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Universität Hamburg (UHH) >
Hamburger Zentrum für Versicherungswissenschaft (HZV) - Institut für Versicherungsbetriebslehre, Universität Hamburg >
Working Papers on Risk and Insurance, Institut für Versicherungsbetriebslehre, Universität Hamburg >
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http://hdl.handle.net/10419/54216
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| Title: | | The impact of intermediary remuneration in differentiated insurance markets  |
| Authors: | | Hofmann, Annette Nell, Martin |
| Issue Date: | | 2008 |
| Series/Report no.: | | Working Papers on Risk and Insurance 22 |
| 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. |
| Subjects: | | product differentiation intermediation insurance oligopoly |
| JEL: | | D43 G22 L13 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Papers on Risk and Insurance, Institut für Versicherungsbetriebslehre, Universität Hamburg
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