on into the reasons for the decline in the number of independent insurance agencies operating in California.
Since the mid-1980s, two important changes have occurred that offer potential explanations for the declining fortunes of independent insurance agencies operating within California. The first of changes involved a restructuring of insurance regulation by the State of California. Within this context, the voters of California approved Proposition 103 (Kertesz, 1991, p. 38). Proposition 103 provided the state with additional rate regulatory authority for automobile insurance that included the rolling-back of rates in place at the time the initiative was approved. Simultaneously, several state insurance regulatory boards including the one in California initiated a policy whereby investment income, particularly that derived directly from the investment of premiums, would be considered in the insurance rate-setting process (Knowles, 1991, pp. 1, 6-7). Changes in the insurance regulatory environment in California led to the second important change with a potential to affect to viability of independent insurance agencies. Responding the regulatory changes, some underwriters decided to cease operations within California, while others implemented operational changes that affected both the levels of premium income and operating expenses of independent insurance agencies (PIA national, 1991, p. 9; McCoy, 1992, pp. 24-27). The role of changes in underwriter operational orientations and changes in the California insurance regulatory environment in the decline of the number of independent insurance agencies operating within the State of California was investigated through the conduct of this study.
Two research questions were investigated in this study. These questions were as follows:
1. Were operational changes introduced by insurance underwriters beginning in 1989 associated with the subsequent decline in the number of indep...