{"title":"The impact of intermediaries on insurance demand and pricing","authors":"Dongchen Li , Yan Zeng , Yixing Zhao","doi":"10.1016/j.insmatheco.2025.03.002","DOIUrl":null,"url":null,"abstract":"<div><div>We study the impact of an independent insurance intermediary on insurance demand and pricing. The intermediary holds a fiduciary duty to an unsophisticated insurance buyer and adopts two remuneration systems: a fee-for-advice system and a commission system. Insurance contracting between the buyer (via the intermediary) and the insurer is formulated as a Stackelberg insurance game. Our analysis yields closed-form expressions for the buyer's equilibrium indemnity and the insurer's equilibrium premium loading. Subsequently, we explore the effects of fiduciary duty and remuneration arrangements on equilibrium strategies and stakeholder welfare, unraveling several economic implications. We find that the phenomenon of over-insuring at high premiums attributes to the deterioration of fiduciary duty. Additionally, our results point to the potential presence of tacit collusion between the intermediary and insurer. Moreover, we observe that there is no consensus among stakeholders regarding the most favored remuneration system in the market.</div></div>","PeriodicalId":54974,"journal":{"name":"Insurance Mathematics & Economics","volume":"122 ","pages":"Pages 143-156"},"PeriodicalIF":1.9000,"publicationDate":"2025-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Insurance Mathematics & Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0167668725000393","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
We study the impact of an independent insurance intermediary on insurance demand and pricing. The intermediary holds a fiduciary duty to an unsophisticated insurance buyer and adopts two remuneration systems: a fee-for-advice system and a commission system. Insurance contracting between the buyer (via the intermediary) and the insurer is formulated as a Stackelberg insurance game. Our analysis yields closed-form expressions for the buyer's equilibrium indemnity and the insurer's equilibrium premium loading. Subsequently, we explore the effects of fiduciary duty and remuneration arrangements on equilibrium strategies and stakeholder welfare, unraveling several economic implications. We find that the phenomenon of over-insuring at high premiums attributes to the deterioration of fiduciary duty. Additionally, our results point to the potential presence of tacit collusion between the intermediary and insurer. Moreover, we observe that there is no consensus among stakeholders regarding the most favored remuneration system in the market.
期刊介绍：
Insurance: Mathematics and Economics publishes leading research spanning all fields of actuarial science research. It appears six times per year and is the largest journal in actuarial science research around the world.
Insurance: Mathematics and Economics is an international academic journal that aims to strengthen the communication between individuals and groups who develop and apply research results in actuarial science. The journal feels a particular obligation to facilitate closer cooperation between those who conduct research in insurance mathematics and quantitative insurance economics, and practicing actuaries who are interested in the implementation of the results. To this purpose, Insurance: Mathematics and Economics publishes high-quality articles of broad international interest, concerned with either the theory of insurance mathematics and quantitative insurance economics or the inventive application of it, including empirical or experimental results. Articles that combine several of these aspects are particularly considered.
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