Jian Wen Georgia State University ARIA 2007, Quebec City Brief Discussion on Chen et al.’s Nonspecialized Strategy versus Specialized Strategy: Evidence from the Property-Liability Insurance Industry Jian Wen Georgia State University ARIA 2007, Quebec City

Review of the Paper Contribution Methodology and Data First to examine the efficiency performance and scope economy for nonspecialists and specialists for property and liability industry in the U.S. Methodology and Data Data Envelopment Analysis (DEA) and Stochastic Frontier Approach NAIC for PL insurers from 1997 to 2004 08/06/2007 ARIA’07 Discussion

Review of the Paper (Cont.) Results Small nonspecialists are more likely to realize cost scope economy and suffer revenue and profit scope diseconomies compared to larger ones. Both the nonspecialists hypothesis and the specialists hypothesis hold for different types of property-liability insurers. 08/06/2007 ARIA’07 Discussion

Suggestions More detailed descriptions of data analysis Apply alternative translog model in scope economy estimation in case outputs are equal to zero. Some quoted papers are not listed in the references, such as Vivian and Lai (1995) on page 2. 08/06/2007 ARIA’07 Discussion

Suggestions (Cont.) It’ll be interesting to study this topic in the framework of financial integration after Gramm-Leach-Bliley Act of 1999, which is theoretically predicted to affect the efficiency performance and scope economies of an involved insurer. 08/06/2007 ARIA’07 Discussion