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The Quality of Insurance Intermediary Services – Empirical Evidence for Germany

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Author Info
Eckardt, Martina
Räthke-Döppner, Solvig

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Abstract

Insurance intermediaries help consumers to economize on information and transaction costs in insurance markets. However, competing insurance intermediaries provide heterogeneous services, which are difficult to assess by incompletely informed consumers. Transaction costs economics, search theory and principal agent theory provide arguments on product quality differences between the two main distribution channels in insurance markets (exclusive agents vs. independent intermediaries). The present paper uses a sample of 927 insurance intermediaries in Germany. By performing OLS estimations we test the impact of the different distribution channels, but also of other factors relating to the information processing activities on intermediaries’ service quality. Depending on the proxies used for service quality, we find mixed evidence for the “product quality” hypothesis according to which independent intermediaries provide better service quality than exclusive agents. We find that service quality depends also to a large extent on the information gathering and processing activities of the individual intermediaries.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10703.

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Date of creation: Sep 2008
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Handle: RePEc:pra:mprapa:10703

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Related research
Keywords: Insurance Distribution Channels; Service Quality;

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lucinda Trigo Gamarra, 2007. "Does the Product Quality Hypothesis Hold True? - Service Quality Differences between Independent and Exclusive Insurance Agents," Thuenen-Series of Applied Economic Theory 76, University of Rostock, Institute of Economics, Germany. [Downloadable!]
  2. Hugh Gravelle, 1993. "Product Price and Advice Quality: Implications of the Commission System in Life Assurance," The Geneva Risk and Insurance Review, Palgrave Macmillan Journals, vol. 18(1), pages 31-53, June. [Downloadable!] (restricted)
  3. Lucinda Trigo Gamarra, 2007. "Single- versus Multi-Channel Distribution Strategies in the German Life Insurance Market: A Cost and Profit Efficiency Analysis," Thuenen-Series of Applied Economic Theory 81, University of Rostock, Institute of Economics, Germany. [Downloadable!]
  4. Posey, Lisa L. & Tennyson, Sharon, 1998. "The coexistence of distribution systems under price search: Theory and some evidence from insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 95-115, March. [Downloadable!] (restricted)
  5. Spulber, Daniel F, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-52, Summer. [Downloadable!] (restricted)
  6. Martina Eckardt, 2002. "Agent and Broker Intermediaries in Insurance Markets -- An Empirical Analysis of Market Outcomes," Thuenen-Series of Applied Economic Theory 34, University of Rostock, Institute of Economics, Germany. [Downloadable!]
  7. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law & Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  8. E. Philip Davis, 2004. "Is there a Pensions Crisis in the U.K.?," The Geneva Papers on Risk and Insurance, The International Association for the Study of Insurance Economics, vol. 29(3), pages 343-370, 07. [Downloadable!] (restricted)
    Other versions:
  9. Hirshleifer, Jack, 1973. "Where Are We in the Theory of Information?," American Economic Review, American Economic Association, vol. 63(2), pages 31-39, May. [Downloadable!] (restricted)
  10. Joong, K.W. & mayers, D. & Smith, C.V., 1996. "On the Choice of Insurance Distribution Systems," The A. Gary Anderson Graduate School of Management 96-15, The A. Gary Anderson Graduate School of Management. University of California Riverside.
  11. Doris Neuberger & Solvig Räthke, 2009. "Microenterprises and multiple bank relationships: The case of professionals," Small Business Economics, Springer, vol. 32(2), pages 207-229, February. [Downloadable!] (restricted)
  12. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr. [Downloadable!] (restricted)
  13. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
    Other versions:
  14. J. David Cummins & Neil A. Doherty, 2006. "The Economics of Insurance Intermediaries," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(3), pages 359-396. [Downloadable!] (restricted)
  15. J. David Cummins & Jack VanDerhei, 1979. "A Note on the Relative Efficiency of Property-Liability Insurance Distribution Systems," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 709-719, Autumn. [Downloadable!] (restricted)
  16. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law & Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
  17. Paul L. Joskow, 1973. "Cartels, Competition and Regulation in the Property-Liability Insurance Industry," Bell Journal of Economics, The RAND Corporation, vol. 4(2), pages 375-427, Autumn. [Downloadable!] (restricted)
  18. Sass, Tim R & Gisser, Micha, 1989. "Agency Cost, Firm Size, and Exclusive Dealing," Journal of Law & Economics, University of Chicago Press, vol. 32(2), pages 381-400, October.
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