Under different market structures and utility functions, disscus the best commission rate by a long-term insurance agency model.
Date Issued
2005
Date
2005
Author(s)
Tai, Yu-Chi
DOI
zh-TW
Abstract
Abstract
In this thesis, we analyze some modification manners’ by modeling agents’ behavior and the results can be a reference for insurance companies to design their commission system.
When insurance agency market is a monopoly:
No matter agents’ utility function is CARA or HARA, the results are consistent：the higher unit effort level or the longer policy period, the smaller best fixed income is. In other words, if there is only one insurer in the agency market, all the insurer should pay is a certain amount of fixed income to stimulate agents to extend new business.
When insurance agency market is a perfect competition:
Besides negative exponential utility function, all the other functions are inverse to market volatility and cost coefficient; when analyzing binominal function, the best leveled commission rate increases as market volatility and cost coefficient. Under all functions, the best leveled commission rate increases as contract period and fixed income, but decreases as interest rate.
As for these methods of modification, the most popular methods are to prolong the policy period and shorten the difference between the first year commission and the following ones. However, the passive way is to organize the retention rate into the yearly employee scores. These modifications will be effective to stimulate agents to put more emphasis on their clients in the following years.
In fact, to level the commissions has some difficulties in putting into practice because most agents would not adapt to the sudden change of their income structure and they often quit jobs to protest. So the best suggestion for insurance companies is to gradually lessen the difference between the first year and the next year commission rate. Insurers also have to put more attention on the after-service quality improvement and educate their employees to cherish the value of customers. In the end, we can achieve a goal to supply our clients with more thoughtful services.
Subjects
佣金平準化
市場結構
效用函數
level commission
market structure
utility function
Type
thesis
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