A new study from Wharton, funded by the AIA, concludes that while contingent commissions can be the subject of abuse, they may also benefit policyholders in some ways, especially if they involve profit-based contingencies. Aligning the intermediaries interests with the insurers may relieve the spector of adverse selection and the "winners curse," by providing insurers with more confidence in the quality of the risk being placed. This may encourage more competitive bidding for business.
This Wharton study was funded by the American Insurance Association (AIA), and is available in full text online at Insurance Journal's website. Cummins & Doherty, "The Economics of Insurance Intermediaries," Wharton School, May 20, 2005.
Source: Insurance Journal. Wharton Study Finds Agents, Brokers Play Critical Role in Buying Process
See also: Unintended Consequences: Testimony to Senate Panel on Insurance Brokers
And: Unintended Consequences: NAIC Model Law on Broker Disclosures Criticized by CT A.G. Blumenthal
Posted by dougsimpson at June 9, 2005 09:11 AM