Insurance Selling In India – What The Doctor Ordered!
By Vaidyanathan Ravichandran
A recent survey of over 1,000 consumers conducted by a consulting firm in UK found that the insurance sector ranked lowest for customer service among 14 sectors. I believe results would be similar for India, too!
Retail was ranked first with 38% of people having the best customer experience, followed by hotels/hospitality and food service/restaurants, with 37% and 35% of people citing them respectively. Insurance was last with only 11% endorsing it for a positive customer experience.
Insurance suffers from two key problems in terms of customer experience.
It’s a product people are obliged to have rather than want.
On the rare occasions they do interact with the provider, it normally has negative connotations – either going through a probable onerous claims process or receiving a renewal notice, often accompanied by an increase in premium.
To compound the situation, customers are unaware of the complexity of current underwriting and claims processes, so their expectations of a simple and speedy settlement are high.
Issues associated with speed of response were raised in the study The findings point out that just 50% of routine questions asked via the web, email and Twitter are answered by insurance company customer service teams.
The insurance industry has a serious public relations problem.
Common complaints about the industry include: insurers don’t pay claims, as a result of exclusions in the fine print - What do hospital gowns and insurance policies have in common? You're never covered as much as you think you are-, insurers raise premiums after an auto accident despite policyholder having a previously unblemished record, insurers sell products not appropriate to the customer, Sadly, the list is long.
Insurers are also perceived to be insensitive and too self-centered and have found their way into joke books:
An insurance agent visited his local museum and accidentally knocked over a statue. The museum curator said to him, "That's a 600-year-old statue that you've broken!" The insurance agent replied, "Thank God for that! I thought it was a new one."
Many civilians think the industry is characterized by “mis-selling” and an “overkill”.
Sometimes it even gets personal.
A few months back, a friend vehemently criticized me for my chosen post-retirement profession. “How could you work in such an industry with overpaid executives, who take junkets in exotic places and have jobs that don’t contribute anything to society?”
He angrily said the costs of all those excessive salaries and liberal expense accounts trickle down into premiums, which “we all have to pay for.” “If I had a chance, I’d give those guys a piece of my mind,” he shouted.
As I slowly put my drink down on the table, I tried - and, no doubt, failed- to explain my experience of the industry: the flipside to this negative viewpoint.
Though I don’t work full-time in the industry, it was classic guilt by association. I can’t blame him though. He was simply articulating a common perception that many people have about the insurance industry.
Although it was a difficult conversation, I should probably thank my friend because it created a positive result. It led me to ask: Is this a fair perception? Are the industry and its practitioners as ghastly as he suggested?
When asked what I do for a living, have I found myself hesitating before answering because I suspect wearily that mentioning a career in the insurance industry would be a conversation stopper? If I bravely declare my line of work, I get reactions ranging from general apathy, to eye rolls, to sympathy, to sarcasm. “Oh, that must be fun.”
Have I ever gotten the feeling that the public views insurance professionals as negatively as other alleged bottom feeders: lawyers, politicians and real estate agents?
Perception Creates Reality
Perception – fair or unfair – creates reality, and with the prevalence of such negative viewpoints, how will the industry be able to attract young, talented people to support the growth in the industry?
The insurance industry certainly has its problems – with public relations, with cumbersome back-office systems, with high expense ratios, a lack of transparency, product inflexibility, and with selling the value of its value-chain.
In my experience - having formally worked and retired from this industry and now free-lancing as a consultant - I have had the good fortune to encounter many people who care deeply about what they do, work hard at their jobs and try – and do – make a positive difference. Many give back to society on a personal basis with their time and their knowledge.
As in all walks of life, there are excellent people and, unsurprisingly, some who perhaps are less excellent. One would hope that mastery and excellence are rewarded and those who are incompetent are shown the door.
Yes, top executives and intermediaries in insurance, and many other industries, make large salaries – some would say excessively so. But I’ll have to leave that debate to companies’ shareholders and boards of directors as well as to the regulators to determine whether these highly paid executives provide value for their money.
And yes, some industry meetings are held in “exotic places,” but most are held in ordinary towns across the country because insurers and agents and brokers follow their clients. I’ve attended all kinds of events from high-end to humdrum. Some executives travel 100-plus days a year, which makes business travel much less appealing and very unglamorous.
The Crux of the Matter
After this short consideration of the pros and cons of the industry, let me come to the crux of the matter, the reason this column has been written.
Having had a ringside view of the distribution channels and resources over the past 9 months, I feel there is certainly an overkill. Agents and other intermediaries are being “mass-recruited” with minimum standards of selection. Insurance companies resort to a “blanket-bombing” on social media to onboard agents. Training standards are not high, with an over-emphasis on only selling! Product features and regulatory requirements (KYC, Anti-Money Laundering, etc), nuances of taxation are barely touched upon. Agents are unleased on unsuspecting, naïve customers. The Agents mostly operate with a blinkered vision, guided by the lure of foreign tours to exotic locations, gold coins and other gifts rather than a formally approved commission structure. They are obsessed with laying their hands on a database of potential clients and don’t seem to think twice about the ethics of data privacy and data protection! They are launched into the market, armed with a “one size fits all” strategy! This is a recipe for failure and trust-deficit in insurance selling, especially life insurance.
To make matters worse, some insurance companies operate on a “multi-level-marketing” model, leaving it to their primary agents to further recruit their own teams of agents. Needless to say, training requirements are further diluted in such a model and the ultimate loser is the customer! Insurance companies have hit upon this model to help them keep their direct operating costs in control. They should realize that by doing so, they are harming their own long-term interests as they run the risk of compromising on training as well as ethics.
One more disturbing trend is that the army of retired persons recruited as agents are encouraged to invest their own money into policies. “There’s nothing better to convince your clients than flashing them details of your own policies”, goes the refrain! Thus, these agents become “bonded agents”, who are then under pressure to sell – or rather mis-sell, mostly – to be able to service the future premium payments on their policies!
The need of the hour is to bring about a qualitative change in the way insurance is being sold. The industry’s biggest malaise - mis-selling – can be overcome only by investing more time and efforts in training the distributors and injecting professionalism into the distribution channel.
For a start, the regulator (IRDAI) should increase the minimum threshold of educational qualification, which is currently a 12th pass certificate! The standard of accreditation exams should be made more stringent. Internal overview within the industry as well as regulatory overview of the sales function should be strengthened.
Admittedly, there is an urgent need to increase penetration but diluting the standards of distribution will only prove to be counter-productive in terms of more client dissatisfaction and disenchantment with the products.
The leading insurers should vow to correct the industry’s negative perception. It’s time for the industry to bestow upon the selling function the time and efforts it merits. Not the short-sighted, casual approach currently plaguing the industry.
The regulator should also approach this challenge with a holistic view and fix the problems. Mere rhetoric of a cap on commissions is not the solution.
In conclusion, insurance has rightly been called the DNA of capitalism and is certainly the engine of globalization. International and local economies would grind to a halt without insurance.
The industry – like all other industries – has its share of people who are making a difference, either professionally or personally. They add enormous societal value and make a profound contribution to their communities and to the global economy.
It is important that ill-advised and mis-guided practices by a section of the industry – intended as well as unintended - should not result in an overall setback to the growth of the industry and loss of confidence in the industry on the part of the customers – the ultimate beneficiaries.
By Vaidyanathan Ravichandran
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