📄 Abstract
A life-insurance policy is sold once but must be kept for years, and the people who sell it are paid mostly on the day of sale. This article pairs one human-resource variable, the architecture of distribution-force compensation (front-loading, renewal and longevity pay, clawback), with one economic outcome, the lapse cost that early policy discontinuation imposes on insurers and policyholders. It combines a structured integrative review of audit, field and regulatory evidence (Anagol, Cole and Sarkar, 2017; Inderst and Ottaviani, 2009; ASIC, 2014; Gottlieb and Smetters, 2021) with a principal-agent model solved numerically for 20,000 heterogeneous agents per scenario, calibrated so that the front-loaded status quo reproduces reported industry persistency of about 74% at the 13th month and 50% at the 61st. Rebalancing commission towards renewal and longevity pay, with a two-year clawback, lowers modelled net lapse cost per Rs100 of first-year premium from Rs25.9 to Rs14.1 (a 46% reduction) and raises 61st-month persistency by 3.9 percentage points; however, only 9 to 12% of the saving comes from changed agent behaviour, the rest from lower exposed acquisition cost and recovery. Agent attrition erodes the persistency gain from 3.0 to 1.9 percentage points as annual exit rises from 5% to 50%. Five propositions, an India-versus-global comparison and an agenda for HR-and-economics innovation are presented. The simulation is illustrative, not an estimate.
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📚 How to Cite:
C S Ramya, Dr M Prakash , PERSISTENCY-LINKED COMMISSION ARCHITECTURE AND THE LAPSE COST OF LIFE-INSURANCE DISTRIBUTION: A PRINCIPAL-AGENT ANALYSIS WITH EVIDENCE FOR INDIA , Volume 14 , Issue 10, October 2026, International Journal of Asian Economic Light (JAEL) , Pages: 11 - 18 ,