The insurance agents’ intention to make inappropriate product recommendations. Some observations from Taiwan life insurance industry

Author:Lu-Ming Tseng, Yue-Min Kang, Chi-Erh Chung
Position::Department of Risk Management and Insurance, Feng Chia University, Taichung, Taiwan
Pages:230-247
SUMMARY

Purpose This case study aim to investigate the impacts of insurance agents’ positive attitude toward inappropriate product recommendations on the insurance agents’ intention to make the inappropriate product recommendations. This study further checks how the attitude and intention could be enhanced by the insurer’s manipulation of sales compensations, the agents’ perception of information ... (see full summary)

 
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The insurance agents’ intention
to make inappropriate product
recommendations
Some observations from Taiwan life
insurance industry
Lu-Ming Tseng and Yue-Min Kang
Department of Risk Management and Insurance, Feng Chia University,
Taichung, Taiwan, and
Chi-Erh Chung
Department of Life Insurance, Fubon Financial Holding Co., Ltd.,
Taichung, Taiwan
Abstract
Purpose – This case study aim to investigate the impacts of insurance agents’ positive attitude toward
inappropriate product recommendations on the insurance agents’ intention to make the inappropriate
product recommendations. This study further checks how the attitude and intention could be enhanced
by the insurer’s manipulation of sales compensations, the agents’ perception of information asymmetry
between customers and insurance agents and the insurer’s sales orientation.
Design/methodology/approach – Full-time insurance agents from the life insurance industry in
Taiwan were surveyed. To test the hypotheses, hierarchical regression analyses were used in the study.
Findings – The main results showed that the respondents’ positive attitude toward inappropriate
product recommendations was the inuential predictor of the respondents’ behavioral intention.
Nevertheless, the positive attitude was enhanced by the manipulation of sales compensations and the
insurer’s sales orientation.
Originality/value Very few studies have investigated the relationships among information
asymmetry between customers and agents, management’s sales orientation, management’s
manipulation of sales compensations and the problems of selling unsuitable insurance products to
customers. This study may contribute to the relevant literature by discussing these issues.
Keywords Product recommendation, Sales compensation, Information asymmetry, Insurance,
Sales orientation
Paper type Case study
Introduction
To enhance the insurance agents’ ethical behaviors, the Financial Supervisory
Commission (FSC) in Taiwan has issued “Regulations Governing the Supervision of
Insurance Solicitors”. According to Article 19 of the regulations, the insurance agents
and insurers are jointly responsible for the unethical behaviors such as misselling and
making improper comparisons between different insurance products (FSC, 2010). If the
insurance agents fail to comply with the regulations, the insurance agents and insurers
will both be punished to varying degrees. However, although the Financial Supervisory
The current issue and full text archive of this journal is available on Emerald Insight at:
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JFRC
24,3
230
Journalof Financial Regulation
andCompliance
Vol.24 No. 3, 2016
pp.230-247
©Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-03-2015-0014
Commission in Taiwan has implemented the regulations since 1992, different kinds of
misselling behaviors are still observable in the insurance market. Most regulators
around the world are also following similar approaches to regulating insurance agents,
while misselling is still a problem (Black and Nobles, 1998;Ferran, 2012).
Several researchers have paid attention to this issue (Inderst and Ottaviani, 2009;
Inderst, 2010;Ferran, 2012). Some of the studies found that salespeople’s intention to
engage in misselling was signicantly related to the salespeople’s personal factors, such
as attitudes and self-interest considerations (Radin and Oppenheimer, 2002;Yi et al.,
2012). Because previous research has pointed out that attitudes are very helpful for
understanding unethical behaviors by the professionals (Rhodes and Courneya, 2003),
this study investigates to what extent the insurance agents’ positive attitude toward
inappropriate product recommendations (e.g. selling specic insurance products that
may not t the customers’ needs) could enhance the insurance agents’ intention to sell
inappropriate products to customers.
This research also examines how the attitude and intention could be inuenced by
the sales compensations, information asymmetry and sales orientation. Sales
compensation is considered to be a crucial reason for salespeople to behave unethically
during the service process (Román and Ruiz, 2005;Krafft et al., 2012). In fact, in the
insurance industry, the sales compensations can be the main reward for the insurance
agents. The insurance companies can pay sales compensation to the insurance agents
immediately when specic products are sold to the customers. Such sales compensation
schemes may encourage short-term sales of the specic products, while the schemes
may also encourage some questionable selling activities. For example, because most
rewards comes from selling specic insurance products, some insurance agents may
spend most resources, such as time and sales efforts, on persuading their customers to
buy the products, but spend fewer resources on understanding and satisfying the needs
of the customers. Because of this, the management’s inappropriate manipulation of sales
compensations may enhance the insurance agents’ positive attitude toward
inappropriate product recommendations, and this in return could inuence the
insurance agents’ intention to make the inappropriate product recommendations.
Researchers have also investigated information asymmetry problems and pointed
out that the information asymmetry between principals and agents could affect the
agents’ intention to adopt opportunistic strategies (Balakrishnan and Koza, 1993;
Chiappori and Salanie, 2000;Su, 2007). Based on this view, there seems no reason to
ignore the impact of information asymmetry on the insurance agents’ intention to make
the inappropriate product recommendations. Thus, the relationship between
information asymmetry and the insurance agents’ attitude toward inappropriate
product recommendations is discussed in this study.
Another area which has been less mentioned in the literature is the impact of
management’s sales orientation. Some researchers have discussed the relationship
between salespeople’s sales orientation and customer orientation (SOCO) and the
salespeople’s selling decisions (Stock and Hoyer, 2005;Blocker et al., 2011;Homburg
et al., 2011a). Nonetheless, marketing policy on SOCO at a managerial level should be
inuential as well, because these concepts are signicantly related to the rms’
willingness to satisfy customer needs and protect customer interests (Blocker et al.,
2011). Besides this, previous studies have shown that management’s policy (such as
sales orientation policy) can serve as an important factor that affects the employees’
231
Taiwan life
insurance
industry

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