The Application Of Principal-agent In Insurance Agency And Compensation Design

With the rapid development of the insurance industry in China,Insurance companies face two real problems: how to reduce the asymmetryof information between the insurance company and agent and increaseinvestment profit of the insurce company. Asymmetric information andinconsistent benefits (generally it is embodied in the agency contract)between the insurance company and insurance agent. This makes agents(particularly life insurance and auto insurance agents) signed insurancecontracts by misleading or cheating consumers for their own interests,thatdamage the interests of the insurance company. The agent’s moral hazardproblems often occur in insurance agency. The development of insurancecompanies is not only the increase of premium and loss reduction, but moreimportant is the increase in investment income.This paper based on the two lines. It discusses on the agent’s moralhazard problems and investment department employee incentive problem.From the principal-agent perspective, we analysis to eliminate or reduce theasymmetry of information between the insurance company and the agent, reduce the moral hazard occurs, and design the reasonable compensation toemployees for their own interests,to maximize the use of insurance funds,insurance company to create higher profits.