The role of distribution channels in market discipline for the life insurance industry

Abstract

This paper investigates the role of distribution channels in market discipline for the life insurance industry as marketing intermediaries help transmit information between insurers and consumers. Based on life insurance data in Taiwan during 2004-2013, the paper analyses the relationship between insurance demand and insurers' enterprise risk considering the effect of the distribution channel. The empirical results suggest that the distribution channel is an influential factor in insurance demand. The results also show that insurance demand and choice of distribution channel in Taiwan are responsive to insurers' enterprise risk. These findings suggest that insurance commissioners should consider the role of marketing intermediaries when market discipline is adopted as an approach for surveillance of the insurance market.

Enhancing Unit-linked Insurance Consumer Loyalty: The Role of Service Quality, Information Asymmetry, and Agent Marketing Strategies

“…In practice, consumers are usually unable to directly assess information about the insurance company and the products they sell. Instead, consumers make assessments with the help of marketing intermediaries, namely insurance agents (Chen, 2021). The extent of information highly depends on the intensity of consumer needs, quantity of information acquired, and ease of accessing information (Andini et al, 2023).…”

The Future of Insurance Intermediation in the Age of the Digital Platform Economy

“…The main task here is to organize the search and comparison of products and suppliers. Customers need intermediaries because finding the right insurance product is difficult due to its complexity (Cummins and Doherty 2006;Eckardt and Räthke-Döppner 2010;Focht et al 2013;Köhne and Brömmelmeyer 2018;Ramchander 2016), low financial literacy (Chen 2021;Ramchander 2016), variability, and non-commoditization or because consumer risk profiles and risk attitude are heterogeneous (Schwarcz and Siegelman 2015). The role of matchmakers is generally attributed to the presence of asymmetric information (Eckardt and Räthke-Döppner 2010), which is complicated by the existence of a large number of products and infrequent purchases (Bailey and Bakos 1997).…”

“…In a regulatory role, the intermediary authenticates the contractual parties, monitors and prevents opportunistic behavior, guarantees service and payment, supports the fulfillment of the claims service promise, and reduces adverse selection and moral hazard problems for the insurer. Trust in the ability and willingness of the supplier to fulfill its pledge in (uncertain) future events is critical for insurance customers (Chen 2021). Intermediaries can advocate, for example, claims service regarding amounts paid or prompt payment (Dominique-Ferreira 2018; Liu et al 2017;Schwarcz 2021).…”

“…Since the intermediary has a reciprocal relationship with both parties, the intermediary is better positioned to authenticate transactions between the parties and mitigate potential issues (Dahlen and Napel 2004). Intermediaries encourage market discipline by reducing the "lemons" and adverse selection problems (Chen 2021). Schwarcz (2021, p. 520) further adds that intermediaries can overcome collective action problems and play a role in advancing consumer interests to policy makers.…”