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UBC Theses and Dissertations

Retail price competition in Canadian whole life insurance Mitchell, David Hoadley

Abstract

Problems of price analysis and price comparisons at the retail level in whole life insurance are so complex as to be well beyond comprehension to the average purchaser. In addition to the initial difficulties arising from the combination of savings and insurance protection which exist in whole life insurance policies many variables exhibit influence in the analysis of retail whole life insurance prices. The determination of price is no easy task but is ably accomplished by the level-price method which is utilized in this study. Competition, it is often expressed, should function as a sufficient deterrent against the charging of excessive prices. From economic theory the concept of effective competition dictates that prices need not be completely uniform but that they ought not to exhibit substantial diversity and that they should be flexible. The flexibility of prices in whole life insurance is restricted, by the nature of the product, to changes on an annual basis. Evidence from this study, based on 1967 data, indicates that substantial price disparity between different companies is existent in various types of whole life insurance policies offered in Canada. Competition however, operates as well on variables other than price. The extent to which the existent price disparity reflects the costs of the added variables is not completely clear. While this study only views the price competition situation at one point in time, and is therefore restricted from the advantages of conclusions based on broad foundations in time, it nevertheless appears evident that while no conclusions can be made here on competition as a whole, competition on the basis of price alone is less than wholly effective.

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