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Kylie Braegelmann, Institute for Health Care & Public Management, University of Hohenheim; Joerg Schiller, University of Hohenheim
In the German market for private substitutive health insurance, new business is very limited and brokers have significant market power. As a result, commissions paid to brokers were high, leading also the industry to request regulatory action. A goal of the reform was to dampen acquisition costs. In 2012, commissions for substitutive private health insurance were capped at 9 monthly premiums and a broker cancellation liability period was introduced. We use panel data on German insurers from 2007 to 2018 to analyze the consequences of the commission cap. We provide evidence that the cap did not lead to the intended effect, as the cap did not affect relative acquisition costs and acquisition costs per new contract. Furthermore, we find some evidence that the reform led to a decrease in new business in the substitutive market, while total acquisition costs remained stable over time.
