Finance Seminar（2015-39）

Topic:Financial Regulator Efficacy: Evidence from Customer Complaints

Speaker:Wenlan Qian, National University of Singapore

Time:Wednesday, 16 December, 10:00-11:30

Location:Room 214, Guanghua Building 2

Abstract:

Regulators aim to protect consumers from both insolvency and deceptive trade practices by financial intermediaries. To provide insights into these regulatory goals, our analysis relies on a unique database of customer complaints on insurance firms. We find that for-profit financial intermediaries receive significantly more customer complaints than their matched, mutual insurance peers. Delineating by the type of complaint reveals substantive customer dissatisfaction about the use of delay tactics and claim underpayment by for-profit insurance companies. Exploiting staggered occurrences of large, state-level disasters, we find a substantial increase in customer complaints and spillovers to other states in for-profit intermediaries relative to cooperatives. Surprisingly, we also document greater complaints in for-profit, relative to mutual insurance companies, in states thought to contain strong regulatory oversight. Conflicts between the regulatory goals of intermediary solvency and fair trade practices appear to manifest themselves in greater complaints when for-profit firms approach capital requirement thresholds or encounter strict rate controls. Overall, our findings suggest the need for further improvement in regulatory oversight, especially in for-profit financial intermediaries.

Your participation is warmly welcomed!