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The impact of intermediary remuneration in differentiated insurance markets
| Content Provider | EconStor |
|---|---|
| Author | Hofmann, Annette Nell, Martin |
| Abstract | This article deals with the impact of intermediaries on insurance market transparency and performance. In a market exhibiting product differentiation and coexistence of perfectly and imperfectly informed consumers, competition among insurers leads to non-existence of a pure-strategy market equilibrium. Consumers may become informed about product suitability by consulting an intermediary. We explicitly model two intermediary remuneration systems: commissions and fees. We find that social welfare under fees is first-best efficient but fees lead to lower expected profits of insurers and non-existence of a pure-strategy market equilibrium. Commissions, in contrast, cause 'overinformation' of consumers relative to minimal social cost, but yield a full-information equilibrium in pure strategies associated with higher expected profits of insurers. This might explain why intermediaries are generally compensated by insurers. |
| File Format | |
| Language | English |
| Publisher | Univ., Institut für Versicherungsbetriebslehre |
| Publisher Date | 2008-01-01 |
| Publisher Place | Hamburg |
| Access Restriction | Open |
| Rights Holder | http://www.econstor.eu/dspace/Nutzungsbedingungen |
| Subject Keyword | product differentiation intermediation insurance oligopoly Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection Insurance; Insurance Companies; Actuarial Studies Oligopoly and Other Imperfect Markets |
| Content Type | Text |
| Resource Type | Article |
