Comparison Aggregation Debate Discussion
University of Massachusetts Lowell
October 6, 2014
Backgrounds
With the rapid development of information technology, web comparison aggregation and direct
sales channels become more and more popular in insurance industry, under which a customer can
fill in a single quote application to get several quotes form multiple insurers. Analyzing the
importance of comparison aggregation and direct sales channels becomes a crucial method to
develop company’s effective strategies for next five to ten years.
Comparison aggregation and search cost
1
In a market with homogenous goods, it is generally true that search cost is indeed negligible
if the goods are truly homogenous. But a research indicates that price dispersion has been
persistent even for goods such as books that appear to be homogenous (Baye 2006; Pan et al.
2004). However, in auto insurance industry, the price is highly dependent on specific
characteristics of different persons and price dispersion is very common in auto insurance
industry because of different pricing strategies from insurers. Although comparison aggregation
system can compare and diverse consumer tastes, it’s impossible for this system to eliminate
search cost that really can be decreased by using comparison aggregators. Although customers in
insurance industry are very price sensitive, it implies that price competition may be only
moderately intensified among insurers even with increasing use of comparison aggregators.
Firm strategies with comparison aggregation system
As we know, search cost in not zero and lower search cost on the Internet is correlated with
lower online prices although prices haven’t converged. Because most customers are price-
