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ResearchPaper
2009
Intermediation and matching in insurance markets
Intermediation and matching in insurance markets
Abstract (English)
This paper addresses the role of independent insurance intermediaries in markets where matching is important. A controversial matter in the discussion concerning insurance intermediation is the issue of compensation customs and how the latter affect prices, rents and advice quality in insurance markets. This work compares a fee-based with a commission-based system. We show that in a situation with a non-strategic intermediary both remuneration systems are payoff-equivalent. In a second step, allowing for strategic behavior, we discuss the impact of remuneration on the quality of advice. The analysis shows that the possibility of mismatching can provide the intermediary with substantial market power which however does not translate into mismatching as long as consumers have rational expectations. We o¤er a rationale for the use of contingent commissions. In addition, this paper addresses whether or not the recent ban of any commission payments as introduced in countries such as Denmark and Finland is an appropriate market intervention.
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FZID discussion papers; 04
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Faculty
Faculty of Business, Economics and Social Sciences
State Institutes
State Institutes
Institute
Institut für Haushalts- und Konsumökonomik (bis 2010)
Forschungszentrum Innovation und Dienstleistung
Forschungszentrum Innovation und Dienstleistung
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Language
English
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Classification (DDC)
330 Economics