Economies of scale and scope in Finnish non-life insurance are studied
. The production process is separated into cost and portfolio manageme
nt functions. Firms expand their branch network to either gain market
power or informational advantages. There are diseconomies of scale at
firm and economies of scale at branch level, and economies of scope in
production. Large firms in the non-life insurance industry pay a subs
tantial premium to gain market power via branch networks. The retained
premiums-curve of portfolio management is U-shaped and a positive fun
ction of the number of branches. (C) 1997 Elsevier Science B.V.