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Yuan (Sabrina) Du's Abstract

Expansion into a new market has profound implications for a firm's future profitability and growth opportunities. Insurers enter a new market through two channels: writing new lines of business or entering new states. This paper explores insurers' market entry strategies from two perspectives. First, I study the market entry game between potential entrants and the incumbents and provide empirical attest to incumbency advantages in the insurance industry. A structural approach is used to model the endogeneity of the number of market participants and the sequence of entries. Second, I investigate whether the entry costs of state-related and product-related entrants are different. The results indicate that the incumbency advantage exists in the insurance industry and that markets in short-tail lines have relatively fewer entry barriers than those in commercial long-tail lines.