Paradoxical price effects on insurance markets

József Banyár and Gábor Regős ()

Economic Modelling, 2012, vol. 29, issue 4, 1399-1407

Abstract: In this paper we analyze a paradox phenomenon in certain insurance markets of some countries: in spite of there being strong competition, increasing prices can be found in some submarkets. As a reason for this, we need to note the special distribution of insurance products, a distribution primarily based on intermediaries — and, as a result, there is an increasing part for ‘intermediation’ costs within insurance products' cost structure due to competition for the intermediaries. We build an oligopolistic model assuming that the market is saturated, which is able to explain the overemployment of intermediaries and the high commissions involved. We analyze possible interventions and laws/regulations and suggest that the problem can be solved only with major regulation. Finally, we have come up with an empirical analysis to test the model.

Keywords: Insurance intermediaries market; Price increasing competition; Oligopolistic model; Insurance intermediary regulation (search for similar items in EconPapers)
JEL-codes: C72 D43 G22 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:4:p:1399-1407

DOI: 10.1016/j.econmod.2012.02.018

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