EU intermediary regulation and its impact on insurance agent quality: Evidence from Germany

Implementation of the EU Directive on Insurance Mediation (2002/92/EG) created the first professional licensing requirements for insurance agents in Germany. This study uses data on property-liability insurance policies from a German insurer encompassing the years just before and just after the Directive, to provide evidence of the impact of licensing on insurance intermediation quality. Because many agents left the market once licensing was required, we compare the pre-Directive quality of agents who exit the market with those who remain, and the pre-versus post-Directive quality of agents who remain in the market. Estimation results show no significant effects of licensing on agent quality, either through exit of low-quality agents or through changes in post-Directive quality. Results are most consistent with an increase in consumer search activity after the enactment of licensing. (c) 2021 Elsevier Inc. All rights reserved.