Individual Decisions for Health

By Björn Lindgren | Go to book overview

11

The production and regulation of insurance

Limiting opportunism in proprietary and non-proprietary organizations

Tomas Philipson and George Zanjani


Introduction

It is often argued that the existence of nonprofit and consumer-owned enterprises arises from asymmetric information and incentive conflicts between producers and consumers. When quality is unobservable and costly to monitor, alternatives to proprietary ownership may be desirable if they can be utilized to limit opportunistic behaviour by producers (see, for examples, Hansmann, 1996; Weisbrod, 1988).

Because of a relatively long gap between payment and product delivery, the insurance product is thought to be especially vulnerable to opportunistic actions that jeopardize company solvency. That is, producers are tempted to take actions that increase profits but threaten product quality by making it less likely that the firm will be able to meet its obligations. Such behaviour may take a variety of forms. For example, companies controlled by shareholders might speculate with the company’s assets, neglect costly risk management activities, or even distribute excessive amounts to shareholders through dividends. Nonprofit and mutual firms, however, are not affected by a profit motive. Nonprofits cannot distribute profits to owners, and the owners of mutuals are the consumers themselves. Because of this, management is argued to act in the interest of the policyholder, safeguarding the company’s solvency. 1

Thus, non-proprietary organizations would seem to have significant advantages in the production of insurance, especially for contracts where the gap between payment and final delivery is long, such as life insurance, long-term care insurance, renewable health insurance, and workers’ compensation insurance. Yet, non-proprietary firms are the minority players in all major segments of the US insurance industry and do not appear to have market shares that vary across markets in a manner that would support this theory. In 1997, mutuals had a market share of roughly 35 per cent in both the property-casualty and life-health industries, and nonprofits accounted for about 35 per cent of Human Maintenance Organization (HMO) premiums. 2 Furthermore, coexistence of stock and non-proprietary firms has persisted throughout US history (see, for example, Zanjani, 2000), spanning a variety of different economic situations and regulatory regimes.

-194-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Individual Decisions for Health
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 256

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.