Remunerating Information Providers: Commissions versus Fees in Life Insurance

Research output: Contribution to journalArticlepeer-review

Abstract

Life insurance policies are complex financial products. Potential purchasers can be informed and advised by brokers who are remunerated either by commissions paid by the insurer or by a fee paid by the potential consumer. This article models the determination of the price of advice, the price of the product and the quality of advice under the two remunerations systems. The model predicts that the weak market position of consumers will be exploited, even when advice and the product are sold separately. Neither remuneration system will achieve even a second-best efficient allocation.
Original languageUndefined/Unknown
Pages (from-to)425-57
JournalJournal of Risk and Insurance
Volume61
Issue number3
Publication statusPublished - 1994

Keywords

  • Insurance Insurance Companies (G220) Financial Institutions and Services: Government Policy and Regulation (G280)

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