Details
| Original language | English |
|---|---|
| Journal | GENEVA Risk and Insurance Review |
| Volume | 46 |
| Issue number | 1 |
| Early online date | 13 Jan 2020 |
| Publication status | Published - Mar 2021 |
Abstract
This paper investigates the dynamics of an insurance market on which insurance companies may dishonestly deny eligible claims. Behaving dishonestly can increase the current profit but also entails the risk of losing profit in the future due to a worse reputation. Depending on the reputation cost imposed by policyholders, the analysis either predicts the emergence of reputation cycles or convergence to a stable equilibrium in which all eligible claims are accepted and the insurers’ reputations remain at a high level. I also show that policyholders may discipline insurers using a buying strategy based on an image-scoring rule. My results lead to important insights. For instance, reputation campaigns may have a pro-cyclic effect which leads to more severe reputation crises in the future.
Keywords
- Dishonest insurers, Insurance market, Reputation
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Business, Management and Accounting(all)
- Business, Management and Accounting (miscellaneous)
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: GENEVA Risk and Insurance Review, Vol. 46, No. 1, 03.2021.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - The economics of dishonest insurance companies
AU - Siemering, Christian
N1 - Funding Information: Acknowledgements I declare that I have no conflict of interest. I am grateful to Ingela Alger, Heidrun Hoppe-Wewetzer, Georgios Katsenos, Felix Klapper, Hannes Maxin, Andreas Wagener, two anonymous referees, and many seminar participants for helpful comments and suggestions. Financial support by the Internationalization Fond of the Leibniz University of Hannover is gratefully acknowledged.
PY - 2021/3
Y1 - 2021/3
N2 - This paper investigates the dynamics of an insurance market on which insurance companies may dishonestly deny eligible claims. Behaving dishonestly can increase the current profit but also entails the risk of losing profit in the future due to a worse reputation. Depending on the reputation cost imposed by policyholders, the analysis either predicts the emergence of reputation cycles or convergence to a stable equilibrium in which all eligible claims are accepted and the insurers’ reputations remain at a high level. I also show that policyholders may discipline insurers using a buying strategy based on an image-scoring rule. My results lead to important insights. For instance, reputation campaigns may have a pro-cyclic effect which leads to more severe reputation crises in the future.
AB - This paper investigates the dynamics of an insurance market on which insurance companies may dishonestly deny eligible claims. Behaving dishonestly can increase the current profit but also entails the risk of losing profit in the future due to a worse reputation. Depending on the reputation cost imposed by policyholders, the analysis either predicts the emergence of reputation cycles or convergence to a stable equilibrium in which all eligible claims are accepted and the insurers’ reputations remain at a high level. I also show that policyholders may discipline insurers using a buying strategy based on an image-scoring rule. My results lead to important insights. For instance, reputation campaigns may have a pro-cyclic effect which leads to more severe reputation crises in the future.
KW - Dishonest insurers
KW - Insurance market
KW - Reputation
UR - http://www.scopus.com/inward/record.url?scp=85077850678&partnerID=8YFLogxK
U2 - 10.1057/s10713-019-00047-7
DO - 10.1057/s10713-019-00047-7
M3 - Article
AN - SCOPUS:85077850678
VL - 46
JO - GENEVA Risk and Insurance Review
JF - GENEVA Risk and Insurance Review
SN - 1554-964X
IS - 1
ER -