Market structure, conflict and performance of firms in the Insurance Industry: Evidence from Zambia

Abstract

This paper examines the relationship between market structure, conduct, performance (SCP) in the insurance industry specifically focusing on general and long term insurance by employing a simultaneous equations framework. The empirical analysis was based on quarterly data gathered on fifteen general insurance companies and seven long term insurance companies from 2005 to 2013. The paper developed market share as a proxy for market structure, advertising intensity as a proxy for market conduct and profitability as a proxy performance. Further, the researcher used three Stage Least Squares (3SLS) estimation method to examine the relationship between market structure, conduct and performance using market share, advertising intensity and profitability as proxies respectively. The 3SLS results from the study found that the SCP hypothesis did not hold in both the long term and general insurance industry as the efficient market hypothesis was more likely to apply.