Addressing low-value insurance products with improved consumer information: the case of ancillary health products

Abstract

The sale of financial services products is rife with information asymmetry favoring sellers and leads to the marketing of insurance products offering low value to consumers. Exemplifying this problem is the current market for ancillary health insurance products such as short-term health insurance and supplemental insurance. One policy option for state insurance regulators is to mandate a robust regime of disclosures and labeling, described here as comparative disclosures. This article reviews comparative disclosure regulations previously implemented in the U.S. and proposals for reforms. It then outlines a possible policy solution for the lack of value in ancillary health insurance products: expanding consumer information to facilitate shopping.