Information Asymmetry
- 1970 - AP - The Market for 'Lemons': Quality Uncertainty and the Market Mechanism, by George Akerlof - 15p
- Thirty-one years ago, Mark S. Dorfman (1972) concluded that workable competition did not exist in the market for life insurance products because of industry marketing practices that tended to exacerbate the insurance consumer’s ignorance and the problem of information asymmetry inherent in the industry.
- Utterances by both industry representatives and industry critics suggest Dorfman’s assessment may still linger today.
2004 - LR - Workable Competition and the Life Insurance Market: A Quantitative Analysis - 12p
- (ii) - The concept of informational asymmetries that favour life insurance firms against consumers is central to our analysis of life insurance markets.
- If consumers could sort life insurance policies and firms by their true valuation of policy options and riders, savings elements, and qualities of the management of firms so that price variation would reflect only the differing characteristics of products that reflect, in turn, the differing needs of consumers, i.e. known differences in quality, then any government information program would be unnecessary.
- Unfortunately, there is no reason to believe this is the case and every reason to believe that exactly the opposite holds.
- If consumers could sort life insurance policies and firms by their true valuation of policy options and riders, savings elements, and qualities of the management of firms so that price variation would reflect only the differing characteristics of products that reflect, in turn, the differing needs of consumers, i.e. known differences in quality, then any government information program would be unnecessary.
1981 - Regulation Of Canadian Markets For Life Insurance, by G.F. Mathewson and R.A. Winter. A final report submitted to the Department of Consumer and Corporate Affairs, Government of Canada - 94p