The Influence of Compensation on Product Recommendations Made by Insurance Agents

Posted: 27 Feb 2006

See all articles by William R. Cupach

William R. Cupach

Illinois State University

James M. Carson

University of Georgia


Lawsuits alleging illegal and unethical insurance sales practices have received widespread publicity in recent years. Although many observers have argued that one source of ethical conflicts for insurance agents is the industry's reliance on straight commission compensation, there remains a paucity of empirical data to support the claim. Therefore, we tested whether different forms of compensation influence insurance agent recommendations of products. We obtained survey responses from 336 insurance agents. Respondents were presented with a composite sketch of a hypothetical client. Following this description, they were asked to identify which one of eight specified life insurance products they would recommend to the client. A between-groups design was employed to manipulate differences in compensation associated with the eight products. Results indicated that neither amount of coverage nor type of coverage (term life versus cash value) recommended was associated with compensation. However, an unanticipated finding was that amount of coverage recommended was significantly higher when the insured was male than when the insured was female.

Keywords: agent-client relations, commission, compensation, conflict of interests, incentives, insurance, sales

JEL Classification: D82, G22

Suggested Citation

Cupach, William R. and Carson, James M., The Influence of Compensation on Product Recommendations Made by Insurance Agents. Journal of Business Ethics, Vol. 40, No. 2, pp. 167-176, 2002. Available at SSRN:

William R. Cupach

Illinois State University ( email )

Normal, IL 61790
United States
309-438-7110 (Phone)


James M. Carson (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

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