An Examination of Cost Economies in the United States Life Insurance Industry: ABSTRACT

Using an industry sample of 423 U.S. life insurers, this study reports estimates of overall and product specific scale economies, as well as, pair-wise cost comple-mentarities for a wide variety of products. Estimates of these cost characteristics are provided for numerous output vectors since theory suggests that the magnitude of scale economies and cost complementarities may vary with the scale and mix of outputs. In contrast, previous studies only provide a single point estimate of industry cost characteristics using the sample mean output vector. This study, therefore, provides a more complete representation of the industry's cost characteristic and, in turn, new insights into decisions related to the optimal scale and mix of outputs.