Switching Costs in Competitive Health Insurance Markets: The Role of Insurers’ Pricing Strategies

Karine Lamiraud and Pierre Stadelmann
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Pierre Stadelmann: Service de la santé publique, Etat de Vaud

No WP2004, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: Our article deals with pricing strategies in Swiss health insurance markets and focuses on the relationship between basic and supplementary insurance. We analyzed how firms’ pricing strategies (i.e., pricing of basic and supplementary products) can create switching costs in basic health insurance markets, thereby preventing competition in basic insurance from working properly. More specifically, using unique market and survey data, we investigated whether firms use bundling strategies or supplementary products as low-price products to attract and retain basic insurance consumers. To our knowledge, this is the first paper to analyze these pricing strategies in the context of insurance/health insurance. We found no evidence of bundling in the Swiss setting. We did however observe that firms used low-price supplementary products that contributed to lock in consumers. A majority of firms offered at least one of such product at a low price. None offered low-price products in both basic and supplementary markets. Low-price insurance products differed across firms. When buying a lowprice supplementary product, consumers always bought their basic contract from the same firm. Furthermore, those who opted for low-price supplementary products were less likely to declare an intention to switch basic insurance firms in the near future. This result was true for all risk category levels.

Keywords: Managed Competition; Swiss Health Care Systems; Pricing; Consumer Inertia; Switching Costs; Supplementary Insurance; low-price supplementary product; Bundling (search for similar items in EconPapers)
JEL-codes: I10 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2020-05-13
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Switching costs in competitive health insurance markets: The role of insurers' pricing strategies (2020)
Working Paper: Switching costs in competitive health insurance markets: the role of insurer's pricing strategies (2020)
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