Disclosure of sales compensations and product recommendations

Abstract

Purpose

The purpose of this paper is to examine the influence of disclosure of sales compensations on insurance brokers’ intention to make inappropriate product recommendations.

Design/methodology/approach

This research examines the insurance brokers’ intention to make inappropriate product recommendations through an application of the theory of planned behavior. Surveys are used as the research instrument, and the hypotheses are tested with a between-subjects experimental design. One case of mandatory disclosure and one case of non-mandatory disclosure are compared in the research.

Findings

The results indicate that the disclosure of sales compensations is significantly associated with the subjective norms from the official authority and perceived behavioral control (PBC). The results of this study also indicate that, when the disclosure is mandatory, the PBC has a stronger effect on the insurance brokers’ intention to make biased product recommendations than dose the attitude and subjective norms. When the disclosure is non-mandatory, however, the subjective norms have a stronger effect on the insurance brokers’ intention.

Originality/value

The impacts of compensation disclosures on the financial professionals’ product recommendations have been less examined. This study could make a contribution to the literature by providing some empirical observations from the views of Taiwan’s life insurance brokers.

Citation

Tseng, L.-M. and Yu, T.-W. (2019), "Disclosure of sales compensations and product recommendations", Marketing Intelligence & Planning, Vol. 37 No. 3, pp. 310-324. https://doi.org/10.1108/MIP-05-2018-0160