Agent and Broker Intermediaries in Insurance Markets -- An Empirical Analysis of Market Outcomes

Insurance markets are characterized by profound market imperfections. Insurance intermediaries reduce transaction costs and information asymmetries. From transaction cost economics, agency theory, and law and economics literature the hypothesis is derived that insurance brokers may provide more high-quality information and advisory services which are better suited for the needs of the consumers than insurance agents. Empirical tests for German insurance intermediaries confirm this thesis. But there are also findings that structural factors like firm size, employment structure and degree of specialization may outweigh the incentives set by different legal settings. JEL-classification: D82, G140, G220, L15 1 Paper presented at the 6 annual meeting of the International Society for New Institutional Economics, Cambridge/Mass., September 27-29, 2002. I’d like to thank Annette van den Berg, Wolfgang Kerber, Doris Neuberger, Roland Speklé, and the discussants of the Workshop on Institutional Analysis held by ISNIE-Europe in Barcelona, June 28-29, 2002 for their comments on an earlier draft of this paper. All errors are, of course, my own.