Transition of Insurance Market to Oligopoly: Benefits and Drawbacks

Tatyana D. Odinokova, Natalia

Abstract

The insurance market as an integral part of national economy raises the level of social peace and security. This article is devoted to the analysis of pros and cons of the insurance market transition to oligopoly. The Herfindahl-Hirschman Index was used to determine the oligopolization effect in the market. It was established that insurance supply pattern does not allow satisfying the consumer demand completely. This leads to a reduction in the insurance coverage. Since the large insurance companies have a wide branch network and act as a social institution, they can often go beyond the legislation. Moreover, transnational companies may absorb local insurance companies. On the other hand, greater financial stability of insurance companies can be gained through the international mergers and acquisitions. Oligopolization also refers to relatively low tariffs that contribute to availability of insurance products for the majority of consumers. The authors suggest systematized measures for minimizing the negative oligopolization consequences by improving the specific methods for regulating the insurance entity performance.