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Disclosure, Trust and Persuasion in Insurance Markets

Author

Listed:
  • de Meza, David Emmanuel

    () (London School of Economics)

  • Irlenbusch, Bernd

    () (University of Cologne)

  • Reyniers, Diane

    () (London School of Economics)

Abstract

This high-stakes experiment investigates the effect on buyers of mandatory disclosures concerning an insurance policy's value for money (the claims ratio) and the seller's commission. These information disclosures have virtually no effect despite most buyers claiming to value such information. Instead, our data reveal that whether the subject is generally trusting plays an important role. Trust is clearly associated with greater willingness to pay for insurance. Unlike in previous work, trust in our setting is not about obligations being fulfilled. The contract is complete, simple and the possibility of breach is negligible. However, as for much B2C insurance marketing, face-to-face selling plays a crucial role in our experimental design. Trusting buyers are more suggestible, so take advice more readily and buy more insurance, although they are no more risk averse than the uninsured. Moreover, trusting buyers feel less pressured by sellers, and are more confident in their decisions which suggests that they are easier to persuade. Therefore, in markets where persuasion is important, public policy designed to increase consumer information is likely to be ineffective.

Suggested Citation

  • de Meza, David Emmanuel & Irlenbusch, Bernd & Reyniers, Diane, 2010. "Disclosure, Trust and Persuasion in Insurance Markets," IZA Discussion Papers 5060, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5060
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    References listed on IDEAS

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    Cited by:

    1. Jim Engle-Warnick & Diego Pulido & Marine de Montaignac, 2016. "Trust, ambiguity, and financial decision-making," CIRANO Working Papers 2016s-44, CIRANO.
    2. Johannes G. Jaspersen, 2016. "Hypothetical Surveys And Experimental Studies Of Insurance Demand: A Review," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 217-255, January.
    3. Delis, Manthos D. & Mylonidis, Nikolaos, 2015. "Trust, happiness, and households’ financial decisions," Journal of Financial Stability, Elsevier, vol. 20(C), pages 82-92.

    More about this item

    Keywords

    insurance selling; trust; persuasion;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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