Why Collusion Occurred: The Advantage of Cartelization On Spitzers theory, why might insurers like AIG, ACE, or Zurich–huge, powerful companies–have allowed this to happen?
Why wouldn’t one of them blow the whistle on the fake bids, and demand to submit genuine, lower bids and win even when Marsh didn’t pick them? Put another way, why wasn’t the system self-regulating after all? The answer Spitzer can give is simple. All the big insurers had an interest in creating a system where the brokers–and not the market–decided which company the client would pick. That is, they preferred cartelization to competition. And the brokers were more than happy to set up a system to manage the cartel–for a price. The Harm That Was Caused If Spitzer’s Claims Prove True Some press accounts have asked: Even if Spitzer’s right, what’s the harm to the insurance-buying companies? Isn’t the extra money all coming from the insurers – who are the ones bribing the brokers for policy placement? The answer is no. In the end, the cost of the “bribes” is paid by the clients–companies like Ford. Second, and most important, the real problem with the contingent commission system is not
Related Questions
- Why Collusion Occurred: The Advantage of Cartelization On Spitzers theory, why might insurers like AIG, ACE, or Zurich--huge, powerful companies--have allowed this to happen?
- Could someone please explain Mechanical Advantage and Reciprocating Engine Theory to me, basically?
- What is the advantage of Social Exchange Theory and Conflict Theory?
