Abstract
Performance benchmarking is applied to measure the profit and cost efficiency of UK life insurance products that are required by “polarization” regulations to be distributed through either independent financial advisers (IFA) or appointed and/or company representatives (AR/CR). Relative profit and cost efficiencies are assessed using the fourier flexible form econometric procedure and are based on detailed product‐level disclosure information. United Kingdom life insurance firms employing IFA distribution systems are found to be more cost and profit inefficient than AR/CR firms. The results imply that polarization exacerbated product mis‐selling practices, even after controlling for the effects of organizational form and size.
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