. The chapter starts with an outline of the different distribution systems employed in the insurance industry. Thereafter, it concentrates on insurance intermediaries and describes their specific characteristics and business activities. The subsequent market overview aims at providing a summary on relevance and market structure of the intermediary industry in Europe and North America. The chapter concludes with a discussion of challenges and internal issues of the industry and depicts strategies for counteraction.

2.1 Definition and Business Description

The distribution function possesses a pivotal role in the value chain of insurance carriers. Representing the interface to the customer, there is almost no activity an insurer performs where distribution is not involved (Schareck 2005, p. 88). The first section of this chapter describes the different insurance distribution channels. The second section outlines the activities and functions of insurance intermediaries. In the last section, the characteristics and differences of agents and brokers are summarized.

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