Intermediation and (Mis-)Matching in Insurance Markets-Who Should Pay the Insurance Broker?

Focht, Uwe; Richter, Andreas and Schiller, Jörg (2012): Intermediation and (Mis-)Matching in Insurance Markets-Who Should Pay the Insurance Broker? In: Journal of Risk and Insurance, Vol. 80, No. 2: pp. 329-350

Abstract

This article addresses the role of independent insurance intermediaries in markets where matching is important. We compare fee-based and commission-based compensation systems and show that they are payoff equivalent if the intermediary is completely honest. Allowing for strategic behavior, we discuss the impact of remuneration on the quality of advice. The possibility of mismatching gives the intermediary substantial market power, which will not translate into mismatching if consumers are rational. Furthermore, we offer a rationale for the use of contingent commissions and address whether or not the ban of any commission payments is an appropriate market intervention.

• Item Type: Journal article
• Faculties: Munich School of Management > Institute for Risk Management and Insurance
• Subjects: 300 Social sciences > 330 Economics
• ISSN: 00224367
• Language: English