Abstract: Based on the theory of vertical relationship, the relationship between bank and insurance is modeled as a vertical service transaction relationship. By constructing the commission decision-making model of bancassurance service, the essence and mechanism of bancassurance conflict and its impact on market premium are discussed. It is found that insurance companies are keen to increase commission in order to obtain bank channels, which leads to the prisoner's dilemma in commission decision-making. The prisoner's dilemma of commission decision is the essential reason for bancassurance conflict:on the one hand, banks do not have incentives to cooperate with insurance companies; on the other hand, small and medium-sized insurance companies are unable to obtain high-quality banking channels, thus being excluded from the insurance market. However, judging from the sales price (premium) of insurance products, the prisoner's dilemma of commission decision will certainly lead to the increase of premium, which may reduce the premium and improve the welfare of insurance buyers under certain conditions. The conclusion of this paper is that the core of bancassurance supervision policy is to break the prisoner's dilemma of commission decision-making of bancassurance and promote the decision-making of insurance companies from individual rationality to collective rationality.

Key words: bancassurance cooperation, commission decision, prisoner's dilemma, bancassurance supervision