Brokers' incentives and conflicts of interest in the control of opportunism

Abstract

Purpose

The purpose of this paper is to examine brokers' financial incentives in the Nigerian insurance market and how they balance conflict of interest which their role engenders. The paper aims to assess how these affect the control of opportunism of customers in the Nigerian insurance market.

Design/methodology/approach

The study involved the use of semi‐structured interviews of insurance broking executives and documentary analyses of how incentives aid the control of opportunism in the insurance market.

Findings

Findings suggest that the Nigerian insurance market operates on highly tariff incentive system which might be hampering insurance brokers' role in bridging information asymmetries to control opportunism in the market. Conflicts of interest are also real in the insurance market.

Practical implications

Findings are relevant for practitioners and regulators in addressing the restrictive remuneration system which calls for liberalisation to encourage the control of opportunism in the insurance market.

Originality/value

The study underscores how financial incentives might be utilised to balance conflict of interest which insurance intermediation engenders.

Citation

Olalekan Yusuf, T. (2011), "Brokers' incentives and conflicts of interest in the control of opportunism", Journal of Risk Finance, Vol. 12 No. 3, pp. 168-181. https://doi.org/10.1108/15265941111136923