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25 Yale L. & Pol'y Rev. 289 (2006-2007)
Beyond Disclosure: The Case for Banning Contingent Commissions

handle is hein.journals/yalpr25 and id is 293 raw text is: Beyond Disclosure: The Case for Banning Contingent Commissions Daniel Schwarczt Intro du ction ..................................................................................................... 2 90 1. The Contingent Commission Debate: Increased Steering vs. Reduced A dverse Selection .................................................................................... 296 A. Contingent Commissions and Inefficient Steering ............................ 296 B. Contingent Commissions and Adverse Selection .............................. 303 C. Other Potential Benefits of Contingent Commissions ....................... 305 1. Contingent Commissions as a Method of Expanding Insurance C o verag e .................................................................................... 306 2. Contingent Commissions as a Protector of Small Agencies ....... 308 3. Contingent Commissions as a Protector of Small Insurers ........ 309 4. Contingent Commissions as a Facilitator ofLimited Insurer- Interm ediary Interactions ........................................................... 310 II. Contingent Commissions in Consumer Insurance Markets ..................... 311 A. Disclosure, Steering, and Trilateral Dilemmas ................................. 312 B. Evaluating the Adverse Selection Argument ..................................... 319 C. Toward Banning Contingent Commissions ....................................... 321 III. Contingent Commissions in Insurance Markets with Sophisticated In su red s ................................................................................................... 3 2 4 A. Steering and Signaling in Sophisticated Insurance Markets ............. 325 B. Mimicry: A New Adverse Selection Model for Sophisticated Insurance M arkets ............................................................................. 328 1. The M im icry Assumption ............................................................ 329 2. The Consequences of Mimicry .................................................... 330 t Climenko Fellow and Lecturer in Law, Harvard Law School. Associate Professor of Law Designate, University of Minnesota Law School. Harvard Law School, J.D.; Amherst College, A.B. For helpful comments and discussion, I thank Tom Baker, Glenn Cohen, Neil Doherty, Scan Fitzpatrick, Sydney Foster, Jack Goldsmith, Carissa Byrne Hessick, Bert Huang, Howell Jackson, Shannon McCormick, J.J. Prescott, Steven Schwarcz, Steven Shavell, Peter Siegelman, Matthew Stephenson, and Sean Williams. This Article benefited from comments received in workshops at Harvard Law School and the New England Insurance Law Reading Group. Harold Birnbaum and Daniel Epps provided excellent research assistance.