Journal article
It's about building a book of business: incentives of insurance salespersons from future renewals
Geneva papers on risk and insurance. Issues and practice, Vol.44(4), pp.702-731
10/01/2019
DOI: 10.1057/s41288-019-00136-8
Abstract
Most property-liability insurance contracts are short-term contracts which can be renewed at expiration. With an average policy renewal rate of 89%, selling a policy not only generates immediate revenue but also results in expected future revenue for an agency. Outside employment options give salespersons negotiating power to claim a fraction of their increased production. This link between current performance and future compensation creates implicit incentives. Our empirical analysis documents a strong positive relationship between the fraction of renewals and salespersons' output, and between output and salespersons' compensation. These results hold regardless of whether salespersons receive a fixed salary, a combination of salary and commission, or compensation entirely based on commission. Overall, these findings support the view that property-liability insurance salespersons have strong incentives to build a book of business, and that these indirect sales incentives allow insurance agencies to offer compensation schemes with a fixed salary component.
Details
- Title: Subtitle
- It's about building a book of business: incentives of insurance salespersons from future renewals
- Creators
- Thomas R. Berry-Stolzle - University of IowaDavid L. Eckles - Terry College of Business
- Resource Type
- Journal article
- Publication Details
- Geneva papers on risk and insurance. Issues and practice, Vol.44(4), pp.702-731
- Publisher
- Springer Nature
- DOI
- 10.1057/s41288-019-00136-8
- ISSN
- 1018-5895
- eISSN
- 1468-0440
- Number of pages
- 30
- Language
- English
- Date published
- 10/01/2019
- Academic Unit
- Finance
- Record Identifier
- 9984380445802771
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