Example of minimizing monitoring cost~ insurance company　

In order to stimulate the working incentive of the
insurance agents, some insurance companies adopts a
'prize-rewarding strategy' (See diagram)

If insurance agents achieve the first three
highest sales target in that half year,
they can win the designated prizes.

Reasons for insurance companies adopting such strategy

• Insurance agents seldom stay in their offices as they have to visit customers to
  promote products

• It is difficult to monitor them while they are at work

• Prizes can encourage workers to work harder and meet more customers

• Shirking is reduced

• The value of the prizes are even smaller than the loss of shirking or the monitoring cost

• A higher sales of companies is achieved