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PUBLIKASI

What the Lerner Index tells us about the competition in the Indonesia’s Life Insurance industry?

5 October 2023

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Pricing stands as the foundation of each insurance product. A proper pricing policy is imperative, ensuring the insurance company’s ability to cover its liabilities. Within the insurance industry, ensuring price adequacy holds paramount importance for the long-term financial health and operational success of companies. In this context, pricing involves determining the suitable cost of insurance products and outlining accompanying terms and conditions. In the realm of insurance market conduct, the pricing of insurance products also exerts a pivotal influence on consumers’ decisions. The market conduct pertains to the behavior exhibited by financial service providers in designing, organizing, and delivering information, offerings, product/service agreements, as well as resolving disputes and handling complaints.

This study aims to investigate how pricing policies set by insurance companies reflect the level of competition in Indonesia’s life insurance industry through a comparison of the Lerner Index calculation. Due to the complexities to disentangle cost and premium components for each company, this study is the first attempt to do so in the context of Indonesia’s life insurance industry as a whole. The index measures as the percentage markup of price above marginal cost and often been calculated as a measure of a firm’s market power.

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5 October 2023

What the Lerner Index tells us about the competition in the Indonesia’s Life Insurance industry?

Penulis :

Reza Yamora Siregar, Ibrahim Khoilul Rohman, Yuridunis Saidah, Rosi Melati, Nada Serpina