Documentos de Trabajo “The Chilean Electronic Market for Annuities (SCOMP): Reducing Information Asymmetries and Improving Competition”

The Chilean Electronic Market for Annuities was created in 2004 in order to correct several malfunctions of the market for annuities. The Chilean Pension System is composed of two phases. On the accumulation phase, savings are collected and managed by asset managers. The payout phase consists in pension payments mainly in the form of annuities and programmed withdrawals. The market for annuities is the interface between these two phases and therefore, any excessive transaction costs in this market will have direct implication in the final pension. The SCOMP or Electronic Consultation and Offer System for Annuities and Phased Withdrawals, replaced the traditional way the pensioners looked for and bought retirement products in the Chilean market. This electronic quotation system was created to help reducing search costs for both retirees and suppliers of retirement products (Life Insurance Companies and Pension Fund Administrators), as well as diminishing room for manipulation by individual brokers. This paper presents and analyzes the main features of the Chilean electronic quotation system, with particular attention to its effects on the industry competitiveness. To this end, statistical evidence is presented to evaluate the benefits of the system in terms of information transparency and price competition in the market. * The authors are grateful of the outstanding research assistance by Juan Ignacio Zucal, as well as helpful comments and suggestions by Osvaldo Macias, Ernesto Rios, Roberto Rocha, and Dimitri Vittas. a Superintendencia de Valores y Seguros, Chile b Universidad Diego Portales, Chile.