Breaking the cycle of fire sales: rethinking sales incentives for sustainable sales growth

Abstract

This study investigates how fire sales, as incentive structures, shape the behaviour, ethical decision‑making, and fairness perceptions of financial advisers in the insurance industry, and its implications for sustainable performance outcomes. The purpose of the study was to evaluate the effectiveness of commission‑based and alternative incentive models, identify their unintended consequences, and explore frameworks that balance short‑term productivity with long‑term customer trust and organisational stability. Commission‑driven environments, while effective in motivating immediate sales, have been criticised for fostering mis‑selling, fire‑sale behaviour, and policy lapses that undermine sustainability and erode consumer confidence. Grounded in Expectancy Theory, amongst others, the study adopts a quantitative approach, combining literature analysis with adviser perspectives to examine behavioural, organisational, and ethical dynamics. Findings confirm that commission‑based incentives strongly motivate short‑term sales but embed structural vulnerabilities that compromise policy persistency. Ethical behaviour emerged as a mediating mechanism that mitigates adverse effects but does not fundamentally alter the biases inherent in commission systems. Hybrid and value‑based models, integrating customer satisfaction and retention metrics, were identified as more sustainable alternatives. The contribution of this study lies in advancing understanding of how fire sales, through incentive design, influences both performance and ethics, offering pathways for reform. Limitations include reliance on sector‑specific data and the need for broader empirical testing across diverse financial contexts.