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Disclosure, Trust and Persuasion in Insurance Markets

81 Pages Posted: 26 Jul 2010  

David de Meza

London School of Economics & Political Science (LSE) - Interdisciplinary Institute of Management

Bernd Irlenbusch

London School of Economics & Political Science - Department of Management; IZA Institute of Labor Economics

Diane J. Reyniers

London School of Economics & Political Science (LSE) - Interdisciplinary Institute of Management

Abstract

This high-stakes experiment investigates the effect on buyers of mandatory disclosures concerning an insurance policy's value for money (the claims ratio) and the seller's commission. These information disclosures have virtually no effect despite most buyers claiming to value such information. Instead, our data reveal that whether the subject is generally trusting plays an important role. Trust is clearly associated with greater willingness to pay for insurance. Unlike in previous work, trust in our setting is not about obligations being fulfilled. The contract is complete, simple and the possibility of breach is negligible. However, as for much B2C insurance marketing, face-to-face selling plays a crucial role in our experimental design. Trusting buyers are more suggestible, so take advice more readily and buy more insurance, although they are no more risk averse than the uninsured. Moreover, trusting buyers feel less pressured by sellers, and are more confident in their decisions which suggests that they are easier to persuade. Therefore, in markets where persuasion is important, public policy designed to increase consumer information is likely to be ineffective.

Keywords: insurance selling, trust, persuasion

JEL Classification: C91, G22, M30

Suggested Citation

de Meza, David and Irlenbusch, Bernd and Reyniers, Diane J., Disclosure, Trust and Persuasion in Insurance Markets. IZA Discussion Paper No. 5060. Available at SSRN: https://ssrn.com/abstract=1648345

David Emmanuel De Meza (Contact Author)

London School of Economics & Political Science (LSE) - Interdisciplinary Institute of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Bernd Irlenbusch

London School of Economics & Political Science - Department of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 (0)20 7955 7840 (Phone)
+44 (0)20 7955 6887 (Fax)

HOME PAGE: http://www.lse.ac.uk/collections/management/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Diane J. Reyniers

London School of Economics & Political Science (LSE) - Interdisciplinary Institute of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 020 7955 7921 (Phone)

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