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Information versus persuasion: experimental evidence on salesmanship, mandatory disclosure and the purchase of income and loan payment protection insurance

de Meza, David, Irlenbusch, Bernd and Reyniers, Diane J. (2007) Information versus persuasion: experimental evidence on salesmanship, mandatory disclosure and the purchase of income and loan payment protection insurance. The Financial Services Authority, London, UK.

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Abstract

How malleable are preferences? This paper provides experimental evidence on the extent to which insurance sellers can influence buyers and whether mandatory information disclosure offsets these effects. The experiment involves 214 subjects seeking or recently obtaining unsecured loans and 25 sellers with experience of commission selling and in receipt of substantial performance pay. Potential insurance buyers had up to £5,750 value at risk. Extravert sellers are particularly effective. The most persuasive sellers raise willingness to pay by a substantial amount relative to the least successful. These differences arise even though sellers are only given a couple of minutes to make a “pitch”. Trusting buyers seem the most susceptible to seller influence. Revealing information concerning value for money (the claims ratio) or the seller’s commission is regarded as important by most consumers but is found to have negligible effects on behaviour. Knowing the claims ratio tends to make subjects less confident in their decisions. Overall, there is little evidence that disclosure benefits consumers.

Item Type: Monograph (Report)
Official URL: http://www.fsa.gov.uk/
Additional Information: © 2007 The authors
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Sets: Departments > Management
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 02 Dec 2009 10:26
URL: http://eprints.lse.ac.uk/25998/

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