Sasaki, Luiz

Examining the prevalence of transparency in the sale of insurance in Brazil and around the world, this study considers the costs and benefits of this transparency through surveys and based on extensive contextual and scholarly analyses. The framework for buying insurance in Brazil consists of two principals [the consumer and insurer] and one agent [the insurance broker]. This relationship presents a classic principal-agent dilemma in which the broker’s compensation system — in which insurance companies pay the brokerage commission — may portend negative effects for consumers.

In addition to a broad legal and contextual review of transparency in the insurance sector, this study presents two surveys on the transparency of insurance brokers’ commissions, one international and the other national. The international survey queried insurance supervisors and organizations representing insurers and insurance brokers from around the world. A total of 39 foreign jurisdictions responded, in addition to the European Commission. In the national survey, 191 Brazilian insurance brokers answered a questionnaire. The results show that 24 out of 39 international jurisdictions analyzed require or encourage the disclosure of brokerage commissions to consumers. In jurisdictions where disclosure is compulsory, there exists prior disclosure (prior to the decision made by the consumer) and active transparency (disclosed to the consumer independent of asking). In the national survey, results showed that 92% of insurance brokers (legal entities) in Brazil do not disclose to consumers the amount of brokerage commission received, and that 93% of brokers are against active disclosure and 92% against passive disclosure (i.e. disclosure at the consumer’s request). Given these results, and based on the theoretical and empirical evidence examined, this study recommends the adoption of transparency requirements relating to prior and active disclosure of brokerage commissions.