Insurers’ Digital Technology Accessibility and Adoption Decisions
The digital technology has been widely used in many–if not all–industries, but the insurance industry is slow in adopting it. Within the insurance industry, there is also digital divide among insurance companies. This paper studies insurers’ technology adoption decisions and the insurance market equilibrium from the perspective of costs of both supply and demand sides. Specifically, this paper studies the competitive equilibrium in a theoretical framework featuring heterogenous individuals with different search costs and consider two types of insurers with their operation costs as their private information: one of them has access to digital technology while the other does not. The results show that the technology accessibility divide between these two insurers does not necessarily lead to a technology usage divide between them. However, an expected market share gap is always created due to the accessibility divide, even though the insurer with access to the digital technology does not adopt it. When insurers’ technology accessibility is unobservable to individuals and individuals are over confident about it, the technology usage divide can be widened while the market share gap is narrowed.
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