Mobile application sales channel and insurance market: performance, information asymmetry and technology risk
Creators: name: Xu, Wei
Publisher: name: University of Limerick
Year: 2023
Subjects: classificationCode: 350103
subject: Financial accounting

description: The rise and ubiquity of the mobile Internet has been one of the most outstanding technological innovations of the past decade, facilitating customer-oriented digital transformation. Within the insurance value chain, digitization of the consumer interface and the resultant mobile application sales channel have been one of the more successful adaptations of a digital strategy. China's market of digital insurance distribution and the associated vibrant environment of Insurtech innovations have accumulated a rich dataset, allowing for a research agenda to better understand the microeconomic impacts and mechanisms of the mobile application sales channel in the insurance market. This understanding is not only crucial for insurance industry in decision-making on digital distribution strategy, but also generally revealing for other industries under the broad context of the digital economy. However, there exists a deficit of relevant academic studies at this time. As such, in this thesis examines how and why the adoption of the mobile application sales channel affects the sales and profits of insurance companies. This fundamental question is the first concern of insurance companies when considering a digital distribution strategy. The research in this thesis quantifies the microeconomic effects, evaluates heterogeneity effects and explores the underlying mechanisms.Chapter 1 details the sales and profits analysis frameworks which then allow for the effective research design and ability to interpret the research results. The sales analysis framework decomposes the effect of the mobile application sales channel on insurance sales into the changes of policy quantity, received premiums, insured amount choices, observed risk and price, which are addressed in Chapters 2 and 4. The profits analysis framework highlights the effects of the mobile application sales channel on information asymmetry and technology cost, which are addressed in Chapters 3 and 5.Specifically, Chapter 2 empirically assesses the effects of the mobile application sales strategy on the quantities and received premiums of sold policies through the Event Study analyses. This chapter also presents a variety of heterogeneity analyses on different demographic groups and examines proposed reasons of price adjustment and insurance access. It also disentangles previously controversial channel cannibalization. This chapter complements the insurance literature on the sales performance of digital distribution. Chapter 3 theorizes and empirically documents how digital distribution engages with information asymmetry to achieve advantageous risk screening on consumers. This chapter also investigates the effect of introducing digital distribution on underwriting profitability and explores its extensive margin and intensive margin. By demonstrating the advantageous risk screening effect and examining the associated mechanisms including channel capability and channel preference, this chapter links insurance literature, risk selection literature and digital economics literature. Chapter 4 empirically studies the inclusion of mobile insurance on the demand of low- and high-insured-amount policies. This study is also an extension of the heterogeneity analysis in terms of insured amount choices. It is found that mobile insurance is more inclusive than traditional insurance by generating greater incentives to the growth of low-insured-amount policies associated with low-income population than to that of high-insured-amount policies. By intersecting financial inclusion and digital distribution, this chapter contributes to the literature in both fields. Chapter 5 identifies the changing perception of cyber risk and associated cyber risk sources by using a novel methodology which combines Natural Language Processing methods and statistical methods. This study takes a cost perspective when it comes to the effect of the digital technology adoption on profitability, which makes the research perspectives of this thesis integrated. This chapter methodologically and insightfully innovates both the cyber risk literature and risk perception literature.The findings of this thesis generate significant implications on decision-making of the digital distribution strategy to the insurance industry, and implications on financial inequality andcyber risk to financial regulators. In the academic sense, this thesis not only fills in the gap of empirical literature on the impacts of digital distribution on insurance business performance, but also at a high level, deepens the understandings of how digital distribution improves the efficiency and affects the structure of the insurance mark.